THE fight against inflation threatens to hijack Kevin Rudd’s second 100 days in power, with deep-seated fears inside government that the drivers of inflation are resistant to interest rate rises and budget spending cuts. The Prime Minister told The Weekend Australian yesterday that while there were signs of inflationary pressure before November’s election, it was now clear Labor had taken government in a set of circumstances that were unique in recent economic history. The Reserve Bank is battling to rein in inflation with a series of interest rate rises that to date have done little to slow the economy and rising prices. The Government has joined the effort, pledging to slash spending in its first budget, address poor savings rates and tackle skills shortages, ageing infrastructure and low workforce participation. He has even marshalled the proposed $31billion tax cuts to his case, suggesting that delivering relief in pay packets will ease pressure on the demands for wage increases, particularly in the next Fair Pay Commission minimum wage hearings. The fears that interest rates will have to bite harder to have an effect when inflation is being fuelled by other factors has the Government bracing for at least two further rises. Read More