To see through the Treasurer’s subterfuge, simply ask yourself: will the cost of living measures put money into people’s pockets or remove it from them?
“The theory that targeted relief can lower inflation has caused disagreement among economists …” In fact, I don’t know a single one of repute who agrees with it.
Former head of Deloitte Access Economics, Chris Richardson, wrote: “[Governments] find it hard to fight a cost of living crisis [because] they fight it by giving people money. But that money then gets spent, meaning that it adds to inflation. So [government] attempts to help cost of living DON’T actually help cost of living.”
At best, the net effect is a change in the distribution of resources but with lower output and higher unemployment than there otherwise would have been. In this environment, extreme caution should be urged when attempting to blunt the inflationary impact in this way. The RBA and Treasury seem to believe that from here on out we will experience an immaculate disinflation. Maybe.
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