Every time inflation rises, Australians are given the same advice: spend less, borrow less and don’t ask for a pay rise. The Reserve Bank raises interest rates, governments urge households to “live within their means”, and families are left wondering how they are supposed to stretch the weekly budget any further. It has become the standard response to rising prices. But what if we have been asking the wrong question?
Speaking at the NSW Teachers Federation Annual Conference last week, economist Alison Pennington challenged delegates to think differently about inflation. Instead of focusing solely on wages or consumer spending, she suggested we look at what has actually become more expensive over the past three decades.
The answer is revealing. Electricity, gas, housing, childcare, healthcare and education have all increased significantly in cost. These are not discretionary purchases or luxury items. They are the essentials of everyday life, and they also happen to be the services that have increasingly been privatised, commercialised or shifted away from universal public provision.
That observation should prompt a broader conversation about the path Australia has taken over the past thirty years.
From the 1980s onwards, governments of different political persuasions embraced the idea that markets could deliver many services more efficiently than the public sector. Competition, we were told, would lower prices, improve quality and give consumers more choice. Some reforms undoubtedly brought benefits, and it would be simplistic to dismiss every privatisation as a failure. However, three decades later it is reasonable to ask whether the overall promise has been fulfilled, particularly when it comes to the services that Australians simply cannot do without.
Electricity is a good example. New South Wales sold significant parts of its electricity network on the promise that private ownership would improve efficiency and deliver lower prices. Instead, households have watched their power bills climb while energy companies have continued to return healthy profits. The market may have worked well for investors, but many families would struggle to argue it has worked equally well for consumers.
Housing tells a similar story. Over time, Australia has increasingly treated housing not primarily as shelter, but as an investment asset – a wealth creation mechanism. Tax settings have encouraged speculation, supply has failed to keep pace with demand, and home ownership has slipped further beyond the reach of younger Australians. Governments have responded with grants, rebates and incentives, but these measures often address the symptoms rather than the underlying problem. If housing is essential to a decent life, then expanding the supply of affordable and social housing must be part of the solution.
The same questions can be asked of early childhood education. Childcare is now indispensable for many working families, yet the cost often rivals a second mortgage. Governments spend billions subsidising fees while parents continue to struggle with affordability and for-profit providers expand their market share. Rather than constantly subsidising an increasingly expensive market, perhaps we should be asking whether affordable early childhood education should be regarded as essential public infrastructure, much like schools or hospitals.
We should also reflect on what this means for public education. Public schools educate the overwhelming majority of students with disability, Aboriginal students, newly arrived migrants, children from disadvantaged backgrounds and students in regional and remote communities. They are asked to meet increasingly complex social needs while continuing to deliver high-quality educational outcomes. Investing in public education is often portrayed as a budget expense, yet it is more accurately understood as nation-building. Every child who receives a quality education contributes to a more skilled workforce, stronger communities, higher productivity and greater social cohesion.
This broader principle is what economists describe as the “social wage”. While wages provide the income people earn, the social wage represents the value of the public services they receive. When governments invest in quality public education, affordable healthcare, accessible childcare, public transport and social housing, households spend less purchasing those services privately. In other words, families become better off not simply because they earn more, but because the essentials of life cost less.
Australians instinctively understand this when it comes to Medicare. Few people would argue that access to healthcare should depend entirely on an individual’s capacity to pay. Medicare is valued because it protects families from financial hardship while ensuring universal access to essential care. The same logic applies to other essential services. Affordable childcare supports workforce participation. Public education creates opportunity and drives economic growth. Public transport connects communities. Social housing provides stability for families who would otherwise struggle in the private rental market. These are not simply social policies; they are investments that strengthen the economy while reducing the financial pressures faced by ordinary Australians.
None of this suggests that governments should run every industry or that markets have no role to play. Markets are highly effective in many parts of the economy. However, essential services are different. When success is measured primarily by returns to shareholders rather than affordability for families, there is an inevitable tension between public need and private profit. Markets can be extraordinarily effective servants, but they are not always the best custodians of services that underpin people’s quality of life.
This has always been one of Labor’s defining ideas. The role of government is not simply to balance budgets. It is to create the conditions in which people can live secure, productive and fulfilling lives. The great Labor reforms of the past—Medicare, universal superannuation, the expansion of public education, public infrastructure and the social safety net—were not merely acts of social justice. They were also sound economic policy. They increased productivity, reduced inequality and made life more affordable for millions of Australians.
Teachers understand this perhaps better than anyone. Every day they see the consequences when families are under financial pressure. They see children who move schools because housing has become unaffordable, students whose learning is affected by unmet health needs, and parents struggling to balance work with the cost of childcare. Schools do not exist in isolation. They are part of a broader public system that gives every child the opportunity to succeed.
Perhaps, then, the debate about inflation needs to change. Rather than focusing exclusively on how governments can compensate households through rebates, tax cuts or one-off payments, we should also be asking why the essentials of life have become so expensive in the first place. Strengthening the public services that Australians rely upon is not simply good social policy. It may also be one of the smartest and most enduring ways of making life more affordable.
Sometimes the best way to put more money into people’s pockets is not by giving them more cash. It is by ensuring they never had to spend so much on life’s essentials in the first place.
Denise McHugh is an experienced educator in Tamworth. She is Chair of the NSW ALP Education and Skills Committee and Deputy President of the Independent Education Union (IEU).
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