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Australia’s Fiscal Framework: Revisiting Options for a Fiscal Anchor

By: Allan Dizioli,Mr.Philippe D Karam,Mr.Dirk V Muir,Siegfried Steinlein

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Australia’s Fiscal Framework: Revisiting Options for a Fiscal Anchor

By: Allan Dizioli,Mr.Philippe D Karam,Mr.Dirk V Muir,Siegfried Steinlein

This paper revisits options for fiscal anchors in Australia against the backdrop of a medium-term budget balance anchor that has led to larger than expected upward drift in the net debt to GDP ratio since the end of the mining investment boom. The IMF’s G20MOD model is used to compare the budget balance anchor with a long-term debt anchor. Using model simulations evaluated against objective macro stabilization-debt control criteria under three likely scenarios for the Australian economy, the latter is found to perform at least as well as the former. The paper also considers the operationalization of a long-term debt anchor utilizing a combination of fiscal rules which includes expenditure restrictions and a flexible time horizon for convergence, aiming at encouraging countercyclical fiscal policy and minimizing the cost in terms of real GDP foregone in the medium term under fiscal consolidation.

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Page Count

40

Publisher

International Monetary Fund

Published Date

ISBN 10

1484336240

ISBN 13

9781484336243

Australia’s Fiscal Framework: Revisiting Options for a Fiscal Anchor

By: Allan Dizioli,Mr.Philippe D Karam,Mr.Dirk V Muir,Siegfried Steinlein

Write a review Read reviews Take a Quiz Solve Book Puzzle

Australia’s Fiscal Framework: Revisiting Options for a Fiscal Anchor

By: Allan Dizioli,Mr.Philippe D Karam,Mr.Dirk V Muir,Siegfried Steinlein

This paper revisits options for fiscal anchors in Australia against the backdrop of a medium-term budget balance anchor that has led to larger than expected upward drift in the net debt to GDP ratio since the end of the mining investment boom. The IMF’s G20MOD model is used to compare the budget balance anchor with a long-term debt anchor. Using model simulations evaluated against objective macro stabilization-debt control criteria under three likely scenarios for the Australian economy, the latter is found to perform at least as well as the former. The paper also considers the operationalization of a long-term debt anchor utilizing a combination of fiscal rules which includes expenditure restrictions and a flexible time horizon for convergence, aiming at encouraging countercyclical fiscal policy and minimizing the cost in terms of real GDP foregone in the medium term under fiscal consolidation.

Average ratings

N/A

5

0%

4

0%

3

0%

2

0%

1

0%

Solve jigsaw puzzle

Age

Page Count

40

Publisher

International Monetary Fund

Published Date

ISBN 10

1484336240

ISBN 13

9781484336243