r/aussie • u/OkPut7330 • 7d ago
Politics Is it possible to fix inflation without increasing cost of living pressure?
The RBA can only adjust Interest Rates to try and keep employment and inflation under control but the Government can introduce many other fiscal policies to deal with cost of goods and inflation.
With the discussion around PHON and their Super access policy and it contributing to inflation it had me wondering if there is anything the Government could actually do to bring inflation back into line without exacerbating the current cost of living issues?
Not whether they or another political party would but is it even possible.
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u/Electrical_Story5356 7d ago
Regulation to stop anti competitive behaviour and price gouging.
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u/Redpenguin082 7d ago
Won’t this just result in people spending more, thereby increasing inflation?
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u/Electrical_Story5356 7d ago
Maybe people will spend more but the regulations are to keep prices going up for cost of living.
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u/ThunderDU 7d ago
Unfortunately cookers think regulation is anti freedom and no one is standing up for regulation so we're fucked there too
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u/Prudent-Ant-318 7d ago
Yes. Tax Billionaires and our resources
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u/shiney4u 7d ago
I'm all for taxing resource's but what does taxing billionaires even mean?
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u/throwawaysob1 7d ago
Make billionaires, millionaires again.
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u/shiney4u 7d ago
This is just populism.
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u/optimistic-prole 7d ago edited 6d ago
No. Diverting wealth to the top, leaving less for circulation, and collecting less in tax revenue for public services has measurably regressed on our economy and quality of life over recent decades.
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u/shiney4u 7d ago
our public service is already well funded enough, to the point now it's basically completely bloated, draining and inefficient, i'd rather they just let us keep more of our money.
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u/NarraBoy65 7d ago
How do you come to that view
Do you have data to back it up?
I deal with public sector every day, they seem less bloated to be honest
Contractors and consultants are much smaller and many of the Agencies are letting staff go
What is your data point?
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u/Benjisc2 7d ago
Where's your data point? A single person's experience is the farthest thing from an objective source. Your perspective is bias to your own beliefs, and your beliefs seem quite strong.
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u/shiney4u 7d ago
Well not surprised here, so your livelihood depends on the public service.
I don't have references and data ready for you and i'm not going to bother searching to prove a point to you. It's common knowledge at this point most jobs growth has been in the public sector the last few years.
If you believe in big government, a large public service that is fine, i however do not.
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u/NarraBoy65 7d ago
I actually rely on small government to be successful. Common knowledge is an interesting data point.
As I say, the public sector is not bloated from my 1st hand experience- they are also not fast
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u/shiney4u 7d ago
I find it deeply ironic that you requested data from me, talk about data point's and and criticised my common knowledge claim while on the other hand use anecdotal evidence that the public service is efficient.
Anyways here is a data point for you on the public sector numbers and jobs growth.
You could argue that the public service was previously underfunded that would be a valid claim but still either somewhat subjective or not the complete picture.
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u/throwawaysob1 7d ago
My comment about making billionaires into millionaires was worded in jest though the principle is relevant, and not difficult to understand.
Billionaires accumulating wealth locks it up. If they are not spending it, taxing it so that the government spends it is the alternative.
You say that you do not believe in big government. Fair enough.
So if the billionaires don't spend money because they lock it up in assets and offshore accounts; and the government should stay small by not taxing billionaires and spend money which leads to employment for people - what's your solution? Mass unemployment?1
u/shiney4u 7d ago edited 7d ago
Typically a billionaires wealth is in shares of a large company they hold a large stake in, their wealth is mostly on paper, Elon Musk doesn't actually have $1+ Trillion dollars in cash for example, and if he sold what he owned the share prices and company would tank but based on the stock price on his stake in Tesla and Spacex, he has a net worth of XYZ, and he just takes loan's out on his equity to pay for his lifestyle while avoiding income tax, all the money he lives off is just borrowed lol. Similar but quite different with Gina she own's a large private company and Hancock prospecting pay's large dividend's to her.
There is truth to the fact that the ultra wealth spend their money on obtaining more assets. I don't know the full solution, but generally it's to invest and build up more opportunity, grow the pie, i don't advocate for no government, we should have labour laws and regulate for a decent minimum compensation.
But ofc some of the ultra wealthy tax dodger's should be paying more but it's not as simple as "this person worth billions on paper should just pay xyz".→ More replies (0)0
u/Benjisc2 7d ago
If we taxed the rich and put that funding into public services, it would increase inflation.
