No CrossRef data available.
Published online by Cambridge University Press: 01 January 2023
For several years leading up to the 2008 financial crisis, Australia registered a public surplus, and this was generally interpreted as the result of responsible fiscal policy. However, since the outbreak of that crisis, no such fiscal balance has again been attained, giving rise to a range of explanations from the political incapacity of governments to the weak economic behaviour characterising the post-crisis era. Noteworthy in any case is that analysts have failed to cite the importance of a factor that was key to reaching pre-crisis surpluses: the vertiginous growth of private debt. This work argues that it was precisely the intense granting of bank loans and consequent increased demand from the private sector that boosted economic activity and led to the generation of public income sufficient to feed the fiscal surpluses of that period. Indeed, according to the proposals of Wynne Godley, this would have been the only way to register a public surplus in a context of current account deficits, typical of the Australian economy. This paper considers whether Australian private debt played a significant role in achieving fiscal surplus by way of a review of the Australian real estate boom and public accounts from the 1990s onward, also estimating an econometric model of autoregressive vectors to explore the link between these two variables. The results obtained appear to corroborate the hypothesis: severe private borrowing contributed to Australia’s fiscal surpluses. This finding has significant implications for budgetary policy.
To send this article to your Kindle, first ensure no-reply@cambridge.org is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about sending to your Kindle. Find out more about saving to your Kindle.
Note you can select to save to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be saved to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.
Find out more about the Kindle Personal Document Service.
To save this article to your Dropbox account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you used this feature, you will be asked to authorise Cambridge Core to connect with your Dropbox account. Find out more about saving content to Dropbox.
To save this article to your Google Drive account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you used this feature, you will be asked to authorise Cambridge Core to connect with your Google Drive account. Find out more about saving content to Google Drive.