Weekend Economists Down Under May 23-26, 2014

[Demeter]

47. Australia’s economy is healthy, so how can there be a budget crisis?

IT'S PROBABLY A SCAM, SAM, TO ROB THE POOR AND GIVE TO THE RICH...

http://theconversation.com/australias-economy-is-healthy-so-how-can-there-be-a-budget-crisis-26036

As the 2014-15 budget nears, Australians are hearing that the government must mount an urgent repair job to address the looming structural crisis that will see the budget in deficit for decades to come. The “budget crisis” is a convenient narrative - but how true is it?

In the first of our series, University of Canberra Professor Phil Lewis argues Australia’s economy is strong - and why it is wrong to draw a straight line between it and the budget...


Prime Minister Tony Abbott has suggested that “You can’t fix the economy unless you fix the budget“.

If we are to believe the over-the-top Commission of Audit report it will take far more than this to bring the budget to surplus by 2023. But few seriously think many of the recommendations will be implemented.

While it is correct to say that lower debt would allow more government revenue to fund worthwhile projects to improve economic outcomes, it is not clear why lower (or zero) deficits or debt necessarily implies the economy will perform better.

A balanced budget may be a very valuable, but not essential, condition for good economic management. There are even fellow economists who argue (in my view wrongly) that increasing deficits and debt are necessary at the moment to increase current economic growth and reduce unemployment...