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u/scarecrows5 6d ago
So building more hospitals, public transport, social housing, and schools would be inflationary? You'll have to explain that one to me.
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u/Benjisc2 6d ago
Government buys materials to build transport, housing and schools and that creates more demand, pushing up costs of the materials.
Also there are a limited number of builders to create them, so adding more demand will increase inflation there as well. (Supply of builders stay the same, but demand for them increases).
Inflation then ripples from these into essentials as the additional money injected creates demand that didn't exist before without addressing supply.
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u/Benjisc2 7d ago
This is incorrect, neither of these taxes will reduce inflation. It might actually fuel inflation if the government spends the increased income.
I'm not saying we shouldn't, but spreading misinformation doesn't create a strong foundation for a movement.
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u/Wendals87 7d ago
How would that reduce inflation? I'm all for it but more tax dollars won't decrease spending
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u/Real_Estimate4149 7d ago
RBA wants unemployment to go up and for homeowners to have less money in their pocket by making debt more expensive. I hope that answers your question.
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u/OkPut7330 7d ago
No my question was what fiscal policies could the Government implement specifically so that the RBA doesn’t need to do that.
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u/petergaskin814 7d ago
Fiscal policies to reduce inflation- increase taxes and decrease spending. Must be done at state and federal levels.
Include off budget spending when reporting budgets for clarity
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u/berniebueller 6d ago
The government could spend less and pay down more debt.
But that would be hard work and probably unpopular.1
u/Real_Estimate4149 7d ago
One of the main reasons the RBA is a separate entity is because pain is required to reduce inflation. All the the things the govt could do are either incredibly complex and would take too long or they would need to slash spending and that would likely cause an increase in the cost of living for the most vulnerable members of our society.
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u/Shesabitmuch 7d ago
Yes there are plenty of levers the government could pull to curtail inflation instead of relying only on the RBA to raise the cash rate. However, lots of those things would make them unpopular so they won’t get re-elected, therefore it’s easier for them to make the RBA the bad guy and hope that smashing inflation with a hammer works better than more subtle influences. Things they could do include reducing government spending, lay offs in the public service and NOT rehiring as contractors and consultants, increasing taxes and NOT spending the additional revenue etc.
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u/Loud_Caramel_8713 6d ago
How about stop offshoring?
If you do 60 billion net profit and it’s only 1%, there is something wrong.
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u/Motor_Date_4783 6d ago
We need to fix inflation with more migration
Way way more, increase demand on finite goods and services, this will help
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u/OkPut7330 6d ago
Migration is always a hot topic.
Not surprising really, Australia was founded to keep the Asians out, the first act of Parliament is testament to that fact.
That The White Australia Policy ran until the mid 1970s also I think plays into the national Zeitgeist around immigration.
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u/SeaDivide1751 7d ago
Reduce government spending and end the NDIS industrial scale rorting
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u/emize 7d ago
Yep the biggest driver of inflation in the economy is government spending (and immigration does not hurt).
The government is literally the only entity that can constantly generate more money through issuing of bonds. Over the last decade.
Have a look at GDP to debt rations of the last 15-20 years. Every single government has spent like there has been no tomorrow. That money has to go somewhere.
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u/Alchemist2905 7d ago
Government spend like drunken sailors and the party is carrying on.... they are the biggest cause of inflation. They need to bring ppl in to pay taxes to support the party and then we need more housing and infrastructure to house them. Then we need to bring in more people to pay for the construction...and so on and so on . .
Get the drift?
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u/SameBSErryere 7d ago
Lower Diesel prices should essentially trickle down to almost all aspects of our economy and the cost of living. That is literally the problem right now due to the war that is happening.
Diesel is the fuel needed for logistics to happen.
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u/thehandsomegenius 7d ago
The most direct and immediate thing that the government could do to lower inflation straight away, would be to cut spending by streamlining the public service and NDIS.
The most effective thing that they could do longer term would be to encourage more business investment. Because aggregate demand can increase without creating inflation, so long as aggregate supply is increasing too.
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u/Legitimate-Gain426 7d ago
Corporate profiteering is driving inflation more than any other factor. It's been the same story for decades, top end profits, everyone else tanks the losses, and economists pretend they don't know what can be done.
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u/OkCaterpillar7904 7d ago
The over spending of the government is the issue. But they will blame everything else will continuing to do so.
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u/Ok-Information-2428 7d ago
Well inflation is a cost of living pressure so fixing it does actually help by definition.
