As interest rates climb and inflation remains stubbornly high, Australians are feeling the squeeze more than ever. With cost-of-living pressures mounting, many are asking: What can the government do to help? Micaela Fuchila from Jarden has laid out some crucial steps the Albanese government can take to limit inflation’s growth — and it starts with no more subsidies.
Tackling Inflation: The Power of Removing Subsidies
Micaela Fuchila, Jarden’s chief economist, isn’t holding back on what needs to be done to keep inflation in check. One of the most pressing issues, she argues, is subsidies. While many may think that giving rebates like the power subsidies that were phased out at the end of 2025 helps, Fuchila says it’s a temporary fix at best. Essentially, while rebates might offer a quick relief, they ultimately push prices higher, making it harder for inflation to come down, reports Sky News.
It’s a tough pill to swallow, especially when households are already struggling. But Fuchila’s point is simple: if we want inflation to ease in the future, we have to stop propping up costs now. If the government can find ways to reduce price pressures without relying on short-term subsidies, it would go a long way toward tackling the core issue.
Boosting Productivity is Key
Another key measure Fuchila highlights is the need to boost productivity growth, which has dropped to historic lows. Currently sitting at around 0.8% annually, this figure is far below what Australia needs to keep up with global competition. Fuchila suggests that increasing productivity in sectors like manufacturing, technology, and services could help reduce cost pressures and allow the economy to grow without inflating.
But here’s the catch — increasing productivity isn’t a quick fix. It requires investment in infrastructure, technology, and a strong workforce. It also means making sure that Australians are skilled up for the jobs of the future. Without this, we’ll continue to face an uphill battle, particularly in industries that are essential for everyday life.
The Role of Government Spending
When it comes to government spending, there’s a real split in opinions. Some economists, like Shane Oliver from AMP, argue that cutting public spending is the key to easing inflation. Others believe private sector spending is the main culprit, as the RBA suggested in their most recent statement.
Fuchila doesn’t shy away from calling out the high levels of public spending over the past few years, particularly following the pandemic. With public sector spending at 28% of GDP, up from the historic average of around 22%, Fuchila says it’s time to rethink how money is being spent. Reducing wasteful government expenditure could, in her view, alleviate some of the inflationary pressure that’s currently weighing on the economy.
But here’s the tricky part: cutting government spending during times of high inflation and a cost-of-living crisis could be politically difficult, as it risks alienating voters who depend on certain programs. The government will have to walk a tightrope to balance these needs.
What Does This Mean for the Future?
While the government has already made moves like phasing out rebates, there’s a clear need for more coordinated action across all levels of government. Fuchila calls for a joint effort between state governments, the RBA, and the federal government to support the inflation outlook. The idea is that if all parties can work together, inflationary pressures could be eased without triggering another rate hike or further hurting Australians already struggling with rising costs.
The question now is whether these measures will be enough. Inflation is expected to remain above the RBA’s 2-3% target, so the road ahead is still uncertain. But by focusing on long-term solutions like cutting subsidies, boosting productivity, and being smarter about government spending, there may still be hope for tackling inflation without overburdening Australians.
For the everyday Aussie, the hope is that these policies translate into real relief. After all, the high cost of living isn’t going anywhere anytime soon.
