The evolution of fiscal policy in Australia

David Gruen and Amanda Sayegh
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Amanda Sayegh: Treasury, Government of Australia

No 2005-04, Treasury Working Papers from The Treasury, Australian Government

Abstract: This paper examines the evolution of Australian fiscal policy and the fiscal policy framework over the past quarter century. Following the early 1980s recession, a sustained fiscal consolidation saw the general government budget balance (for all levels of government) move from a deficit of 3 1/2 per cent of GDP in 1983-84 to a surplus of 1 3/4 per cent five years later in 1988-89. A severe recession in the early 1990s interrupted this process, and the budget returned to sizeable deficits which peaked at 4 3/4 per cent of GDP in 1992-93. The second half of the 1990s saw a repeat of the experience a decade earlier, with the budget returning to surplus in 1997-98. In contrast to the 1980s experience, however, the general government sector (for all levels of government) has recorded surpluses for the subsequent eight years to the present. The paper outlines Australia’s macroeconomic experience over this time and argues that there have been two significant medium-term factors motivating the extended periods of fiscal consolidation. The first factor, relevant since the mid 1980s, has been the large Australian current account deficits since that time, and the associated build-up of net foreign liabilities. The second factor, which entered the public debate more recently, is a desire to provide fiscal policy flexibility to respond to the ageing of the population and the projected rising public cost of health services-both influences that are likely to be of increasing importance over the next generation or so. The paper discusses the introduction and evolution of Australia’s medium-term fiscal framework which has been put in place to respond to these challenges.

Keywords: fiscal policy framework; current account; fiscal effects of ageing (search for similar items in EconPapers)
JEL-codes: E62 F32 H60 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2005-11, Revised 2005-11
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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http://archive.treasury.gov.au/documents/1033/PDF/TW_2005-04.pdf First version, 2005 (application/pdf)

Related works:
Journal Article: The Evolution of Fiscal Policy in Australia (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:tsy:wpaper:wpaper_tsy_wp_2005_4

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