Macroeconomics uses its Mid-year Budget Bulletin to congratulate Australian governments for their recent fiscal performance, which will see most governments running budget deficits after undertaking discretionary fiscal easing in the face of economic windfalls, but still blame the GFC!
The Government is acting prudently to spend big and fast in the GFC’s wake. Good management and good luck should keep Australia out of recession. But we should still cut wasteful spending and use current circumstances to support economic reforms. Both add to activity and create jobs.
The economy appears to be insulated from a downturn until 2009-10 by which time our proactive monetary and fiscal stimulus should combine with the coordinated global action to alleviate most of the GFC’s impact, leaving our economy growing modestly in 2009-10 and 2010-11. While most Australian governments will run deficits for 2008-09 and 2009-10, prospects are much better than in either 1983 or 1991.