Australia is too preoccupied with public debt and should focus on using it as an instrument of growth rather than employ measures to reduce spending, according to University of Adelaide’s new Dean of Business School.
In response to the Commission of Audit released yesterday, international economic commentator Professor Lawrence Abeln (formerly with Cambridge University and MIT) says what is missing from the current federal budget debate is the fact that Australia remains one of the strongest economies in the World.
“Australia’s inflation is contained. Our employment is low especially relative to Europe and the US, and most importantly, we have among the lowest public debt ratios to gross domestic product (GDP) of any industrialised country in the world,” Professor Abeln says.
“Australia has managed its economy well—in fact it weathered the banking crisis and housing crisis—and did not borrow as heavily, like many other industrialised countries, to get out of the financial crisis.
“Our public debt is 30% of GDP. Both France and the UK have a public debt ratio three times that of Australia. The ratio is 75% in the US and over 200% in Japan.
“Our public debt is already under control. The Government has made efforts to contain it relative to our heavily indebted peer G20 nations. We should not be so preoccupied with the current debt level as we have many additional capacities in the world markets to use debt as an instrument of growth,” he says.
Professor Abeln says instead of an overemphasis on further reducing our relatively low debt levels, the government should use additional spending measures to grow GDP.
“The government should use incentives to encourage multinationals to relocate to Australia to create good jobs. It should continue to encourage consumer spending and secure further free trade agreements to increase exports,” he says.
“Australia should support education of all levels to equip the future workforce and offer incentives for more small and medium sized businesses to innovate,” Professor Abeln says.
“Our service sector now represents two thirds of the economy. It’s increasingly important to diversify and develop our workforce to meet the needs of future business, to manage an aging population and to transition to a cleaner energy economy.
“These are better economic policies than debt containment and enacting additional tax levies on consumers while reducing their ability to spend and limiting the opportunities for small businesses to grow.”
Professor Lawrence Abeln
Dean of Business School
The University of Adelaide