Reserve Bank of Australia governor Michele Bullock has confirmed government spending is contributing to a level of economic activity that Australia could not sustain without seeing a worrying resurgence of inflation, which led the central bank to raise interest rates for the first time in two years on Tuesday.
The comments by Bullock to the government’s economics committee on Friday come as economists and industry argue that government spending, which reached 26.9 per cent of gross domestic product in 2025-26 – the highest level in the past four decades outside the pandemic – has been crowding out household spending and business consumption.
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