Comment below HILITE-->Australias leading economists, including Bernie Fraser (former Treasury Secretary and RBA Governor), say Joe Hockeys fears are MISPLACED. Economists’ Statement on Commonwealth Budgetary and Economic Priorities September 2014 • The austere measures contained in the proposed Budget have been justified by fears that Australia’s public debt is expanding rapidly and dangerously, and must be arrested through a dramatic change in fiscal policy. These fears are misplaced. • Australia does NOT face any present / imminent debt crisis. Australia’s deficit and accumulated debt are both low, relative to international experience and Australia’s own history. • According to the Organization for Economic Cooperation and Development (OECD), the current net debt (for all levels of government) in Australia is equivalent to 13.8 % of GDP • Since the GFC, debt has grown less rapidly here than in other countries. Interest rates paid on Australian debt are at record-low levels (and likely to stay that way for years), further reducing the burden of net interest payments. In short, Australia’s ability to manage public debt is very strong. • The major cause of the current gap between revenues and expenditures of the Government is continued cyclical weakness in macroeconomic performance. 1. The employment rate has declined markedly, and continues to decline in the face of recent lay-offs and weak job-creation. 2. Incomes have been growing at their slowest pace in decades (consequently constraining consumer spending). 3. These trends, combined with large tax cuts during the early stages of the mining boom, have undermined tax revenues from personal income taxes, corporate income taxes, and the GST. • The most effective route to restored fiscal balance is to help more Australians find work, earn incomes, and pay taxes. But major and unnecessary reductions in program spending and public sector employment would have the opposite effect. • The goal of fiscal policy is not simply to eliminate the deficit as quickly as possible, nor is it to generate surpluses (government is NOT, after all, a “profit-making business”). The timing and method of deficit reduction must be balanced with other economic and social goals, including 1. job-creation, 2. infrastructure needs, and 3. social conditions. • The governments economic responsibility is to establish policies which support Australian firms, workers, and communities to utilise their full potential to work, produce, generate income, and sustainably consume. • When spending and demand conditions in the private sector of the economy are sub-optimal (as they have been, and continue to be), government has a responsibility to play a leading role in supporting economic activity and job-creation. At times, this responsibility requires deficit financing of public programs and infrastructure investments. • There are many projects and priorities which would enhance Australia’s productive capacity in the future, and hence are deserving of more government support, not less. These include investments in: 1. transportation, 2. energy conservation and alternative energy, and 3. affordable housing. • When a new public investment project enhances the economy’s long-run productive potential, it is economically prudent to finance it with public debt (just as private firms and households finance long-lived investments with their own debt). • The true goal of fiscal policy is the need to ultimately stabilise the level economic activity at full employment. We should not be satisfied until unemployment is back to rates Australia enjoyed in the early post war decades. Debt and deficits should not be targets in their own right but simply treated as by-products of the required fiscal strategy. • International agencies (such as the International Monetary Fund and G-20) have urged extreme caution in future fiscal retrenchment, for fear that indiscriminate spending reductions will undermine growth and job-creation – ultimately defeating the goal of fiscal balance. They have acknowledged that past polices of austerity in other countries have had large negative effects on growth and employment. • Australia should not make the same mistake. Major spending reductions by the government are economically unnecessary and socially damaging. The first priority of Australian fiscal policy should be to strengthen: 1. investment, 2. employment, and 3. growth. • Government can and should pursue this priority without jeopardizing its long-run fiscal strength and stability. Signed, George Argyrous - UNSW Tony Aspromourgos - Uni of Sydney (US) Raul Barreto, UA Mike Beggs - US Grant Belchamber - ACTU Harry Bloch - CU Dick Bryan - US John Buchanan - US Gavan Butler - US Damien Cahill - US Lynne Chester - US Richard Dennis - Australia Institute Alan Duhs - UQ Peter E.Earl - UQ Bradon Ellem - US Craig Emerson - former Trade Minister Geoffrey Fishburn - UNSW Gigi Foster - UNSW Bernie Fraser - former Treasury Secretary and RBA Governor Roy Green - UTS Corrado Di Guilmi - UTS Tim Harcourt - UNSW Neil Hart - UNSW Gillian Hewitson - US Elizabeth Hill - US Therese Jefferson - CU Evan Jones - US Raja Junankar - UNSW Steve Keen - Kingston U Stephen Koukoulas - Market Economics Peter Kriesler - UNSW Rick Kuhn - ANU James R. Levy - UNSW Bill Lucarelli - UNSW Alex Millmow - Federation University Sinchan Mitra - UQ James Morley - UNSW Alan Morris - UTS Adam Morton - US Rod ODonnell - UTS Joy Paton - US Juan Carlos Ponce - UNSW Suraj Prasad - US John Quiggin - UQ Patricia Ranald - Australian Fair Trade and Investment Network Goran Roos - UA Susan K. Schroeder - US Rhonda Sharp - U SthAust. Chris Sheil - UNSW Tom Skladzien - AMWU Julie Smith - ANU Ben Spies-Butcher - Macq U John Spoehr - UA Jim Stanford - US (visiting) Frank Stilwell - US Tony Stokes - ACU Tim Thornton - La Trobe U Phil Toner - US Georgia Van Toorn - UNSW Beth Webster - UM Graham White - US John Wiseman - UM Sarah Wright - ACU (Ive just put it into point form, deleted the word Commonwealth and abbreviated their academic institutions to make it more user-friendly)
Posted on: Sun, 21 Sep 2014 01:30:27 +0000
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