The government gets permission from Parliament to spend money. The Treasury tells the Reserve Bank of Australia (RBA) to add money to someone's account. The Australian government pays for things by adding money to banks' accounts.
When people buy government bonds, the RBA moves money between accounts. The RBA also adds money to accounts when the government pays interest on the public debt.
The government creates a need for money by making people pay taxes. People then try to earn money to pay these taxes, which creates jobs. The government can buy goods and services from people using the money it previously created.
People pay their taxes with the money they have earned. If people want to save more money, the government spends more than it collects in taxes; this is called deficit spending.
The money the government spends but hasn't been used to pay taxes is called public debt. People can buy government bonds with this money, which is then moved from their bank accounts to special accounts for the bonds.