Debt and deficit Downunder – a view from Europe

Australia's Prime Minister has just delivered a speech similar to that of most of her counterparts across the globe. Though with notably brighter news.

Today's economic challenges are worldwide. The global downturn is continuing. Company profits are being squeezed, job opportunities are declining and wages are not rising. Hence government tax revenues are diminishing. Grim remedies are required.

The US President told his nation this in February: "Most Americans – Democrats, Republicans, and Independents – understand that we can't just cut our way to prosperity. They know that broad-based economic growth requires a balanced approach to deficit reduction, with spending cuts and revenue, and with everybody doing their fair share. And that's the approach I offer tonight."

Prime Minister David Cameron admonished the British in March: "There are some people who think we don't have to take all these tough decisions to deal with our debts. They say that our focus on deficit reduction is damaging growth, and what we need to do is to spend more and borrow more. It's as if they think there's some magic money tree. Well let me tell you a plain truth: there isn't."

François Hollande addressed the French two weeks ago: "What I want is genuine budget discipline, essential to reducing indebtedness in the medium term. Unless there's a commitment in terms of public accounts, there will be no return to confidence and therefore growth. It all goes together."

Similar dismal directives were given by Canada's Prime Minister, the Chancellor of Germany and other heads of state.

While the challenges are universal and the approaches of governments are equally determined, if differently configured, the responses in Australia are somewhat bizarre. The reaction of some Opposition and media critics shows an immaturity and crude point-scoring that is frankly embarrassing to read or listen to.

Many Australian commentators seem unaware of several highly significant realities.

1. Australia handled the initial impact of the global financial crisis in 2009-10 better than any nation bar none. No other government responded to the first shocks with the same mix of cash handouts and rapid infrastructure spending. Poland came close. No other nation avoided recession, widespread job losses and cuts to services and benefits. Poland came second.

The Gillard Government appears to be responding appropriately now.

2. Australia is clearly better off now than anywhere else in the world. On all economic indicators Australia is streets ahead of whoever is second. Some claim this is Switzerland, others Canada. Norway and Israel are sometimes mentioned also. None has anywhere near Australia's sustained growth, strong productivity, strong currency, excellent economic freedom, low inflation, low unemployment, low debt, and well-placed interest rates, pension levels and superannuation.

3. Australia is also better off than at any time in its history. Yes, there have been brief periods of more rapid growth or lower deficits. But never before top ranking in the world on all the major indicators.