Australia still has a budget deficit problem

AMP Capital

Government spending surged 25% between 2006-07 and 2008-09 to combat the GFC, and this has never been unwound. We are still spending the proceeds of the boom even though it’s long gone. While our public debt to GDP ratio is low compared to the US, Europe, and Japan, comparing ourselves to a bad bunch may not be wise. And in any case, we are a bit different to Europe and Japan which run current account surpluses and so are not dependent on the rest of the world for capital inflow and the US, which has the benefit of the US dollar being a reserve currency. Australia’s sizeable current account deficit of 4% of GDP means we have the classic twin deficit problem that leaves us vulnerable should foreign investor sentiment turn against us. See Shane Oliver’s thoughts on the Federal budget: (VIEW LINK)


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