Australia's Fiscal Space: The Role of Public Investment

Begoña Domínguez and John Quiggin

Australian Economic Review, 2022, vol. 55, issue 3, 383-388

Abstract: How large is Australia's fiscal space? Blanchard (2019) shows that as long as the real interest rate R $R$ is below the real growth rate G $G$, a government can sustain a positive primary deficit with a constant (or even declining) ratio of public debt to GDP. In this article, we explain the neutral real interest rate and the reasons for its decline. Then, we discuss the results of a companion paper, Domínguez and Quiggin (2022), in which we quantify the fiscal space for Australia and find that a permanent increase in the primary deficit can be afforded up to reaching a debt to GDP ratio of 79 per cent. Furthermore, this so‐called ‘free lunch’ in the fiscal space can be expanded if debt is used to finance public investment.

Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/1467-8462.12481

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:ausecr:v:55:y:2022:i:3:p:383-388

Ordering information: This journal article can be ordered from
https://ordering.onl ... 7-8462&ref=1467-8462

Access Statistics for this article

Australian Economic Review is currently edited by John de New, Viet Hoang Nguyen and Susan Méndez

More articles in Australian Economic Review from The University of Melbourne, Melbourne Institute of Applied Economic and Social Research Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().