Once again we're starting to hear the idea propogated in the news that increasing the rights people have to their money, by decreasting tax, will cause inflation.
Where do these people learn their economics from?
Inflation is caused by a number of things, most commonly an increase in demand or a decreas in supply. For example, labour is in short supply, the cost of labour inflates. The drought has caused a decrease in supply but not demand, the cost of the products of primary industries goes up.
What I supspect is, that the coallition's new tax policy has struck fear into the hearts of those who don't really want them there. I can only hope that this is the best they can do as it will be good for the country 
I like this tax policy as unlike increasing welfare and other spending, it benefits single middle income earners like me. Not as much as I'd like but I won't frown at having an extra $120 in my monthly pay cheque.
Even if I was willing to vote for the outher side, Rudd's avoiding committing to any definite tax policy annoys me. But then again, I'm yet to see him commit to anything - IR policy, Foreign Policy on the death penalty...
I have to say once again Howard has impressed me, and I dare say that this is just the beginning. It would not surprise me if this is the first of many announcements that will keep Labor on the back foot and the Liberals in the headlines. The key will be to keep up momentum without giving voters and the press fatigue. Now if only the Qld state politicians can pull something off like that we may actually get rid of Blight as well. | 
• 17/10/2007 - inflation
The government cannot make more of these limited resources but they can make more money. This is occurs through the banks which lend out money that never existed to borrowers either government or private sector. That is the bank creates money out of thin air. When interest rates are lower and money is "cheap" investors tend to borrow more thus increasing the supply of money in the economy.
At no time in this money cycle will taxation impact on money supply. Once money is loaned it exists until it is repaid to the bank, when it is then destroyed. If the government takes a portion of this money as taxes it then either uses this for public spending or to repay debt or invested in the money market where it is then used by a bank to secure further loans out to investors. Whichever way one looks at it, government taxation cannot change money supply which is the key determinant of inflation.
Another Labor misnomer. You know what government behaviour will be inflationary? The State Labor governments' combined forward borrowing plan of $70 BILLION over the next 5 years. While the Coalition repays debt, Labor just racks up more.
It just goes to show Labor can't manage money. Excuse my rant but I feel very strongly about this illusory subject.