Earlier in the year, there were signs that the general public had picked up the then orthodoxy that what we needed was a contractionary fiscal policy, to the point of not wanting their tax cuts in cash (there was support for diverting them to superannuation).
But it seems that the flipside orthodoxy – that we need deficits in the downside of the economic cycle – has not (or not yet) entrenched itself. A Newspoll published today found that 56% of voters would be concerned about the budget going into deficit next year.
As Club Troppo readers would have predicted, Fred Argy isn’t impressed.
Regardless of the purely economic arguments on this subject (few economists think that temporary deficits are of major concern), I think this is quite a good result. On the assumption that few voters will ever acquire sophisticated economic knowledge or understanding, and that they will use rules-of-thumb instead, an anti-deficit rule of thumb is the one to have.
In other countries with weaker anti-deficit cultures, borrowing is used to finance normal recurrent expenditures and avoid budgetary discipline. Australia is in a much better long-term position than most other countries for having taken its anti-deficit attitudes beyond what economic theory would recommend.