Question to the Treasurer – November 11, 2016

Letter sent by email, 11th November 2016

In the event that the economic policy of Donald Trump’s future presidency results in a US recession (which presumably would spread), would the Government consider passing a stimulus package similar to that of the Rudd/Swan government?


Response received by post, dated 6 December 2016

Dear Mr Mann,

Thank you for your correspondence of 11 November 2016 to the Treasurer concerning a Government stimulus package in the event of external shocks, such as a recession in the US. The Treasurer has asked me [Dr Kouparitsas] to respond to you.

The Government’s fiscal strategy is detailed in Budget Paper No. 1 Statement 3: Fiscal Strategy and Outlook. The fiscal strategy underlines the Government’s commitment to budget discipline and outlines how the Government will set medium-term fiscal policy. The Government’s medium-term fiscal policy is to achieve budget surpluses, on average, over the course of the economic cycle.

The strategy is underpinned by the four policy elements:

  • investing in a stronger economy by redirecting Government spending to quality investment to boost productivity and workplace participation;
  • maintaining strong fiscal discipline by controlling government expenditure to reduce the Government’s share of the economy over time in order to free up resources for private investment to drive jobs and economic growth;
  • supporting revenue growth by supporting policies that drive earnings and economic growth; and
  • strengthening the Government’s balance sheet by improving net financial worth over time.

The Government also committed to a Budget repair strategy which is designed to deliver sustainable budget surpluses building to at least one per cent [sic] of GDP as soon as possible, consistent with the medium-term fiscal strategy. The Budget repair strategy complements the medium-term fiscal strategy by helping ensure that public debt remains low and thereby increasing our resilience to economic shocks, including external shocks.

Once again, thank you for taking the time to write.

 

Yours sincerely,

Dr Michael Kousparitsas

A/g Division Head

Macroeconomic Modelling and Policy Division [of the Treasury]