Treasurer Jim Chalmers has declared he will not resign from his position following the latest interest rate hike, while conceding the conflict in Middle East is “not the only driver” of Australia’s stubbornly high inflation.

“Today’s decision was widely expected, but that doesn’t make it any easier for Australian families and businesses to absorb,” the Treasurer said shortly after the RBA confirmed the fifth interest rate hike for the year.

“It will be difficult news for many Australians who are already paying a hefty price for circumstances outside of their control.”

Fronting the media in Canberra, the Treasurer pointed to the ongoing war in the Middle East as a major factor for the country’s high inflation.

“The war’s in its ninth month and its re-escalation is putting sustained upward pressure on inflation,” he said.

“It’s weighing on growth and its end can’t come soon enough for the global economy or for Australians facing cost of living pressures.”

Facing growing political pressure over Australia’s level of government spending, Dr Chalmers also seized on Reserve Bank’s assessment that public sector demand was “weaker than expected” in early 2026, the period when inflation began its resurgence.

“Public demand growth has eased quite substantially at a time when private demand has tripled,” the Treasurer told reporters in Canberra.

“Our budgets are not what’s putting upward pressure on inflation, but we can play a helpful role and that’s what we intend to do.”

The Treasurer again declared there would be new savings in next month’s mid-year budget update but could not say whether they would be enough to outweigh new government spending measures.

“We take responsibility for our part of the fight against inflation,” Dr Chalmers said.

“We’re helping with the cost of living at the same time as we manage the budget responsibly.”

When asked about the Federal Budget and its impact on inflation, the Treasurer argued “our budgets are not what’s putting upward pressure on inflation. But we can play a helpful role and that’s what we intend to do”.

Pressed on whether he would consider stepping aside given the latest hike, the Treasurer responded: “No.”

Inside the Albanese Government there has been heightened discussion about the Treasurer’s future, with many Labor insiders claiming there is a growing rift between Dr Chalmers and the Prime Minister over various budget spending decisions.

Shadow treasurer Tim Wilson said that high levels of Federal Government spending was responsible for rising inflation and Tuesday’s announcement of another interest rate rise.

“The Reserve Bank has been forced to raise interest rates on Australian families and small businesses for the 17th time under the Albanese Labor Government because the taxaholic Treasurer still can’t kick his spending addiction,” Mr Wilson said.

“The Reserve Bank has increased interest rates — we’ve had about five. Most advanced countries have had one, and that is because we have a problem around government spending putting upward pressure within the economy.”

“I know a lot of Australians are sitting around the kitchen table right now, making tough choices about if they can afford to send the kids on school excursions, if they can afford to pay for a birthday party and other cuts that they will have to make within their own budget while the Government won’t make theirs,” he told the ABC.

The Shadow Treasurer also argued that Labor’s claim that the conflict in the Middle East was the driver of Australia’s inflation had begun to unravel, after RBA governor Michelle Bullock said Tuesday’s rate hike was a response to ease “domestic capacity pressures”.

“That’s underlying inflation and that’s coming from domestic problems. Interest rate hikes will not control the global price of oil; they will control domestic spending pressure. This is where the Treasurer continues to spin to try and get himself out of the problem that he has created,” Mr Wilson said.