Factcheck: Three misconceptions about inflation, government spending and taxes
Jack Thrower
Much of the media and political class is repeating a lot of nonsense about government spending, taxes, and inflation, mostly to claim that the Government needs to make big spending cuts. Let’s go through three misconceptions.
- Does the Government need to make big spending cuts to tackle inflation?
No. Much of Australia’s inflation comes from supply shocks (eg high fuel prices and flow-ons), not excessive demand. Even if governments do want to reduce demand in the economy, cutting public spending is only one option. Instead, they could raise taxes, such as on gas exports or wealth, or intervene in other ways. For instance, if there are supply constraints in construction, one way to free up labour and materials would be bans on new fossil fuel projects or a moratorium on constructing giant data centres.
- Are cuts justified because Australia’s government spending is historically high?
No. While it is true that public spending is quite high in historical terms, this is not a problem in itself, and is actually highly predictable. As societies get richer and older (as Australia has), the public demands more social services such as education, healthcare and social care (aged, disability, child etc). Leaving social services to the private market leads to failure, as shown by economic theory and experience. This means Australia has the choice of either higher public spending, privatised failure, or (too often) a combination of these two.
- Is ‘cutting middle-class welfare’ (means-testing social spending) needed and progressive?
Commentators claim that Australia needs to means-test things like the NDIS, the Child Care Subsidy and Aged Care subsidies in order to avoid giving help to richer people.
This is misguided, often economically inefficient, and frankly morally wrong.
Firstly, it fundamentally misunderstands the point of social spending. Social spending is not just about moving money from rich to poor; it also has a ‘social insurance’ role: it insures or protects everyone against certain risks to their livelihoods, such as sickness and disability, and helps smooth consumption across people’s lives, meaning they experience less hardship in harder times (such as parenthood).
While cutting social services by introducing means testing is framed as ensuring that “those who can pay more” do so, it actually just means people with disabilities or illnesses pay more, while the healthy, able-bodied rich are let off the hook. If Australia wants rich people to pay more into the system, we should tax the rich directly.
Means-testing systems also create inefficiencies and harm poorer people; they require complex bureaucracies to manage and construct barriers to people accessing benefits. Applicants will now have to fill out additional complicated paperwork to prove their income and assets, often leading people to slip through the cracks.
















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Sam
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Sam
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Sam
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Sam
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For randoms to claim to have uncovered stonks of fraud they would need to access sensitive data, which they are unlikely to be able to do lawfully.
"We'll keep you safe"... unless you're a teenage girl and the Coalition wants to avoid committing to consent education in schools for a culture war committed to protecting boys who commit sex crimes....
Haven't we been here before with Robodebt? What legal opinion backs this up?
Honestly, man serves sentence. Man leaves prison. This is literally how this is meant to work.
Three Opposition front benchers ordered out under 94(a) - where is the civility we were “promised” from last week?
If sewerage is the question; what is the issue?
The Opposition has a limited number of questions to challenge the Government with and they focus on this one.
Memories of the $275 power saving strategy.
The G-deficient Taylor does not need an update, rather a complete re-chipping. Mind you, he has not plumbed the sullage-pond overflow chute that Hanson with her putrid cartoons has managed, so there might be a delay securing stock from NVidious.
I am a bit disturbed by the increased acceptance of injecting oneself with unregulated products bought online. Injecting drug use used to be viewed as very "hardcore" but now it seems to have become much more socially acceptable. Guessing that is the ozempic effect but still troubling.
I have always been baffled by the Evangelical pro-life movement that practically salivates at the idea of executing people. That we even had to argue against the US live streaming an execution in 2026 just demonstrates how different our values are.
I find it impossible to understand their behaviour. It shows not only how different our values are, but also that they are pro-birth, not pro-life. They don't actually care about the child once it is born.
One thing about my "prolife" Catholic relatives is that they have always consistently opposed the death penalty. It seems like their ideology is a bit more coherent, although still lacking when it comes to women and girls right not to die from a miscarriage.
I do not support the death penalty and I'm an atheist.
My objections are practical. Law enforcement and the judiciary have been known to fail, quite often. You can always release a convicted murderer if further evidence clears them of their crime, but you cannot raise someone from the dead after they've been executed.
