The week Albo’s excuses finally ran out: No Australian can now be in any doubt about who’s driving the nation’s inflation pain: PVO
The article argues that the Australian government’s spending is adding to inflation, and that ministers’ denials have weakened public trust. It says the Reserve Bank governor has identified domestic capacity pressures and the contribution of both public and private demand, making government spending part of the inflation debate.
It reports that Commonwealth spending reached 26.9 per cent of GDP last financial year, its highest share in four decades outside the pandemic. The author also points to changed or unfulfilled election promises on tax cuts, superannuation, electricity bills and property taxes, arguing that voters were not given a chance to assess some policy reversals before they happened.
- Commonwealth spending reached 26.9 per cent of GDP.
- The article says public demand adds to inflationary pressure.
- It links broken election promises to declining trust.
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Australia has faced elevated inflation in recent years, pushing up the cost of living for households. The question of what is causing this inflation has become a political issue, with debate centring on whether government spending is a significant contributing factor.
The Australian government's spending reached its highest level in four decades last financial year (outside the pandemic years), at 26.9 per cent of the nation's economic output. Economists and the Reserve Bank governor have identified both government and private sector spending as creating pressure on the economy, though government ministers have disputed how much their spending matters.
The debate has become linked to voters' expectations about election commitments. Several government policies have changed or failed to materialise as promised, including pledges on tax cuts, superannuation changes, electricity bill relief and property taxes. This has added public scrutiny of government decisions and whether voters had sufficient opportunity to assess policy reversals before they happened.
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The case for
The government has spent at historically elevated levels during a period of high inflation, with Commonwealth spending reaching 26.9 per cent of GDP—the highest share in four decades outside the pandemic. The Reserve Bank governor has identified domestic demand pressures as contributing to inflation, suggesting fiscal spending is part of the problem. When ministers deny responsibility for inflation dynamics while the evidence indicates government spending plays a role, it damages public trust. Voters also deserve full transparency about policy reversals, particularly broken election promises on tax cuts, superannuation and electricity costs, before those changes are implemented.
The case against
Australia's inflation has been driven substantially by global forces beyond government control—energy price shocks, supply chain disruptions and international commodity costs. Significant Commonwealth spending was necessary for economic stabilisation during and after the pandemic to prevent deeper economic harm and job losses. Monetary policy through interest rate rises remains the primary tool for managing demand-driven inflation, and the Reserve Bank has deployed this aggressively. Essential government spending on services, defence and social support cannot be arbitrarily slashed without causing real damage, and fiscal policy necessarily complements monetary policy in managing complex economic conditions.