Specifically he states:
In fact, a GST cut is the perfect tax cut right now. It is a deflationary tax cut targeted at the poorest and at those with the most squeezed disposable incomes.
This is a common misconception which results from the way us economists often teach people to think of inflation. For this error I apologise. However, fundamentally, a cut to GST rates is just as inflationary as a cut to personal income tax rates. As I’ve stated here:
inflation is the rate at which prices grow – not the price level
The inflation that economists are scared off is the rate at which the price level grows. Continue Reading →