To spend or not to spend ... that's the government's dilemma
THE difficulties faced by government budget makers were highlighted last week by Craig Emerson who is the Federal Minister for Trade and Competitiveness, Minister for Tertiary Education, Skills, Science, and Research, and Minister Assisting the Prime Minister on Asian Century Policy.
Speaking at a budget breakfast as a guest of Federal Member for Blair Shayne Neumann, the Minister clearly highlighted the difficulty faced by governments in setting budgets
With a background of an internationalised Australian economy from the Hawke and Keating governments, emergence of Asian neighbour China as an economic superpower, and the bursting US property bubble and subsequent Global Financial Crisis of 2008, the question became greater than ever before - should the Australian Government spend or not?
It is history that the Australian Government decided to operate with deficit budgets at that time unlike most other nations of the world. This meant no recession unlike most of the developed world, but also increased debt levels for Australia.
So as the American and most of the European economies have struggled through recessionary times over the past five years, Australia has continued to grow, albeit with increased debt levels.
Some suggest that the Australian economy should have been left to slide into recession and to find its way forward eventually without increasing the debt level of the country.
The counter argument is that the pain of a recession including high unemployment, property mortgage foreclosures, and harder times for all, is simply too much to bear if there is a way to avert it.
The Minister stated that the Australian debt level currently stands at about 11.5% of GDP which is as he put it akin to a salary earner of $100,000 owing $11,500.
Many European countries as well as the US and Japan are all reported to be more than 100% on this ratio measure indicating that Australia was one of the few countries in a position to follow a deficit budget program over the past five years to avert recession.
So that is the question - did the Australian Government correctly choose a deficit budget in recent times, thereby averting recession?
You be the judge.
SUNCORP Bank Business Leaders Lunch, Friday, May 31 at the Ipswich Turf Club from noon-2.30pm, featuring keynote speaker Darryl Conroy, Senior Financial Markets Analyst - Suncorp Bank.
Darryl has more than 15 years' experience in the fields of finance and treasury.
He will share his knowledge and insight into the recent Federal Budget, movements in financial markets, interest rates, currencies and commodities and the impact they could have on your business.
Members $77, Non-members $99. Bookings are essential for all events.
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