Those who hold treasury bonds don’t tend to spend the interest on their day-to-day living costs. Those who hold treasury bonds use them as an investment vehicle, whose proceeds are usually either reinvested or invested elsewhere where the effects of investment aren’t inflationary. Many treasury bonds are also held by the international community, who by definition don’t spend those proceeds within the country whose bonds they hold. Domestic Australian retail investors make up such a small fraction of total ownership and, those that do own them in this context, tend not to use the proceeds as regular income that would be inflationary.
Where the money goes to holders of treasury bonds who then spend it again
Those who hold treasury bonds don’t tend to spend the interest on their day-to-day living costs. Those who hold treasury bonds use them as an investment vehicle, whose proceeds are usually either reinvested or invested elsewhere where the effects of investment aren’t inflationary. Many treasury bonds are also held by the international community, who by definition don’t spend those proceeds within the country whose bonds they hold. Domestic Australian retail investors make up such a small fraction of total ownership and, those that do own them in this context, tend not to use the proceeds as regular income that would be inflationary.