Inflation is back in headlines, and Labor is busy spinning stories about geopolitics and supply chain disruptions. Meanwhile, the opposition has dialled in on Labor’s reckless spending, attempting to move the nation’s focus onto the economy. As both parties circle each other like lions on the savannah, they are equally determined to avoid confronting the elephant watching.

Australia’s economic and inflationary problems were made in Canberra. Since the end of the Howard era, neither the Coalition nor Labor has prioritised budgetary restraint. Both parties have borrowed money to win and hold power, with the worst period of economic vandalism undertaken during the pandemic.

The Reserve Bank’s decision to slash interest rates, embark on quantitative easing, and purchase large volumes of government bonds created an unprecedented monetary stimulus. These policies dramatically expanded the supply of money while making borrowing cheaper. At the same time, federal and state governments injected hundreds of billions of dollars into the economy through wage subsidies, cash payments, grants, early access to superannuation, and infrastructure spending.

Some of these measures were justified during the height of the crisis. However, the mistake was allowing them to continue long after the emergency passed. When the cash was flowing, everyone was winning. Politicians basked in soaring approval ratings, businesses loaded up on JobKeeper, and anyone with an asset felt rich.

Australia’s housing market demonstrates how supply-side inflation took hold. Ultra-low interest rates encouraged borrowing without an increase in housing stock. The result sent property prices to record highs. Existing homeowners and investors enjoyed enormous gains, while younger Australians faced unaffordable house prices and rents. In short, our assets went up because the value of our money went down.

By the time Labor got back in government, they inherited an overheated economy and a mountain of public debt. Instead of pumping the brakes on borrowing and delivering productivity reform, they did the opposite. New taxes, new industrial laws and more borrowing.

The electorate can feel their standard of living going backwards. Yet neither side of politics has the courage to confront our addiction to debt or our chronic productivity failure. As most professional politicians will tell you, there are no votes in austerity or industry reform. From left to right our politics is lazy and has become about opposing reform rather than offering it, and as a result our electoral contests have been reduced to pork barrelling and mudslinging.

Despite Labor’s current economic dumpster fire, they have little political opposition. Historically, the electorate punishes Labor when the reality of socialism impacts their standard of living, but the public no longer trusts the Coalition to fix Labor’s mess. After nine years of internal bickering, limited policy achievements, and record spending, the Coalition is no longer a credible alternative. A sad reflection on a party which considers itself the political home of small business, but an outcome entirely self-made as the result of abandoning principles and filling their ranks with political staffers.

While government talks about inflation, its impact is felt most by low- and medium-income earners. I see it clearly in my business on the factory floor. Over the past year more staff are asking for pay rises, overtime and even payday loans. My experience lines up with the national trend of most salaried workers living paycheck to paycheck. Many employers like us have increased staff pay rates at a cost to profitability, but even after a 5 per cent or more increase on salaries, inflation is running higher.

The most disheartening aspect is talking with younger staff who struggle to afford rent and fuel. The reliable trajectory of working hard, buying a house, and settling down is seen as impossible. I hear disillusionment every day from young men who feel ripped off by a system that prioritises others and demands they pay for it.

Businesses face their own impossible balancing act. Most cannot simply raise prices overnight because they are locked into contracts or operate in highly competitive markets. Even where higher prices are eventually possible, the adjustment often lags well behind rising costs. Materials, energy, insurance and finance have all become significantly more expensive over the past three years. Many businesses are struggling to remain profitable, with some surviving by stretching supplier payment terms and hoping conditions improve before cash flow runs out.

The biggest winner from inflation is debt-riddled government. Public debt is fixed in nominal dollars, and inflation gradually erodes its real value. At the same time, governments collect more tax as wages and prices rise, pushing workers into higher tax brackets even when their real purchasing power is falling. Inflation is ultimately an invisible tax, which is transferring wealth from households to government.

The biggest losers are young Australians who are being taxed to pay for the decisions of governments they didn’t elect. Unless inflation can be tamed, wealth inequality will be Covid’s defining legacy. The economic division between wealthy asset owners and the rest of us is politically fertile for Labor, but their solution of higher taxes and more handouts will ultimately devastate aspiration and drive capital overseas.

It’s time for Australians to focus on the elephant instead of the lions. As the electorate, we should stop voting for promises of free stuff and smear. Our path to prosperity lies in restraining government spending, reforming the tax system, productivity growth, cheap energy, and more housing.

Angus Taylor deserves praise for his frank reflection on the Coalition’s failure in government. What needs to follow is a clear plan to rebuild our middle class and steadfast discipline by his parliamentary colleagues.

If the Coalition cannot offer these two things in the months ahead, they deserve to be replaced by a party that will.