Inflation is the sneakiest tax of all. It does not show up on your payslip, there is no debate in Parliament, and no Treasurer ever stands up to announce it. Yet it eats away at every dollar you earn quietly, relentlessly, and without mercy. Everyone pays, and everyone suffers. And right now, Australians are paying through the nose.

This week’s CPI figures should have been a wake-up call if anyone in charge was actually awake. Headline inflation came in at 3.2 per cent for the year, with the trimmed mean at 3.0 per cent. Both sit outside the Reserve Bank’s 2-3 per cent target band.

And let us also not forget, the RBA is already one of the more lenient central banks on Earth. The US Federal Reserve, the Bank of England, the European Central Bank, Japan, Switzerland, Canada – all target 2 per cent. Australia, in its infinite southern wisdom, allow a bit of flexibility. You know because Australia is special and different.

The Reserve Bank’s recent rate cut was a mistake. I said so at the time and I recommended against it.

If inflation keeps running hot, the next move may well be another hike not a cut. The promised relief might turn into another slap from Chifley Square, home of the RBA’s current digs. But the real fire is not coming from the RBA but rather it is being stoked in Canberra.

The federal government is spending like there is no tomorrow, because in political timeframes, there is not. Every new initiative is rolled out with fanfare and focus-grouped slogans of ‘relief’, ‘support’, ‘fairness’. But the bill always lands on the kitchen table of the taxpayer.

Record program spending, ballooning public-sector payrolls, multi-billion-dollar ‘transition funds’, and an endless carousel of subsidies are flooding the economy with demand while doing nothing to boost supply. More money chasing the same limited goods and services: that is the textbook recipe for inflation.

Worse, this spending spree is being shackled by layers of regulation that strangle productivity before it can even start. Energy policy changes, industrial relations red tape, housing and planning restrictions. Every new rule adds cost, delay, and uncertainty.

Businesses are suffocating under compliance while the government boasts of ‘investment’. It is a vicious cycle: Canberra pumps money into the system to help, then ties the economy up in paperwork that ensures every dollar buys less.

Australia’s inflation problem is not imported. It is homegrown. Cultivated in Canberra, propagated from Parliament, fertilised by debt, and watered by regulation. As long as governments keep breaking our economic legs and demanding applause for handing out crutches, do not expect anything to change.

3.2 per cent inflation, runaway public spending, suffocating regulation, and a central bank out of step with the world. The inflation will continue until everyone is entirely dependent on the state. Then it will go hyper. As in hyperinflation.

This article was first published on Substack.