Medium Term Fiscal Policy Issues and Challenges in Australia

16 Pages Posted: 28 Jun 2012

See all articles by Marc Robinson

Marc Robinson

Queensland University of Technology - School of Economics and Finance; General Motors Corporation

Date Written: March 21, 2002

Abstract

Robinson presents an overview of fiscal policy objectives and challenges in Australia. He notes that from the mid-Eighties to the late Nineties fiscal policy basically reflected the need to lower the external current account deficit. Avoiding public sector dissaving was supposed to require the avoidance of (cash) budget deficits. The public sector was to refrain from drawing, other than temporarily during a recession, on private sector saving. The budget was to be balanced, on average, over the course of the economic cycle. In the second half of the Nineties, this policy view gradually changed. Fiscal sustainability became the key concern, in view of the potential threat of unsustainable fiscal policies to external balance and market confidence. However, the rule calling for a balanced-budget over the business cycle was not modified. Public debt is considered both a threat to fiscal sustainability and inconsistent with intergenerational equity. Robinson notes that no distinction is made between borrowing for capital purposes and borrowing for current purposes and that this may contribute to the capital spending drought in Australia. Taking into account asset sales, in recent years the federal government has recorded negative capital investment. Robinson finally notes the changes in the budget deficit concept. While in 1999 cash accounting was replaced by accrual accounting, in 2001 the government reverted again to a cash accounting concept of the budget balance.

Suggested Citation

Robinson, Marc, Medium Term Fiscal Policy Issues and Challenges in Australia (March 21, 2002). Available at SSRN: https://ssrn.com/abstract=2094453 or http://dx.doi.org/10.2139/ssrn.2094453

Marc Robinson (Contact Author)

Queensland University of Technology - School of Economics and Finance ( email )

GPO Box 2434
2 George Street
Brisbane, Queensland 4001
Australia

General Motors Corporation

100 Renaissance Center
Societal Analysis Division
Detroit, MI 48243
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
64
Abstract Views
897
Rank
623,067
PlumX Metrics