it warned of a global recession due to the oil crisis<\/a>.<\/p>\nRenowned economist Paul Sheard, who served as vice chairman at S&P Global, said lavish government spending could worsen the inflation crisis.<\/p>\n
\u201cIf you say, \u2018we need to put more money back in households’ pockets because they’ve been hit by the rising prices,\u2019 that’s putting more demand stimulus into a system that probably needs a little bit more restraint and patience,\u201d Mr Sheard told Business Weekend.<\/p>\n
\u201cIt can be a little counterproductive in that sense that – particularly if it’s done on a mass scale – you’re really doing a fiscal stimulus which would tend to be inflationary into a situation that is already inflationary to start with.\u201d<\/p>\n
Inflation in the 12 months to February was already elevated at 3.7 per cent.<\/p>\n
This figure, which sits outside the Reserve Bank of Australia\u2019s 2-3 per cent band, is expected to balloon upwards of five per cent once the fuel crisis is considered.<\/p>\n
Australians will see just how impactful the price rises have been on Wednesday when the Australian Bureau of Statistics hands down the March inflation figures.<\/p>\n
Government spending was already a contributor to the high level of inflation before the crisis, along with low productivity and the resurgence of the private sector last year.<\/p>\n
Labor handed down cost of living relief during the fuel crisis by spending $2.6 billion to halve the fuel excise for three months.<\/p>\n
Meanwhile, all states and territories have agreed to forego their GST take from the excise.<\/p>\n
Former Reserve Bank of Australia economist John Simon said governments needed to avoid issuing universal subsidies which heap pressure on public debt.<\/p>\n
\u201cThey need to resist the universal subsidies because, frankly, I don’t need electricity subsidies (and) people don’t need fuel subsidies to fill up their Porsche Cayennes,\u201d Mr Simon told Business Weekend.<\/p>\n
\u201cWhat you want and what the IMF is recommending is that, to the extent that the government feels support is necessary, that they target it.\u201d<\/p>\n
Meanwhile, the IMF said large government spending would be at odds with central banks around the globe which are struggling to keep inflation under control.<\/p>\n
\u201cAvoiding fiscal stimulus is also critical when inflation is rising, so as not to complicate central banks\u2019 task,\u201d the IMF said.<\/p>\n
Additional government handouts may seem tempting for short term relief, but they could force the RBA to lift the cash rate and hurt Australians in the long run.<\/p>\n
Economists expect the RBA to deliver another cash rate hike next month.<\/p>\n
This will be the third consecutive hike this year if it eventuates and will undo all three cuts handed down in 2025.<\/p>\n","protected":false},"excerpt":{"rendered":"\u201cCounterproductive\u201d mass government spending during the fuel crisis is worsening Australia\u2019s already high inflation rate, a leading economist…\n","protected":false},"author":2,"featured_media":632925,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[64,63,99,164,98767,28874,5465,258948,267069,306556,81671],"class_list":{"0":"post-632924","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-au","9":"tag-australia","10":"tag-business","11":"tag-economy","12":"tag-fuel-crisis","13":"tag-imf","14":"tag-inflation","15":"tag-middle-east-conflict","16":"tag-oil-crisis","17":"tag-paul-sheard","18":"tag-sp-global"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/632924","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=632924"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/632924\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/632925"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=632924"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=632924"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=632924"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}