The federal government's budget cabinet sat on Monday and again on Tuesday, the day the Reserve Bank lifted rates for a fifth time this year. With the mid-year budget update due in December and Inflation at 4.3 per cent, every spending decision is being read for its effect on prices. For taxpayers, it raises a simple question: what is already locked in, and what could still change?

Two days of budget cabinet

The Expenditure Review Committee, the cabinet group that signs off on spending and savings, met on Monday 2 November and was meeting again on Tuesday 3 November.

Treasurer Jim Chalmers did not say what savings the Mid-Year Economic and Fiscal Outlook would contain.

"We know that there is more work to do to make the budget as tight as it can be," he said.

Finance Minister Katy Gallagher and Chalmers had earlier declined to commit to the update containing more savings than new spending. "I can't, I don't want to pre-empt the [Expenditure Review Committee] process," Gallagher said on 1 November.

No date has been set for the update beyond December, leaving taxpayers and markets to read the signals in the meantime.

The spending pressure

According to analysis published on 1 November, policy decisions in the budget and the last mid-year update added about $14 billion to spending across the current and last financial years.

Chalmers has said those decisions make a net "positive contribution over the four years". Some Labor MPs privately want means testing and net savings in December.

The same analysis said relief measures such as energy rebates and fuel excise cuts are no longer part of the government's approach.

Gallagher also described Medicare as being in "freefall", a sign of the competing demands on the budget.

Rates day politics

The RBA's Monetary Policy Board raised the cash rate from 4.60 to 4.85 per cent on 3 November, on a six to three vote. It said "inflation remains elevated" and is "broadly based", and that it is "now forecast to remain elevated through much of 2027".

The board expects inflation to stay above 3 per cent over the coming year. Commonwealth Bank expects the cash rate to hold at 4.85 per cent before cuts in August and November 2027, while ANZ sees some risk of a further rise to 5.10 per cent in December or February. Those are forecasts, not certainties.

The RBA statement did not mention fiscal policy. But the opposition did.

Shadow Treasurer Tim Wilson blamed government spending for persistent inflation. He said the Coalition would cut public service jobs where "bureaucracy exists and it's not serving a purpose".

Prime Minister Anthony Albanese responded that "my government has made savings in every single economic statement", and called interest rates a "blunt instrument".

Chalmers said a rate rise "will make things much harder", adding that the full effect of earlier rises "hasn't been felt yet".

As of mid-afternoon on Tuesday, no Treasurer media release responding to the RBA decision had appeared on his ministerial website.

What is already locked in for taxpayers

Several personal tax changes are already legislated and are not up for decision in December.

The 16 per cent tax rate, which applied to Taxable Income between $18,201 and $45,000, fell to 15 per cent from 1 July 2026. It is legislated to fall again to 14 per cent from 1 July 2027.

A $250 Working Australians Tax Offset starts from 1 July 2027, for the 2027–28 income year. The ATO's law and policy update lists it under the Tax Reform No. 1 Act, which received assent on 26 June 2026. It is a non-refundable offset, so it can reduce tax payable but cannot create a refund on its own.

One proposal still in play affects older Australians. The Private Health Insurance Amendment (Modernising the Private Health Insurance Rebate) Bill 2026 [No. 2] was introduced on 15 October, with a proposed start date of 1 April 2027. It is a bill, not law.

Other tax measures are also still before Parliament. On 29 October, the Tax Reform No. 3 Bill, the discretionary trust minimum tax bill and the Tax Reform No. 4 Bill passed the House and moved to the Senate. The trust minimum tax would start on 1 July 2028, and the Tax Reform No. 4 Bill includes optional monthly PAYG instalments and changes to the R&D tax incentive. None of these is law yet.

Hypothetical example: what the rate cuts are worth

Hypothetical example: a worker earns $70,000 a year in taxable income.

The 16 per cent band covers $26,800 of income, from $18,201 to $45,000. Each one-percentage-point cut to that rate is worth $26,800 multiplied by 0.01, or $268 a year.

In 2026–27, with the rate at 15 per cent, the worker pays $268 less tax than they would have at the old 16 per cent rate.

In 2027–28, with the rate at 14 per cent, the saving compared with the old rate doubles to $536.

If they are eligible for the full $250 Working Australians Tax Offset in 2027–28, and have enough tax payable to absorb it, their total reduction that year would be $786.

Anyone earning above $45,000 gets the same $268 and $536 dollar amounts from the rate cuts, because the change only applies to the slice of income in that band. The calculation ignores the Medicare levy and other offsets, and is illustrative only.

Key dates to watch

  • 5–6 November: Senate committee hearings on the Tax Reform No. 3 Bill and the discretionary trust minimum tax bill.
  • 25 November: The next monthly CPI figures.
  • December: MYEFO, with updated forecasts and any new savings or spending decisions.
  • 1 April 2027: Proposed start of the private health insurance rebate changes, if the bill passes.
  • 1 July 2027: The 14 per cent rate and the Working Australians Tax Offset begin.

The December update will show whether the government's "more work to do" translates into net savings, or whether the pressure stays on the RBA alone to bring inflation down.