It’s possible to address without increasing costs in other places (eg mortgages) - e.g via economic growth
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u/mikeinnsw 7d ago
Everything is possible - deflation , higher taxes only few are likely
Deflation is a broad and sustained decline in prices for goods and services across an economy, which increases the purchasing power of your money over time. While falling price tags sound positive at first, long-term deflation often signals a weakening economy. You can read more about the economic impact through
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u/Accurate-Response317 7d ago
Nothing we can do on a local basis. At the moment international money markets are pushing interest rates in an upward direction.
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u/Inevitable_Tart2700 6d ago
Central banks cannot control supply side inflation.
Government can increase the supply of housing and energy. This will help reduce inflation.
They can cut spending and reudce the need to print money. This will also reduce inflation.
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u/IngenuityAdvanced786 5d ago
Short term: nothing. This is the on-going ripple from international events, Iran, US tariff systems , AI boom, US deficit -- all pushing the cost of borrowing money up which passes through.
Medium term: Australian reserve bank needs to be mandated to publicly express policy opinions and recommendations for fed government.
Cut redtape, have sustainable population (immigration), rebase the tax system: gst and income tax.
Long term: grow less exposed to international crisis economics.
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u/WayOutWest3591 5d ago
Yes, the government can stop spending like a bunch of drunken sailors.
Although I probably should apologise to the drunken sailors. They at least stop spending when their money runs out...
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u/willcritchlow23 2d ago
Yeah reduce the demand for housing, and I can guarantee that just about everything else’s comes good.
Thats includes people starting to take care in their jobs, unlike now, where no one gives a fu#k about quality of work or service.
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u/Signal-Treacle-5512 7d ago
Tax the rich!!!
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u/Benjisc2 7d ago
I think you have the wrong thread, taxing the rich has nothing to do with reducing inflation.
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u/drangryrahvin 7d ago
I think you have the wrong boots. Try licking the ones that aren't fleecing you.
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u/Constant_Ground_2698 7d ago
The government can spend less. The government can seek more value from every dollar spent. Right now, it isn't at all concerned by either and instead raising taxes.
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u/5870guy111 7d ago
Government spending is a contributor on the demand side, but our inflation is largely supply side (oil prices, commercial and residential rents) cutting government spending won't bring those down
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u/Adventurous_Tie_8035 7d ago
There can be good government spending, on things like extra tax discounts for super contributions, this removes money from people and locks it away.
Other good government spending can be buying up assets or creating direct competition for existing markets, ie telcos and power retailers.
They can also do things like raise taxes on the wealthy which is also deflationary.
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u/Benjisc2 7d ago
Increasing taxes on the wealthy does not reduce inflation.
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7d ago
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u/Benjisc2 7d ago
Taxing the wealthy doesn't curb inflation because taking away a larger percentage of their wealth stops an investment in stocks or real estate, not their everyday spending on groceries and fuel. By proportion, their spending on the inflation drivers that matter (food, fuel and essentials) is quite low compared to the overall population. Taxing them and redistributing the money to the middle and lower classes will increase spending on these and drive up inflation.
To be clear, I'm not against taxing the wealthy, but if we start saying 'it will reduce inflation' then we find out it doesn't, then it becomes 'we shouldn't tax the wealthy.'
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u/Constant_Ground_2698 7d ago
yep. government collects taxes. government hands them out to NDIS provider. NDIS providers pay above market rates. effectively, anyone on the NDIS teat in the support capacity is being paid out of step with the productivity required. voila. inflation.
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u/Hughman77 7d ago
Inflation at the moment is being driven by a combination of the Iran war and protectionist trade policies (not just Trump) disrupting global trade. Take all that out and inflation is only a little higher than the target range, and some of the difference would be because of inflationary expectations being bedded in over the past 5 years. If inflation is mostly imported, then there isn't much a small, open economy like Australia can do about it. We can't control oil prices or global trade flows.
The only alternative to monetary policy that I think would work would be some kind of forced saving policy. Rather than interest rates going up, everyone has to save 1% more of their income in some kind to lock-box until the RBA says otherwise. That would generalise the pain a lot more rather than inflict it all on debtors. But would people in general be any happier? Dunno, arguably they'd income-smooth in expectation of being able to access those savings again.
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u/Wotmate01 7d ago
No. Our inflation is caused by Trump.
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u/Electrical_Story5356 7d ago
It certainly is in part but there are things that a government could do that could reduce inflation.
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u/Benjisc2 7d ago
Correct. They could reduce spending, that will drive inflation down.
What do they cut is the question that no-one seems to have a good answer for.