No God required.
I am SO relieved to know that Michelle Bullock is 'not worried' about the almost inevitable rise in unemployment rates due to the expected rate rise. That she might be worried (indeed, anybody on a $1M or more salary with as close to an impregnable tenure of employment would be) about the unwashed poor being still further ground into the dirt, keeps me awake at night.
For the sake of Jesus Greentree Frog, we need to be rid of this person in charge of the RBA. And very possibly, the RBA on which she rode into town as well.
One of the arguments for high salaries for public servants or CEOs of NGOs is to attract or retain talent. Michelle Bullock has spent her entire career at the RBA. Anecdotally , NGOs increased their pay for their ED/CEOs but largely kept the same people. We really need to revisit this idea. I think there is a floor where below a certain salary you would not get competent people for what the role entails but i am not comvinced paying higher leads to better recruitment. Nor am I convinced that lifers would automatically jump ship if they were paid 900k instead of 1 million
Well Sam, looking at how our economy is going and at our government and senior public service I reckon a 50 percent pay cut for senior public service would clear out a lot of dead and diseased wood.
We might get better government without having to pay massive salaries to people whose only concern is to keep their cushy safe jobs.
This really is quite silly. We have a lot to gain from a trading with the EU - strong institutions, not wildly unreliable with every election, a large market - quite reasonable for the EU to require trade partners to meet climate requirements, especially given we already committed to Paris. Also, it was literally the Coalition that made that commitment. There is a cost to becoming an unreliable country that doesn't meet commitments every time there's a change in government.
They call it a "free trade agreement" but that's a lie. They're all regulated trade agreements. They say "free trade agreement" only because that's what Murdoch wants to hear.
As the great philosopher Kylie Minouge once said, I would sooner stick pins into my eyes.
Anyone could do better with the mining boom Costello squandered
Why don't more men prioritise spending time with their children?
The RBA Governor talked about more pain to reduce inflation. No pain of course for those on 7 figure incomes. Cost increases always hit those with the least hardest. Tax cuts do nothing if your income is below the tax threshold.
As far as productivity goes - we have been killing off productive industry for decades with industry moving offshore. It is much more difficult to measure productivity of an economy based on providing services not making stuff. How do you meaningfully measure the work of cares, nurses, teachers, fire-fighters, politicians, content creators? Is productivity actually a meaningful measure in any of those areas. Will building lots of data centres add anything to national productivity?
The old adage of lies, damned lies and statistics holds true. Raw stats can be manipulated to mean almost anything.
Productivity for economists is cutting Registered nurses from aged care homes and then having to call GP or nurse practitioner or ambulance when , quite predictably, someone in an aged care facility needs more than an AIN can provide. I am not talking about multiple RNs, just having 1 on staff at all times.
I worked more than 20 years in aged care in a number of nursing homes. Productivity consisted of setting work routines so onerous that us workers were spending an hour unpaid each day just to finish our day's work so that it didn't spill over to the next shift. Extra productivity was achieved by workers having to forgo their breaks because the work routine was too tight. You should see my varicose veins from standing too long on my feet.
It's a con and it is the workers who suffer.
I know this option wasn't available to many people who couldn't afford a different upfront choice but for those that had a choice, there have been opportunities to lower fuel consumption - especially when purchasing or leasing new vehicles. We can reduce our reliance on fuel through both EVs and more fuel efficient fleets.
We bit the bullet 18 months ago and took out a loan to buy an EV. Best thing we did. When petrol was $1.70 p/L, I was spending, at best, $85 every week to fill the car. Now it's costing me around $20 a week to charge the car, with petrol much higher than it was. Servicing is around $250 against an average of $1500.
We rent, and most of my charging is done over night on a low EV rate through AGL and a 'granny charger'. Even if we didn't have access to home charging, it would still only be about $45 per week to charge the car at a fast charger while I do the shopping.
Yep. We bought an EV earlier this year. We live in an apartment and don't have the option of charging at home. However, the slow pole chargers around the place have made it easy to charge. The only thing that went up was the insurance premiums but that has been completely offset by the drop in all the other costs.
This really is very stupid.
I don't know if two double-shot lattes are going to be enough for this s***show, Amy.
And yes, I believe in us, but do I believe in them is the real question. Answers on a postcard.