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Australia's Fiscal Space: The Role of Public Investment.
- Source :
- Australian Economic Review; Sep2022, Vol. 55 Issue 3, p383-388, 6p, 2 Graphs
- Publication Year :
- 2022
-
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. [ABSTRACT FROM AUTHOR]
- Subjects :
- PUBLIC investments
PUBLIC spaces
DEBT-to-GDP ratio
PUBLIC finance
INTEREST rates
Subjects
Details
- Language :
- English
- ISSN :
- 00049018
- Volume :
- 55
- Issue :
- 3
- Database :
- Complementary Index
- Journal :
- Australian Economic Review
- Publication Type :
- Academic Journal
- Accession number :
- 159106500
- Full Text :
- https://doi.org/10.1111/1467-8462.12481