RBA Admits to Ignoring Government Spending Cut Scenario

Former treasurer Joe Hockey has disputed a Reserve Bank of Australia (RBA) admission that they have not modelled a scenario where government spending is cut by two percent. During a parliamentary hearing, RBA Governor Michele Bullock and assistant governor Sarah Hunter were questioned about the central bank's inflation modelling.

RBA officials confirmed that they had not run a scenario to see how demand would change if government spending was reduced by two percent. Liberal MP Simon Kennedy asked if reducing government spending by this amount would increase demand, but RBA officials said they had not modelled this scenario.

Hockey stated on social media that the RBA's admission is 'not true', claiming they had done so when he was treasurer and used it to argue for fiscal consolidation. The exchange has sparked debate about inflation modelling and government spending.