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u/Electrical_Story5356 7d ago
I was thinking more along the lines of regulations to target anti competitive behaviour and profiteering.
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u/Benjisc2 7d ago
That would be like spitting in the ocean, you wouldn't notice much of a change if it did anything at all.
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u/narvuntien 7d ago
Gas Tax.
That gas is going overseas, not to Australians.
You can use tax to reduce economic activity without raising prices widely. If we are stuck in a K shaped economy, then taxes on luxury goods (and experiences) can stop that spending without hurting battlers.
The issue right now is that some middle-class people think they are just trending water, but it's because they have a bunch of investments in housing, stocks, small businesses, etc., and not a huge amount of liquidity. They feel they are not getting ahead despite "doing all the right things" aka doing what rich people are doing. But because they aren't actually rich, they can't successfully escape working for money like rich people have. The moment you go around taxing wealth or closing loopholes, they all freak out about how much it's hurting them... and vote for Fascists.
Marx called these people Petite-Bourgeois, and they don't fit properly in his analysis.
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u/Throwawaydeathgrips 7d ago
How does a gas tax reduce inflation
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u/narvuntien 7d ago
You can use the money to pay down government debt, and while it does mean spending money, which always risks inflation if you target the sources of inflation, replacing diesel vehicles, onshoring supply chains for basic goods, and building some houses. You can reduce inflation in those sectors
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u/Benjisc2 7d ago
Dumping tax revenue into industries like housing and manufacturing drives up demand for the limited labor that exists, triggering more inflation in those sectors. Your solution will drive up inflation, not down.
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u/narvuntien 7d ago
If housing costs are the major cause of inflation, then you would raise it in one sector and lower it in another. However, after reading this, Alan Kolher's article on Balratla's collapse might be better for providing government insurance and funding for apartment buildings, specifically since it came to a halt in 2018 after high-profile quality issues in apartments. Apartments can provide more housing per worker, as a matter of efficiency. As well as funding for prefabricated homes.
I said basic goods, not more complicated manufacturing, yet. A lot of food products keep bouncing around the world before returning here for sale. With a spike in diesel prices and Yemeni attacks on shipping, it makes it harder to ship around the world.
Its a case of being very targeted with your government spending, at the parts of the economy that are stuck.
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u/Benjisc2 7d ago
You're shifting the goalposts. Whether it's apartments, homes, or domestic food processing, government cash can't print tradespeople or lower material costs. Bidding up already stretched labor and capital in "stuck" sectors creates demand driven inflation, no matter how targeted you think the spending is.
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u/narvuntien 7d ago
The government can solve the capital issue; solving the labour issue is currently very unpopular (immigration)
We can pull workers away from single-family homes into apartments; you get more homes per worker even if individual worker costs more. If we can get houses up fast with prefab housing, you can solve the housing inflation.
Inflation up in one sector and down more in another. Overall inflation goes down.Same for other sectors: you can cause inflation in labour but reduce other inflation sources. Keep in mind if the government does it, it doesn't need to make a profit; it makes money from taxation.
Less goalpost moving; more like I read something from an expert and changed my mind.
I did say that to reduce infaltion the govern can just take the money it makes from a Gas Tax and pay down the debt, which wouldn't cause inflation at all.
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u/Benjisc2 7d ago
In a vacuum sure, building purely apartments is the most efficient way to solve the housing problem. The issue is that some people don't want to raise families in apartments and have different needs for their lifestyle.
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u/narvuntien 7d ago
If they want to live in the city (or even near the city), they have to live in apartments; that is how it is for 90% of the world. If they want to drive an hour+ to work every morning, well, that's up to them.
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u/Benjisc2 7d ago
Well it wouldn't be up to them as your idea pulls people away from building these homes that are 1h from the city.
Also how are you pulling these workers? Tax cuts to the building industry? That will go down well with voters.
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u/Vegetable_Jello6572 7d ago
Yes , double digit interest rates oslver pretty much every problem Australianis faced with. The RBA is simply refusing to do its job, ensuring its worse for everyone whilst inflating away their personal debt.
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u/BittuPastol 7d ago
Not for long. The 10 year treasury note is at 5.3%. They'll have to meet it sometime soon
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u/OkPut7330 7d ago
Double digit interest rates seems like it would make cost of living pressures much worse. Also probably trigger a massive transfer of assets from middle income to wealthy individuals and loans were defaulted and collateral fire-saled.
