Australian economists debate spending cuts as alternative to RBA rate hikes
With the Reserve Bank tipped to raise rates again, scrutiny turns to whether government budget cuts could do the inflation-fighting job instead.
What to know
- The RBA is tipped to raise interest rates on 2026-11-03, which would be its fifth hike this year and 18th in five years.
- Debate has intensified over whether targeted government spending cuts could substitute for broad, 'blunt' rate hikes in curbing inflation.
- The government's budget is framed as a more precise tool than rates because it can target where the pain of demand suppression falls, but cutting spending is politically costly.
- Online reaction pushes back on the mainstream framing, with critics arguing coverage omits corporate profits and price gouging as drivers of inflation.
“High inflation hurts all Australians, especially the most vulnerable. Every household has seen how the price of everything has gone up in recent years. Pay packets don't go as far as they used to”
Michele Bullock, RBA governor · ABC Australia ↗ · Nov 1
Michele Bullock Reserve Bank of Australia governor
Jim Chalmers Australian TreasurerTom Crowley ABC News reporterAlbanese government Federal government of Australia
How it unfolded 3 developments, newest first · click a bar or a number to jump articlesposts
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RBA expected to raise interest rates for fifth time this year — The Reserve Bank is tipped to lift rates again, which would mark the 18th hike in five years, intensifying pressure on borrowers and renewing calls for alternative tools.
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Government flags fresh budget savings — The Albanese government has signalled at least some new spending cuts amid the inflation debate, though the scope of the savings is not yet detailed.
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Reader accuses article of ignoring corporate profiteering
A Bluesky commenter argues the explainer omits price gouging, wage suppression and record corporate profits as drivers of inflation, framing spending cuts as unfairly burdening ordinary Australians.
“You must suffer so the rich can live beyond their means.”
— timinclimate.naruresearch.com.au -
T
Any article about inflation in Australia that mentions none of the words "price gouging", "wage suppression", "corporate greed" or "unlawful cartel" isn't worth shit. We have companies in this country today making all-time record profits. You must suffer so the rich can live beyond their means.
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Economist critiques article's account of inflation's cause
Economist John Quiggin questions the ABC piece's causal reasoning, noting it attributes inflation to the Middle East war without explaining the mechanism, instead deferring to the RBA's claim that 'the cause can come from anywhere.'
“How does this work? Crowley doesn't tell us, but relies on the RBA "The cause can come from anywhere.”
— johnquiggin@aus.social -
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ABC Tom Crowley tell us "In simple terms, inflation happens when an economy is operating above capacity. When the demand to spend is more than what an economy can supply, the extra demand pushes prices up." then instances the Middle East war. https://www. abc.net.au/news/2026-11-02/gov ernment-spending-cuts-to-control-inflation-explained/107337846…
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ABC explains case for and against spending cuts over rate hikes
ABC's Tom Crowley publishes an explainer on how demand-suppressing tools work, citing RBA governor Michele Bullock on the dangers of embedded inflation and noting the political difficulty of cutting spending versus raising rates.
“It's critical that we stop [this] from becoming embedded in price-setting decisions across the economy or the problem will only become worse.”
— Michele Bullock -
first by ABC Australia, 11d ago
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Commentary turns to spending cuts as inflation tool — In the week before the expected rate decision, commentary increasingly focused on whether government spending cuts could act as a targeted, 'precise instrument' against inflation, as opposed to the Reserve Bank's blunt rate rises.