The NSW premier, Chris Minns, has warned an expected interest rate increase will force job losses and cause businesses to close, insisting the federal government and states should rein in spending to take pressure off the economy.The intervention from the leader of the country’s biggest state will heap yet more pressure on the Albanese government ahead of the Reserve Bank of Australia’s cash rate decision on Tuesday.Markets predict the bank will deliver the fifth rate rise in 2026. A move to 4.85% would bring rates to their highest level in 18 years.Minns, who is increasingly outspoken on differences of opinion with the prime minister, Anthony Albanese, said increasing rates was not “a straightforward decision” for the RBA.“The impact of another rate rise on the New South Wales economy will be massive,” Minns said.“There’ll be jobs that go that will never come back.

There’ll be shops that close that do not reopen with another rate rise.“We can’t be flippant about this, this is a very, very tough call for them.”Asked about government spending adding to inflation pressure, Minns said: “I think everybody needs to do their bit.”Albanese and the treasurer, Jim Chalmers, have confirmed next month’s mid-year budget update will including a savings package, even as they point to international factors including the war in Iran as the cause of price hikes.Internally, frustration is growing about the government’s handling of the economy.One Labor MP told Guardian Australia voter anger was already high ahead of the rates decision, likening the tough political climate facing the government during a slump in polling in its first term.They said Albanese and Chalmers would be hoping the trajectory for inflation and interest rates experienced before the 2025 election would play out again next year. After peaking at nearly 8% in late 2022, inflation fell to within the Reserve Bank’s target band before voters went to the polls.“It’s the mid point in the cycle and people are grumpy,” the MP said.Albanese will be at the Commonwealth leaders’ summit in Antigua and Barbuda on Tuesday when the RBA announces its rates decision, leaving Chalmers to speak for the government.The environment minister, Murray Watt, defended the government’s spending on Monday.“We need to remember that Australia is not the only country going through inflationary pressures at the moment,” he told ABC radio.“This is a global phenomenon, and even if the Australian government was to cut its budget to zero, we would still be experiencing inflationary pressures because of what’s happening around the world.”Labor frontbencher Tanya Plibersek defended Chalmers, insisting the savings would be meaningful but would not hurt households.“There’s been no reforming treasurer in Australian history that hasn’t copped it when they’ve made big changes,” Plibersek said. “We all support Jim.”ACTU secretary Melissa Donnelly warned workers “cannot survive another interest rate rise”, in a demonstration outside the RBA’s Sydney headquarters.

She blamed big banks and supermarket giants for adding to the pressure on households by slugging customers.“Workers are already struggling and feeling the brunt of these cost-of-living pressures. Workers didn’t create this inflationary crisis, it’s caused by Trump’s war in the Middle East, but workers are feeling the pain of it every day,” she said.Monday’s Newspoll put Labor’s primary vote at 27%, behind One Nation on 28%, but remaining ahead of the Coalition on 21%.The opposition leader, Angus Taylor, accused the federal government of losing control of inflation and interest rates.“We’re seeing a Labor government that can’t control its spending,” he said. “It cannot control its spending and the result of that is the Reserve Bank needs to do all the hard work.”