Bullock's Stark Warning: Government Spending Fuels Inflation

Reserve Bank Governor Michele Bullock has delivered an economics lesson to the Albanese government that they badly needed.

The cash rate is now at its highest level in 15 years, standing at 4.6%, and borrowers are being squeezed once again.

Bullock made it clear that blaming the Middle East conflict doesn't explain the whole situation, as Australia already had an inflation problem before the war began.

In response to a question from Daily Mail reporter Nicholas Comino, Bullock explained that aggregate demand is made up of both public and private demand, and both contribute to inflation.

The RBA Governor stated that demand growth has been running ahead of supply, which is what they're trying to address with interest rate rises.