Comments on: A tutorial on fiscal surpluses http://clubtroppo.com.au/2007/05/13/a-macroeconomics-tutorial/ Thu, 08 Jan 2009 19:36:55 +0000 http://wordpress.org/?v=2.6.5 By: stephen bartos http://clubtroppo.com.au/2007/05/13/a-macroeconomics-tutorial/#comment-119682 stephen bartos Mon, 14 May 2007 10:02:40 +0000 http://clubtroppo.com.au/2007/05/13/a-macroeconomics-tutorial/#comment-119682 and then when I get home and read today's SMH I see ross gittins making the same point! and then when I get home and read today’s SMH I see ross gittins making the same point!

]]> By: stephen bartos http://clubtroppo.com.au/2007/05/13/a-macroeconomics-tutorial/#comment-119638 stephen bartos Mon, 14 May 2007 02:30:11 +0000 http://clubtroppo.com.au/2007/05/13/a-macroeconomics-tutorial/#comment-119638 good thoughts james. Agree that you can't derive a strict formula on the link between tightening and loosening to interest rates, but would suggest that were fiscal policy to be loosened to a significant extent beyond market expectations, that in itself would put pressure on rates (nothing the financial markets hate more than to have their expectations wilfully ignored). There's a wide range in what constitutes 'acceptably within' expections, and the last budget fell comfortably within that range. But if it had (for example) projected a deficit for 2007-08, I'd suggest that it would have been outside that range. Incidentally, in relation to the last para, the observation applies only if households have a positive savings rate (which in recent years we don't in Australia) - although your use of not "necessarily" qualifies the point. More generally, I wonder about the whole structural balance question in the current climate. We are in unprecedented territory - the longest continuous period of uninterrupted economic growth in Australian history. What point in a "cycle" are we at when there is not a marker of the ups and downs of the cycle? Makes it very hard indeed to maintain the concept. good thoughts james. Agree that you can’t derive a strict formula on the link between tightening and loosening to interest rates, but would suggest that were fiscal policy to be loosened to a significant extent beyond market expectations, that in itself would put pressure on rates (nothing the financial markets hate more than to have their expectations wilfully ignored). There’s a wide range in what constitutes ‘acceptably within’ expections, and the last budget fell comfortably within that range. But if it had (for example) projected a deficit for 2007-08, I’d suggest that it would have been outside that range.

Incidentally, in relation to the last para, the observation applies only if households have a positive savings rate (which in recent years we don’t in Australia) - although your use of not “necessarily” qualifies the point.

More generally, I wonder about the whole structural balance question in the current climate. We are in unprecedented territory - the longest continuous period of uninterrupted economic growth in Australian history. What point in a “cycle” are we at when there is not a marker of the ups and downs of the cycle? Makes it very hard indeed to maintain the concept.

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