ANALYSIS
Everyone in Australia right now feels like something’s off.
You’re working, you’re earning, on paper the economy looks “okay” … but everything feels harder. Groceries, insurance, rent, mortgages – it all just keeps creeping higher.
And then you hear the explanations. Supply chains, global shocks, wages.
But none of that really explains why it feels persistent. Why it doesn’t go away.
Because the real issue isn’t one-off shocks.
It’s the system.
Over the last few years, Australia hasn’t just grown – it’s been propped up.
Governments stepped in during Covid and spent aggressively, and fair enough at the time. But the key point is – they never really stopped.
Spending kept rising. Programs expanded. Debt kept building.
State debt is on track to approach $900 billion in the next few years. Total public debt is pushing past $1 trillion. And we’re now spending tens of billions every year just servicing that debt.
And that matters, because governments don’t have a vault of money sitting somewhere.
They borrow it.
And when they borrow, the banking system creates credit. And when credit is created, new money enters the economy.
So every time spending ramps up, the amount of money in the system increases.
Quietly, but relentlessly.
Now, at the same time, look at where the economy is actually growing.
Since 2023, we’ve created around 926,000 jobs. Sounds like a strong labour market.
But nearly 70 per cent of those jobs are in government-funded sectors – health, education, public administration.
Those sectors are important, no question. But they don’t behave like the private sector.
They don’t generate exports. They don’t compete globally. And critically – they don’t drive productivity in the same way.
And here’s the imbalance. Government-funded jobs are about 30 per cent of the workforce, and yet they’re producing the vast majority of job growth.
So what you’ve really got is this: an economy where growth is increasingly driven by government spending – not private sector expansion.
Which means that growth has to be continuously funded.
More spending. More taxing. More borrowing. More credit creation. And that means more money creation.
Now here’s the key point – the one that actually explains why everything feels more expensive.
If you increase the amount of money in the system, but you don’t increase the amount of real output at the same pace, each dollar buys less.
Not because companies suddenly got greedy.
Not because supply chains broke forever.
But because the unit you’re measuring everything in – the dollar – is being diluted.
That’s inflation.
And here’s where most people get lost.
Because they look at Consumer Price Index (CPI) and think that’s the whole story.
But inflation doesn’t show up evenly, all at once.
New money enters the system in specific places first.
It flows into housing. Into financial assets. It flows into anything that holds value and can’t be easily created.
And only later does it spread through the rest of the economy – into everyday prices.
So if you want to see what’s really happening, you don’t start with CPI.
You look at the early signals.
And this is where gold and silver come in.
Not as investments. Not as speculation.
As measuring tools.
Because unlike dollars, they can’t be created by a bank or a government.
They just sit there.
So when you see gold move from around $3000 to over $7000 an ounce in Australian dollars and silver triple – that’s not telling you something changed about gold.
It’s telling you something changed about the dollar.
It now takes more dollars to buy the same ounce.
That’s the system revealing itself.
And when you connect that back to what’s happening here, it lines up perfectly.
We expanded government spending.
We expanded debt.
We expanded credit.
We expanded the money supply.
At the same time, we shifted job growth toward sectors that don’t lift productivity.
So you’ve got more money chasing less real improvement in output.
That gap is inflation.
And then we get to the final act.
Interest rates.
People ask – why are rates still high?
Because once that money is in the system, the only way to deal with it is to slow it down.
Higher rates reduce borrowing.
They reduce credit creation.
They try to take pressure off prices.
But by then, the money is already out there.
So when people say inflation is coming down, they may be right.
But the structure that created it is still there.
Mark Bouris is the Executive Chairman of Yellow Brick Road Home Loans