This is not the time to turn to Keynes

Economic history is replete with examples of "expansionary fiscal contraction". For instance, there were no economic downturns following the significant spending cuts undertaken by treasurers Paul Keating and Peter Costello in the 1980s and 90s; quite the contrary. More recently, Ireland has emerged as one of the ­strongest performing economies in Europe after severe public spending cuts.

It's hard to think of a more contentious economic policy issue than the role government spending plays in influencing the economy's overall performance. The consensus academic view has oscillated on this issue since Keynes's The General Theory of Money, Interest, and Employment was published in 1936. Keynesianism peaked in the 60s and 70s but was largely discredited by monetarist and new classical economists in the 80s and 90s. More Nobel prizes have been awarded to non-Keynesians than to Keynesians over this time.

Yet crude Keynesian thinking has always held sway in government circles, and a clear fault line exists between academic and official thinking about using fiscal policy as a macroeconomic policy instrument. Policymakers are naturally drawn to the Keynesian emphasis on government spending as it puts government in charge of the economy, provides a rationale for spending on anything, and affords unelected ­bureaucrats power and influence.

Hence Keynesianism is as much a political doctrine as an economic one. For that reason it has significantly politicised fiscal policy since the GFC. This has biased government thinking against undertaking budget repair via spending cuts at the cost of Australia's long-run economic performance.