Mark Knight’s cartoon explores the dark irony of economic policies

Let’s talk about the dark art of economics*.

One of the darkest aspects of this wizardry is how the Reserve Bank of Australia (RBA) controls inflation* through monetary policy*, a blunt instrument that fills the hearts of home mortgage borrowers with terror.

Inflation is where the price of goods and services rises over time due to demand and the cost of production. Rising inflation means it takes more money to buy the same goods than it did before. In other words, your money buys you less.

Sometimes, inflation can run wild due to the demand for goods and services outweighing the available supply, pushing up prices at a faster rate. And prices can rise rapidly. Look at the price of things now! The prices of petrol and diesel have skyrocketed due to the conflict in Iran. Begun by US President Donald Trump’s joint operation with Israel, the war against Iran has reduced the world’s supply of oil. This shortage adds to the cost of farming and transport freight worldwide, causing our shopping bills to be higher.

At the same time, a nationwide housing shortage means rents have become higher.

To cool down inflation, central banks* around the world raise cash interest rates for borrowing and interest costs, making money harder and more expensive to get, so people can’t spend as much money. With less money to spend, people can’t buy as much.

When Australia’s central bank, the RBA, hikes interest rates, it usually reduces demand, which in theory reduces prices. It’s like putting the brakes on the economy to stop it from overheating.

But everyday Aussies aren’t the only ones that cause rising inflation. Governments don’t help either. When a government pumps too much money into an economy (like during Covid with all those support programs, cash to stay at home and welfare for the middle-class), it also adds to inflation. Stimulating the economy by investing more money into it creates demand and, as we talked about before, high demand leads to rising prices.

Governments have to cut back on spending but find it hard, because the electorate* often favours such handouts and cutting off these funding programs may cost votes!

Productivity* is another highly important aspect to consider in reducing inflation too – that every dollar spent is spent productively; that things are produced effectively and efficiently. But that’s a whole other topic.

Australia is in such a situation at the moment, with the RBA raising rates to try and bring inflation back from nearly 4 per cent to its annual 2-3 per cent target. The RBA’s rate hikes have been causing financial pain for people with mortgages who are trying to raise families and pay their bills. So I thought I would have a look at it in my daily cartoon.

Now, drawing cartoons about economics sounds like a very dry argument, so in a bid to try to make it more interesting, I decided to create a dungeon below the offices of the RBA in the Sydney CBD, where pain is dealt out to those unlucky enough to have borrowed money to buy a home. Apparently stretching their finances to the limit will save the country economically.

The cartoon started with a drawing of one of those wooden medieval* torture racks from the Dark Ages* that prisoners were tied to and stretched until it hurt. In the cartoon we see a poor mortgage holder in such a situation, who is being scolded by his torturer from the Reserve Bank for living too extravagantly and, as a result, driving up inflation. Naturally there is a twist in the cartoon, no pun intended.

The hairy torturer is holding a small bone as evidence that the citizen has been living too high on the hog*, but as we see in the cartoon, the bone was not from a meal the mortgage holder was devouring. Instead, the bone has no doubt landed from the dining table of our government, where we see our Prime Minister seated in front of a smorgasbord* of government spending programs: a buffet of cash salads, monetary meat trays and wine symbolising the economic stimulus* and handouts still occurring, despite the central bank torturing home mortgage borrowers accused of overspending.

With Australians on the rack, it is like our Reserve Bank tormentor has one foot on the brake and the other foot on the accelerator!

POLL

GLOSSARY

• economics: the study of the way businesses, individuals, governments and societies allocate scarce resources (such as time, labour and money) to satisfy unlimited wants and needs (such as housing, food, entertainment and transport)
• inflation: when the cost of goods and services goes up over time, reducing the purchasing power of money
• monetary policy: the actions and strategies used by a country’s central bank to drive key economic goals like price stability and full employment and manage the overall money supply
• central banks: a public or semipublic bank that manages a country’s currency, monetary policy and supply of money. Central banks act as a ‘bank for the banks’ by providing emergency short term loans for lenders at risk of collapse. They also supervise the commercial banks by setting certain rules and requirements. Central banks also issue currency and handle government debt
• electorate: the people who vote
• productivity: a measure of efficiency with which inputs, such as labour, time and materials, are converted into outputs, such as goods and services
• medieval: refers to the period of European history between about 600AD to 1500AD
• Dark Ages: also known as the Early Middle Ages in Western Europe was an era from the 5th to the 10th century originally referred to as the Dark Ages because it followed the fall of the Western Roman Empire and involved fewer written records and much warfare stemming from multiple barbarian migrations. More recent scholars rejected the term “Dark Ages” because the period also featured cultural and scientific progress, the rising power of the Catholic Church and thriving civilisations, such as Byzantine Empire
• high on the hog: an informal expression for someone living in a decadent or luxurious style
• smorgasbord: buffet, a huge and generous spread
• economic stimulus: steps taken by a government to encourage businesses and individuals to spend more or invest in order to create more economic activity and boost demand. This is often done to prevent or recover from a recession

EXTRA READING
Inflation dragon blocks homebuyer
All aboard RBA runaway rate train
Runaway train halted, or is it?

QUICK QUIZ
1. In what way does rising interest rates help to prevent people spending money?
2. How does reducing spending in the economy help to lower inflation?
3. Ordinary people spending money isn’t the only thing that drives high inflation. What is another factor that causes it?
4. How is the Reserve Bank of Australia (RBA) depicted in Mark Knight’s cartoon?
5. After looking at the cartoon and reading Mark’s description, what do you think is portrayed as the cause of inflation? And is the cause being addressed by the RBA’s solution of raising interest rates?

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CLASSROOM ACTIVITIES
1. Understanding the personal impacts
Perhaps you have heard some of the grown ups you know talking about inflation or rising interest rates. Take the time to understand the impact these have on individuals and families by having a discussion with adults you know.

In class: Make a list of open questions you could ask people regarding their knowledge about inflation and how inflation is impacting them.

Outside of school: Engage one or more of the adults in your life in a conversation about inflation. Ask them the questions you came up with, and other questions you think of during your discussion. Try to gain a greater understanding of the specific real life impacts.

Time: allow 20 minutes in class, plus home discussion time to complete this activity
Curriculum Links: English; HASS/Economics and Business; Personal and Social Capability

2. Extension
Draw a graphic or diagram that visually explains your understanding of inflation and how it works.

Time: allow 10 minutes to complete this activity
Curriculum Links: English; HASS/Economics and Business

VCOP ACTIVITY
Describe it
Look at the cartoon and make a list of five nouns that you see. Then describe those five nouns with five adjectives.

Choose your favourite bundle and put all the words together to make one descriptive sentence.