Labor's Spending Addiction Fuels Interest Rate Rise

The Reserve Bank is expected to raise interest rates again tomorrow, but Deputy PM Richard Marles' promise of 'light at the end of the tunnel' falls short of addressing Australia's spending addiction.

Labor points to external factors such as the Iran war and rising fuel prices for inflation woes, but RBA governor Michele Bullock's words in July suggest a domestic problem preceded these events.

Bullock noted that inflation was already above target before oil price rises, which means the government's high spending is contributing to the issue. AMP chief economist Dr Shane Oliver agrees, saying public spending uses up spare capacity and depresses productivity, contributing to inflation.

Despite forecasts for a decline in spending to 26.2% of GDP by 2029-30, current projections show federal spending at 26.8%, or nearly $830 billion this financial year. Oliver recommends bringing spending back towards 25% of GDP to ease the problem.