Like what you've read?

On Line Opinion is the only Australian site where you get all sides of the story. We don't
charge, but we need your support. Here�s how you can help.

  • Advertise

    We have a monthly audience of 70,000 and advertising packages from $200 a month.

  • Volunteer

    We always need commissioning editors and sub-editors.

  • Contribute

    Got something to say? Submit an essay.


 The National Forum   Donate   Your Account   On Line Opinion   Forum   Blogs   Polling   About   
On Line Opinion logo ON LINE OPINION - Australia's e-journal of social and political debate

Subscribe!
Subscribe





On Line Opinion is a not-for-profit publication and relies on the generosity of its sponsors, editors and contributors. If you would like to help, contact us.
___________

Syndicate
RSS/XML


RSS 2.0

Why is Australia so opposed to public debt?

By Fred Argy - posted Tuesday, 7 October 2008


Third, investment spending has much bigger spin-offs for the economy in the long term than increased transfers and consumer spending, for example, it offers an opportunity to rectify the past neglect of social and environmental investment such as in education, health, public transport, low-cost housing, urban roads, rivers and water.

But governments need to be institutionally prepared. For investments to be well timed and productive there needs to be prior federal state coordination and a national audit to determine priorities. This is currently being done through co-ordinate federal-sate bodies such as COAG or the new Infrastructure Australia body.

The rules of the game

So why is Australia so different from the rest of the world in its stance on fiscal debt?

Advertisement

It cannot be simply the rules of the game. These clearly define the fiscal target as being "to maintain budget balance, on average, over the course of the economic cycle". Formally, this gives governments scope to run budget deficits or surpluses depending on the economic circumstances. Nor have our rules changed much relative to the Hawke and Keating period.

Yet our fiscal advisers seem to make a distinction between “automatic stabilisers” and “discretionary spending” - the former is tolerated (subject to some attempt to cushion its effects) but the latter is not.

I think the reasons must lie in:

  1. Costello’s constant harangues against government debt, forcing new state governments to avoid incurring new net fiscal borrowing;
  2. the fiscal conservatism of people like Carr and Rudd;
  3. the political objections of the far right, who always prefer a tax cut;
  4. ongoing fears of the risk of a debt downgrading (which makes little or no sense); and
  5. a degree of reluctance to run fiscal surpluses in the face of our stubbornly large current account deficit (which is illogical as private borrowing to fund infrastructure has exactly the same effect on the current account deficit).

Can you think of other reasons?

  1. Pages:
  2. 1
  3. Page 2
  4. All

First published in Club Troppo on October 2, 2008.



Discuss in our Forums

See what other readers are saying about this article!

Click here to read & post comments.

7 posts so far.

Share this:
reddit this reddit thisbookmark with del.icio.us Del.icio.usdigg thisseed newsvineSeed NewsvineStumbleUpon StumbleUponsubmit to propellerkwoff it

About the Author

Fred Argy, a former high level policy adviser to several Federal governments, has written extensively on the interaction between social and economic issues. His three most recent papers are Equality of Opportunity in Australia (Australia Institute Discussion Paper no. 85, 2006); Employment Policy and Values (Public Policy volume 1, no. 2, 2006); and Distribution Effects of Labour Deregulation (AGENDA, volume 14, no. 2, 2007). He is currently a Visiting Fellow, ANU.

Other articles by this Author

All articles by Fred Argy

Creative Commons LicenseThis work is licensed under a Creative Commons License.

Article Tools
Comment 7 comments
Print Printable version
Subscribe Subscribe
Email Email a friend
Advertisement

About Us Search Discuss Feedback Legals Privacy