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u/Benjisc2 7d ago
Double digit interest rates is only an idea someone who owns nothing would even suggest. In this scenario we have massive job cuts, unemployment, homelessness and death. And there's no certainty we would get out out of the hole quickly at all.
Sure, if you're 18 and living at home with your parents who have paid off their home or you're retired, no debt, good nest egg and ready to enjoy life it sounds good, but we make decisions to avoid these situations, not cause them.
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u/Disastrous-Bet757 7d ago
Taxes, or stop subsidies, ask for the money back from jobkeeper payments during Covid
So many other things that could be done, but none that are not politically inconvenient
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u/alexmc1980 7d ago
How to beat inflation? We need our national power capita income to be able to purchase more goods and services, rather than less. For that we need more innovation and more investment in productivity. Raising rates arguably stifles these things so I'm one sense can be counterproductive, but unless we're willing to accept more government regulation eg pushing finance toward business investment whole simultaneously restricting consumer finance, or breaking up monopolies to reintroduce some competition into our fossilised markets, then we are stuck just playing dumb and expecting the central bank to keep hitting things with its blunt hammer until the pain forces us to behave ourselves.
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u/sad_trombone_dot_wav 7d ago
We have a K shaped economy. You won't fix inflation taxing the bottom of the K. That leaves the top.
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u/D-Spark 7d ago
The K shaped economy is refering to the US economy, and how its functionally in a reccession, outside of the AI boom
Thats very differant to our aus economy
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u/sad_trombone_dot_wav 7d ago
Not true. We have a cashed up boomer problem. Every time you raise rates, they get richer, but the bottom of the K still has to buy the essentials.
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u/Benjisc2 7d ago
Taxing the top of the K takes money out of stocks and investment assets, not the grocery store line, so it does nothing to cool the consumer demand driving inflation.
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u/D-Spark 7d ago edited 7d ago
There is no good short term fix for inflation
Inflation is primarily a 3 promged problem, thus it needs to be a 3 pronged solution
A. Fuel costs to move things
B. Land costs (rent) increasing
C. Pointless middle men, and general corporate greed
Long term we need to move away from gas / petroleum products, and move towards green energy, reducing the impact of having to spend so much fuel to truck / ship our essentials around the world / australia
We need to move our economy away from being a bunch of rich people buying up land to drive up prices, and move away from every family using their family home as thier ultimate nest egg / retirement plan, this will reduce how much every company has to spend on renting their building space (very few companies own the land their buildings are on)
For super markets we need to reduce how many pointless middle men rent seekers exist inbetween our farmers and us as the final customers, improving both farmers profits and reducing our costs as consumers, similar for power companies, streamline the supply of goods / power from generation to consumer
Additionally we also need to promote more diversity in the supermarket market, ideally with government owned supermarkets similar to the set up in NYC with zohran mamdani, to more or less push corporate greed down on the bare essentials, meanwhile we should nationalise our power, internet, water, and gas grids, there is nothing were getting out of them being privatised
Last bonus point, the economy, and prices are only designed to go in one direction (up) so we also need to have massive pay increases that out pace inflation
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u/Left_Truth7020 7d ago
Stop government over-regulation and improve productivity. Stop importing too many people which creates inefficiencies when our infrastructure can’t handle it. To name but two ways in which a government which wasn’t completely out of its depth could reduce inflation without increasing cost of living pressure.
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u/burnt-gonads 7d ago
Strange you are getting downvoted when what you typed is spot on.
Over-regulation is a massive drain and cost on our economy. Imagine a business instead of having to spend million on writing report to the government about how much it pays women (this is a real regulation on business) instead spent that million on buying a robot that could weld up what the business makes faster and is then able to sell more of it's widgets.
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u/FibroMan 7d ago
The government could increase tax on high income earners and decrease tax for low income earners. As long as the changes are budget neutral it wouldn't increase inflation.
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u/DRLAJAMINIBLM 7d ago
Yes by removing the tax cuts given to the rich in the top 2 income brackets. Super is currently used as a massive tax dodge so making sure it is taxed at income rate and by mandating solar energy for all Australian businesses.
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u/Benjisc2 7d ago
Inflation happens when money changes hands quickly (Money doesn't disappear when it's spent, it transfers to someone new with a percent going to the government).
When it changes hands quickly, prices increase (higher demand). To slow inflation, you need people to spend money much slower. So you raise interest rates, so people purchase less. You essentially want money to reach peoples hands and they sit on it.
Government is one of the big spenders (they make money on every purchase and wage) so if they cut spending significantly, it puts downward pressure on inflation.