Shadow Chancellor of the Exchequer Jane Hume has said Treasurer Jim Chalmers is waging war on the Reserve Bank of Australia (RBA) after the treasurer recently said the RBA and its high interest rates were “breaking the economy”.

“With all this global uncertainty, on top of the impact of interest rate hikes tearing up the economy, it will come as no surprise if the national accounts on Wednesday show that growth is soft and subdued,” Chalmers said ahead of the release of the latest economic data. growth on Wednesday.

During the media rounds on Monday, Hume accused the Treasurer of blaming Philip Lowe’s “hand-picked deputy”, Michelle Bullock, for high inflation.

"At some point he has to turn the mirror on himself and say what can the government do? What can I do to reduce inflation? And it's certainly not an expansionary budget," Hume said.

“We've actually had three expansionary budgets delivered by Labor governments with an extra $315 billion in spending. And Michelle Bullock herself pointed out that public spending, that government spending, is part of the engines that make inflation stay higher for a longer time. And now we're one of, we're the only G10 nation that has core inflation as high as it was in January.”

In his defense of the RBA, Hume said the central bank "can only respond to the inflation it finds itself in", adding that "the problem is that the government is not doing its fair share of the heavy lifting".

"It is impossible to control inflation by opposition, unfortunately, but I can tell you that we would really do things very differently," Hume said.

Premier Anthony Albanese stuck to the party line while in Perth on Monday, insisting there was "nothing new in what Jim Chalmers said".

"He has said this consistently in parliament," Albanese told the media.

“We are very proud to have seen inflation cut in half what we inherited. It peaked in early 2022. Inflation eased to 3.5 percent last week. On an annual basis, we want to see it even more moderate. And one of the things we've also done, of course, is we've created two budget surpluses.

Forced to either support or condemn the treasurer's choice of words over the extent of the RBA's impact on the economy, the Prime Minister maintained that rate rises were designed to "reduce demand".

“The Reserve Bank has to play a role in monetary policy. Our job is fiscal policy to make sure that we both want, we have the same goal, that inflation is moderate. We, of course, have another job, as the Governor of the Reserve Bank has said, which is to look after the interests of the people. And that's what we do. And that's what we're doing," Albanese said.

Economists generally expect national accounts on Wednesday to show real GDP growth of a paltry 0.2 percent from the quarter, which would bring the annual rate down well below the trend of 0.9 percent.

If these figures are correct, the annual GDP growth rate outside the pandemic period will be the lowest since the recession of the early 1990s.

In a note published this week, CBA economist Gareth Aird said "tight monetary policy has clearly worked to slow demand growth in the economy".

"The rise in tax payable has also weighed on household purchasing power, along with the effects of higher inflation and rising mortgage payments. As a result, the labor market loosens and inflation slows. This is all part of the RBA's plan to stay on the narrow path and bring inflation back into the target range,” Aird said.

Although 0.9% year-on-year GDP growth in the June quarter was in line with the RBA's forecasts, looking ahead economists expect a softer GDP profile in 2024-25 than the bank's forecasts.

A recession is also not out of the question, according to AMP's Shane Oliver, who recently warned that the risk of a recession in Australia now stands at 50 per cent.

According to the chief economist, a number of factors could send Australia to the brink, including the possibility that the RBA has got it wrong,

"Central banks, including the RBA, may not have allowed enough for the 'long and volatile lags' with which rate rises affect growth and inflation, and so have tightened too much or left rates too high," Oliver said .

“Because central banks never know when they have raised interest rates enough to control inflation, they often go too far – leading to recession. This was the case before Australia's recessions in the early 1980s and 1990s. Although the RBA still faces inflation that is too high given the US experience, it should now consider cutting interest rates as it now risks much higher unemployment and inflation falling below target.'

While Oliver believes there is a strong likelihood of a rate cut by the end of the year, AMP's official forecast is that the first rate cut will happen in February next year.

That decision was taken on the basis that "we don't think the RBA will be confident enough to start tapering by then," the economist said.

"Actually, I think they should go into a cut, which of course is different than what I think they're going to do," he told InvestorDaily last month.