In the past decade or so there has been a substantial rise in the indebtedness and debt-servicing obligations of Australian households. This has been accompanied by a trend increase in labour force participation (LFP) for women and more recently for men. Microeconomic data show a clear positive correlation between indebtedness and LFP. This paper models...

This paper presents some empirical evidence consistent with optimal smoothing in the face of temporary shocks; the persistence of the deficit is attributed to a modest degree of impatience relative to the rest of the world. It is argued that the factors that have made Australia relatively resilient to external shocks are also those that...