Economist warns of inflation risks from government spending

Independent economist Chris Richardson explains how government intervention, while necessary during high unemployment, risks increasing inflation in current conditions. “In an economy where there's lots of unemployment, where the Reserve Bank is out of ammo, that is a moment where governments absolutely should jump in, boots and all, and help out and make a big difference,” Mr Richardson told Sky News Business Editor Ross Greenwood. “But we are today in a trade-off economy, an economy that has still a bit too much inflation, is one that if governments throw extra money at it, we run the risk of more inflation than we'd otherwise get. “Our alternative wasn't a recession. Our alternative was a Reserve Bank able to cut interest rates now. But change has been in the mix in the economy. Other things equal, taxpayers are better off, they got theirs. Electricity payers, for example, are better off, they got theirs. Borrowers are worse off.”