Experts are warning the Government's policies designed to reduce the deficit and bring down inflation are worsening the impact of the recession on households and businesses.

Former Productivity Commission Chair Ganesh Nana has led group of 15 economists who've written to the Prime Minister claiming spending cuts are harming the economy.

Nana explained that fiscal policy should not be targeting inflation.

"We want fiscal policies to do other things, which is to focus on that external debt that seems to be being ignored by many."

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