We’re not ready for another crisis, economists say

Australia would be hard-pressed to deal with any kind of global downturn given the state of the country’s budget. That’s

Australia would be hard-pressed to deal with any kind of global downturn given the state of the country’s budget.

That’s according to the heads of the Treasury and the Finance Department who say without “considerable effort” to slow spending, it would be unlikely to produce the budget surpluses needed to give Australia any hope of riding out economic adversity in the future.

It’s a stark warning to the major political parties at the end of week two of the election campaign and neither prime minister Malcolm Turnbull nor opposition leader Bill Shorten have made any mention of spending cuts or the risks to Australia’s economic outlook.

Treasury secretary John Fraser and Finance Department secretary Jane Halton however, toldĀ The Australian that a greater commitment to controlling the growth of government spending was required.

“Should Australia experience a significant negative economic shock, the fiscal position would be expected to deteriorate rapidly and not be consistent with the projects,” they said.

Effectively, another global financial crisis would likely see Australia plunged into a recession as no government would be able to bail out the banks for a second time.

Fraser and Halton also acknowledge how crucial it is for Australia to keep its top credit rating “to ensure the Commonwealth’s borrowing costs, and those across the economy more generally are kept as low as possible”.

The discussion was held at the Pre-election Economic and Fiscal Outlook (PEFO), an independent review of the budget that is required by law before an election.

Their statement has been supported by several senior economists across the country, including Labor advisor and economist Ross Garnaut who said, “Our banks are in a weaker position now than they ever were” and Professor John Freebairn, a former advisor to the Henry tax review, who has called politicians on both sides “lying bastards”.

Are you concerned about another financial crisis in Australia? Would you expect the government to assist if there was one?


  1. Donald L Reid  

    As an octogenarian with grandchildren I am extremely concerned at the way our political leaders are ignoring the dire condition of our economy. Of course telling the truth and cutting back expenditure as needed would result in the party that suggested this course of action losing the coming election in a landslide. The media are partly to blame because they are not highlighting the real economic outlook and explaining that problem and part we should all be playing to bring the budget back to surplus and the debt paid off as quickly as possible. When are the media going to realise that they have a more responsible role to play than simply concentrating on the trivia and the sensational? When are commentators going to ask the hard questions in their interviews and insisting on proper answers?

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