‘No subsidies’: Jarden’s Micaela Fuchila reveals crucial ways Albanese government can help limit inflation’s growth

The government has been told of some crucial ways to help limit inflation and keep rate rises to a minimum as debate rages on the role public spending played in the latest hike.

Reserve Bank of Australia’s governor Michele Bullock did not cite government spending after hiking the cash rate to 3.85 per cent on Tuesday, however, many leading economists have raised concerns about public spending’s role.

AMP’s chief economist Shane Oliver said the “best thing government can do to help alleviate” inflation and interest rate rises is “to lower the level of public spending”.

Treasurer Jim Chalmers has blamed the surge of private sector spending, a point mentioned in the RBA Board’s statement on Tuesday.

Despite disagreement over what is driving inflation’s rise, Jarden’s chief economist Micaela Fuchila laid out some crucial ways the government can help limit inflation.

She lauded the government’s decision to roll back subsidies – such as the power rebates which Labor discontinued at the end of 2025 – as crucial for bringing down price pressures in the long-term.

“(With) removing subsidies, optically they increase inflation at the start, but later on … no subsidies are better than subsidies in terms of the outlook for inflation,” Ms Fuchila told Business Now.

She also called for the government to boost productivity growth, which sits near historical lows at about 0.8 per cent annually, and getting power prices down without rebates.

“Get electricity prices back down in a different way than (bringing) rebates in,” Ms Fuchila said.

“That will help to understand where inflation is coming from.”

Inflation may have peaked in some aspects of the economy, however, as Ms Fuchila noted public sector wages growth had likely hit their limit last year.

She also called for a “coordinated effort” to support the inflation outlook from “all levels of governments and the RBA” to help taper price pressures.

Ms Fuchila’s calls come as government spending as a percentage of GDP has sat at an average of 22 per cent since the 1960s but ballooned to about 28 per cent since the high levels of government spending during the pandemic.

Meanwhile, inflation is not forecasted to drop within the RBA’s 2-3 per cent target band this year.

Money Markets expect at least one other rate rise this year, however, it remains unclear whether a second could follow.