The Australian Industry Group has called on the federal government to prioritise controlling inflation in the upcoming budget, warning of continuing economic pressure on households and businesses.
Chief Executive Innes Willox said the Reserve Bank of Australia’s recent decision to raise the cash rate to 3.85 per cent was “unfortunate but unavoidable,” following a broad-based inflationary outbreak in late 2025.
“Inflation is expected to keep rising until mid-2026, economic growth is forecast to slowly slump back towards 1.6 per cent per annum, while real wages face another year of decline due to high inflation,” Willox said. He noted that further rate rises could not be ruled out under current conditions.
Willox argued that the federal government could help by controlling growth in public spending, citing forecasts that the underlying budget deficit will continue to widen, adding to inflationary pressures.
“A more disciplined approach to spending is critical to ensure inflation does not become entrenched, and the budget is returned to balance,” he said.
The warning comes as the RBA seeks to curb inflation without stifling economic growth, a balance that remains challenging amid rising living costs and global economic uncertainty. Willox emphasised that timely government action is needed to prevent inflation from harming households, businesses, and the broader economy.
“Now is the time to nip it in the bud,” he said, calling for fiscal restraint alongside monetary measures to stabilise prices and protect growth.
The AI Group’s statement highlights ongoing concern among business leaders over inflation’s impact on competitiveness, wages, and household finances as Australia navigates the early months of 2026.
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