“There is no budget crisis facing Australia – The debt-to-GDP ratio is quite low by international standards,” said Professor James Morley, joining six other economists from the UNSW Business School who have put their name to a statement rejecting the idea that Australia is facing a “budget emergency”.
Today’s joint declaration on Commonwealth Budgetary and Economic Priorities has been gathered by the Australia Institute which has been signed by 63 leading Australian economists.
Professor Morley said “broad cuts to spending now and a temporary crisis levy are not long-term solutions to demographic challenges Australia and many other industrialized nations face. They are simply a way for a government to achieve a temporary surplus at all costs. The temporary nature of the so-called ‘debt levy’ is as clear an indication as possible that the government’s proposed policies are not really about long-term solutions.”
“If the Prime Minister and Treasurer really want to burnish their economic credentials, they should stop wishing there was a Greek-style fiscal crisis to address and instead act on an unusually good opportunity for long-term investment in infrastructure at low real interest rates,” he added.
The economists state that the government should be focused upon generating employment, pointing out that bodies such as the International Monetary Fund and the G20 have warned that severe spending cuts hamper job creation and economic growth.
Tim Harcourt, the J.W. Nevile Fellow in Economics at UNSW’s Business School added “Australia is not Europe. There is no Big Fat Greek Debt. We are not America or Argentina. The net debt to GDP ratio in Australia is only 11 per cent compared to OECD average of 50 per cent. Quite simply, there is just no ‘debt crisis’.”
“Remember, it makes sense for Government’s to carry some debt. Governments provide hospitals, education, roads and so on, and that can’t be provided by individual firms and households alone,” he said. “The federal budget is not like your family budget. Provided the government can service the debt, it’s a rational and sensible thing to do.”
Other UNSW Business School economists putting their name to the statement include Peter Kriesler, Gigi Foster, Raja Junankar, Georgia Van Toorn.
For further comment call:
Tim Harcourt on 02 9385 3816, 0408 485 479, or Email
James Morley on 02 9385 3366, 0406 842 550, or
Read the statement Here
Associate Professor, Director of The Society of Heterodox Economists, Visiting Fellow
School of Economics