Australia’s Labor government is eyeing spending cuts to show it is tackling inflation, amid growing internal unease and public sparring with the central bank over who is to blame for rising prices.

NSW Premier Chris Minns declined to back Canberra’s fiscal approach this week, saying every government had a responsibility to take demand out of the economy. The comments created a headache for Prime Minister Anthony Albanese ahead of a difficult economic stretch.

Reserve Bank governor Michele Bullock said inflation had been driven by ‘domestic capacity pressures’, challenging Labor’s argument that global factors were mainly responsible. The bank lifted rates to 4.6 percent, the highest since 2011, with annual inflation at 3.5 percent in July.

In a television interview, Assistant Minister Emma McBride defended the government’s record, noting spending was down to 26.9 percent of GDP. Treasurer Jim Chalmers acknowledged the rate hike would mean greater hardship for households, with nearly 1.8 million mortgage holders at risk of stress, according to Roy Morgan research.