In an opinion piece published on Wednesday, Gittins said the production side of the economy was close to full capacity, raising the risk that demand would exceed supply and worsen inflation, which is already above the RBA's target of 2 to 3 per cent. He noted that a rate rise next Tuesday would be the fifth this year.
Gittins rejected what he called the 'suited worthies' who blame the rate rises on the federal government's spending. While acknowledging that government spending adds to demand, he pointed out that private sector spending contributes more to overall growth. He argued that the real contradiction is when fiscal policy adds to demand at the same time that monetary policy is trying to reduce it, and that it is up to the government to resolve this.
The columnist said he wants bigger government and higher taxes, especially on the wealthy, to fund services such as healthcare, education, aged care and defence. He criticised a decision to delay the effect of the Iran war on energy prices for three months, calling it wasteful spending that has cost the budget a significant amount.
Gittins also noted that the problem could be addressed by increasing taxes rather than cutting spending, and suggested that taxing exports of minerals and energy more heavily could help reduce the deficit.