👉 Background: This year, cost of living has hit the highest rates of the past 30 years. We’re talking higher petrol prices, higher grocery costs… not to mention a whopping jump in interest rates. All of this has meant less money in the pockets of Aussies, and a major jump in financial stress.

👉 What happened: Last night, the Treasurer announced a $14.6 billion package to address cost of living. That means 5 million Aussies will be entitled to a one-off payment of up to $500 in power relief, with the focus on pensioners and concession holders.

👉 What else: On top of that, JobSeeker payments will jump by $40 a fortnight for all Australians and even more for those over 55 years old. And while this is good news for the most vulnerable in our community, there are questions on what this might do to inflation.

What's the key learning?

💡At its most simple level, inflation is caused by ‘too much money chasing too few goods’. Inflation has finally started to slow down: it dropped from 7.8% in the year to December all the way down to 7% in April - which is still pretty far away from our target of 2-3%.

💡But every time a government gives one-off payments to its citizens, there’s a risk of inflation jumping again.

💡Get this: the US federal reserve estimates that stimulus during the pandemic contributed to an increase in inflation:

• We’re talking an increase of about 2.5 percentage points in the U.S
• And around 0.5 percentage points in the United Kingdom

And although the size of these cost-of-living measures are nowhere near as large as the stimulus packages... It still gets economists worried.