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Australia’s Fiscal Framework: Revisiting Options for a Fiscal Anchor
Author: Allan Dizioli, Mr. Philippe D Karam, Mr. Dirk V Muir, and Siegfried Steinlein
Series:
IMF Working Papers
Volume/Issue:
Volume 2017: Issue 286
Language:
English
Publication Date:
22 Dec 2017
DOI:
https://doi.org/10.5089/9781484335383.001
ISBN:
9781484335383
ISSN:
1018-5941
Pages:
40
Keywords:
WP; government; long-term debt; net; debt; Fiscal policy; fiscal rules; general equilibrium models; taxation; commonwealth government; budget constraint; debt target; territory treasury; government's goal; government budget constraint; deficit target; government dissaving; government face; long-term government debt target; debt ratio; Budget planning and preparation; Business cycles; Global
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund