Anthony Albanese denies public spending fuelling inflation

The federal government is not splashing too much cash, the Prime Minister says, in light of a worrying Reserve Bank claim.

Anthony Albanese has brushed off concerns his government is splashing too much cash despite the Reserve Bank saying public spending was contributing to inflation.

The Prime Minister said the government had cut “effective inflation in half” since coming to office while delivering two budget surpluses, proving that Labor did not have a spending problem.

“Our approach is to make sure that no one gets left behind … that we have an economy that works for people, not the other way around,” he told the ABC on Thursday morning.

“Fee-free TAFE, cheaper childcare, energy price relief – all of these measures are aimed at making sure we look after people but do so in a way that’s designed to see inflation continuing to moderate which is what we want to make sure happens.”

The RBA factored public spending at all levels of government into its decision to hold interest rates. Picture: NewsWire / John Appleyard

The RBA announced on Tuesday it was holding the official cash rate at 4.35 per cent, giving some reprieve to mortgage holders.

But the board said there would be no cut in the rate this year as the battle to rein in inflation continued.

The RBA said it forecast total government spending at federal and state and territory levels to increase from 2.1 per cent to 4 per cent.

Assistant Governor Sarah Hunter told a cost-of-living senate committee on Wednesday that it was a factor in the RBA’s decision to hold rates but said the central bank did not attribute the rise in spending to any one government.