This week came the evidence that governments can reduce inflation. We also saw evidence that companies don’t actually set prices responding to market forces but in an effort to maximise profits, using their power to raise prices and increase inflation.

Earlier this year, when the government announced its energy rebate, economists who wanted a recession to reduce inflation argued that inflation falling due to government rebates was not real, just “measured” inflation.

This, of course, was bulldust – sorry, that should be measured manure.

Inflation is the measurement of the increases in prices that households pay for things. How that occurs – whether due to government intervention, supply side issues, or companies raising prices to maximise profits – does not make it any more or less real.

And so the monthly inflation data out yesterday (which admittedly is always a bit less accurate than the quarterly figures) showed inflation over the past year rose 2.7% – within the RBA’s target of 2% to 3%:

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A significant reason for the drop from 3.5% in July was the federal government’s energy bill relief fund (EBRF) rebates, and the rebates in Queensland, Western Australia and Tasmania.

The Bureau of Statistics estimates that had these rebates not been in place, on average the cost of electricity would have been 36% higher. Or, to put it another way, the amount of electricity that........

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