Trireme Please let me explain that again so you can understand. To influence our economy the government essentially has only two tools: fiscal and monetary policy. Monetary policy is actions taken by the RBA to influence financial conditions, such as exchange rates and to control inflation. The main tool of monetary policy is setting interest rates which in turn affects how much money we have to spend. In the short term higher interest rates only affect people/business with loans and because the payment of those loans is included in the measures against which the RBA quantify inflation actually raises inflation. Still with me Trireme? Now the same reduction in money we have to spend could be achieved by changing the GST rate and it would affect everyone with disposable income but not affect the cost of essentials which are not GST rated. Now rather than just calling me dumb what is you alternative as we have already agreed that changing interest rates is not working.
