There’s been a lot of discussion about headline inflation and underlying inflation.

Headline inflation is tipped to drop when the August consumer price index data is released on Wednesday. But underlying inflation is not expected to mirror those results.

Underlying inflation strips out volatile items like petrol.

Economists have expressed concerns that the headline number is nothing more than “smoke and mirrors” as it has been heavily swayed by cost-of-living measures like the $300 federal government energy rebates and tax cuts.

Why does this matter? Some argue this is only temporarily pushing inflation into the manageable target and that if people start spending more, the fight against inflation will get “a whole lot harder”.

“They’re watching underlying inflation because the headline numbers will be volatile due to policy changes that have been made, rather than telling you about the underlying pace of inflation in the economy,” HSBC Chief Economist Paul Bloxham told the ABC.

“It’s going to be worth watching that figure tomorrow because it’s obviously going to be really interesting to see if that plays out that way.”

Jim Chalmers has hit back at claims cost-of-living relief has had an “artificial” impact on inflation and backed the policy decisions made by the Albanese government.

“We’ve designed our cost of living relief to help take some of the edge off these price pressures in our economy, rather than make them worse,” he said on Tuesday following the RBA decision.

“You know, there’s nothing artificial about helping people with their electricity bills or making early childhood education cheaper, or medicines cheaper, or a tax cut for every taxpayer or energy bill relief for every household, getting wages moving again.

“We’re doing all of this in the most responsible way we can. Our primary focus is on the fight against inflation, but we can’t ignore those risks to growth.”