This is the sort of Socialist slime that would make Socialist Shorty DROOL and dream of increasing foreign govt debt to $1 trillion in JUST THE 1st YEAR!!!
The Socialist UN want to get control of Aust as part of their eventual One World Govt fiasco.
Beware the Socialists macabre plans for Aust!!!!
Morrison rejects IMF, OECD calls to use boost debt spending
DAVID UREN Economics Editor Canberra The Australian 12:00AM January 9, 2017
The IMF is also pushing Australia to increase its budget spending.
The OECD believes falling interest rates have given the Australian government the scope to more than double its net debt to stimulate the economy, while it calculates that it could spend an additional $8 billion a year on infrastructure for about two years without affecting the long-term trajectory of its debt.
Both the OECD and the IMF have been urging the Australian government to ease up on budget repair and lift spending as part of their global campaign to lift economic growth.
They are using the concept of “fiscal space”, or the ability to raise additional debt without provoking an adverse market reaction, to argue that governments, particularly in the advanced world, should be using fiscal policy rather than relying on central banks to support their economies.
Despite the growth in debt since the financial crisis and continuing budget deficits, they maintain that the fall in interest rates provides an opportunity for most governments to boost growth.
The campaign by the two peak multilateral economic bodies is controversial. Treasurer Scott Morrison has flatly rejected calls to allow spending to rise, while the Bank of International Settlements has warned against abandoning “fiscal prudence”.
“For most of the period since the GFC, there has been too much reliance on monetary policy to support growth. There is a risk that fiscal policy will be overburdened in a similar way, adding new imbalances instead of correcting them, and posing risks to macroeconomic and financial stability,” BIS general manager Jaime Caruana says, adding that fiscal space is a “slippery” concept.
However, the OECD has put it at the centre of its economic strategy, with 335 references to fiscal space in its latest economic outlook. “Policymakers should closely examine fiscal space; low interest rates enable many countries to boost hard and soft infrastructure and other growth-enhancing initiatives,” its chief economist, Catherine Mann, wrote in the outlook editorial.
The OECD says that measures of fiscal space have risen in most OECD countries over the past two years, with lower interest rates more than offsetting the headwinds from lower potential growth and higher debts.
Potential growth rates across the advanced world have halved since the financial crisis from 2 per cent a year per capita to 1 per cent, mainly as a result of weak business investment and declining productivity. This makes it harder for governments to raise the revenue to service growing debts.
However, the OECD says falling interest rates have given governments the opportunity to lock in long-term low-cost debt. Its modelling assumes that countries will make savings or raise tax revenue as their debt rises up to a point, beyond which the additional savings become too hard and default becomes the easier option and that financial markets will anticipate this, pushing rates higher as the limit is approached.
The modelling exercise shows that since 2014, slowing potential growth has reduced Australia’s fiscal space by 30 per cent of GDP, but lower rates have increased it by about 55 per cent, with the net result that Australia’s scope to borrow, before financial markets become concerned, has increased by about 25 per cent of GDP.
With the latest budget papers showing Australia’s net debt is set to peak at 19 per cent of GDP in 2018-19, the modelling, taking account only of the changes in the last two years, suggests there is abundant scope to increase deficits.
The benchmark study on which the OECD’s work is based suggests “fiscal fatigue” — the reluctance to find savings to cover debts as they fall due — does not set in until net debts exceed 100 per cent of GDP and identifies Australia, along with South Korea and Norway as having the greatest scope to raise debt further.
The OECD maintains that well-designed infrastructure investment can be undertaken without lifting debt-to-GDP ratios, because the resulting rise in economic growth will exceed the increase in debt. It estimates Australia could increase its deficit by 0.5 per cent of GDP (roughly $8bn at present) for about two years without affecting the debt profile.
The IMF is also pushing Australia to increase its budget spending. “Australia has fiscal space even though recent budget targets have been missed and debt has risen,” the fund’s review team concluded at the end of their annual review of Australia late last year. “Metrics such as the debt-to-GDP ratio suggest that there is fiscal space under both the baseline and economic stress scenarios,” it said.
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