Structural Deficits and Fiscal Policy Stance in Australia, 1966–67 to 1988–89

J. W. Nevile

Australian Economic Review, 1990, vol. 23, issue 4, 24-32

Abstract: This study adjusts the total deficit (or net public sector borrowing requirement) of the whole of the public sector in Australia for the effects of changes in both the level of economic activity and the implicit tax that inflation imposes on the holders of government bonds. Both adjustments are important, even when looking at year‐to‐year changes in the structural deficit. When the stance of fiscal policy is measured by the structural deficit as a percentage of gross domestic product, four years stand out as years of major changes. In each of the years 1973‐74, 1979‐80 and 1987‐88 the stance of fiscal policy was substantially tightened with the abrupt tightening in 1979‐80 being the largest change, though not much larger than that in 1973‐74. By far the biggest change relaxing the stance of fiscal policy was in 1983‐84, and the change in this year was the biggest of any change in either direction in the period.

Date: 1990
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