Debt and deficit Downunder – a view from Europe

4. The present revenue slump is not of the Government's making. In fact, treasurers and heads of state here in Europe and elsewhere wish they had Wayne Swan's problems.

5. Debt and deficits are not accidental outcomes. They are deliberate strategies. Governments in free enterprise economies can decide how much to borrow and how much to spend. They can also vary the money supply, interest rates and tax rates. They cannot, however, control consumer demand, export levels, company profits and taxation revenue.

Many Australian commentators seem confused about what outcomes they actually wish to achieve. Is it employment, income and security for retirees and those dependent on support? Or education, infrastructure and productivity for future economic development and growth? Or is it to have zero borrowings and zero deficits as desirable ends in themselves?

6. Australia has plenty of room to expand its borrowings in future budgets. More than any other OECD country except perhaps Estonia.

Debt to GDP is currently only 20.7%. This is the lowest of all OECD nations except Estonia and Chile.

The UK, Germany, France, Hungary, Israel and Canada are all above 80%. The USA, Belgium, Ireland, Italy and Singapore are close to 100% or above. Japan is above 210%.

Australia could quadruple its current borrowings and still be better placed than most comparable countries.

In fact, now is the perfect time to increase borrowings. Interest rates are low, current debt is low, growth and income are assured and Australia has for the first time ever the top international credit rating.

7. Demand for Australia's exports has not declined. It has simply stopped growing at the recent rapid rate. And prices have come off their unrealistic earlier highs.

Demand from China has now stabilised, but at a relatively high level. China's economic growth has declined from the extraordinary heights of 2010, but remains above seven per cent. This is more than enough to ensure steady demand for Australia's resources well into the future,

8. The downside also has an upside. Yes, the strong Aussie dollar has hindered exports. No question. That's a headache for the Trade Minister as well as Australia's exporters.

But the advantages of a strong dollar more than compensate. It is boom times for importers. And for travellers. This is the best chance Australians have ever had to see the world. You can buy 100 British pounds for 153 Aussie dollars today. In 2001 that would have cost A$304.

So come to Europe. You will see the boulevards of Paris, the Eiffel Tower, the vineyards of Provence, London Bridge, the British crown jewels, the canals of Venice and the galleries of Rome. You will also see starkly how incredibly fortunate Aussies are relative to the rest of the world.