Fiscal Debt Sustainability in Australia: Is it Feasible?
Melbourne Institute Policy Brief No. 03/15
This Policy Brief proposes projections on the evolution of the Australian debt-to-GDP ratio over the long run. Plausible assumptions about the fiscal policy plans that could be implemented until 2050 suggest that Australian public debt is likely to remain on a sustainable path. This conclusion is supported both by some recent academic literature as well as some popular financial indicators. Further simulations conducted to study the role of credibility and clear communication aiming at reducing fiscal policy uncertainty suggest that fiscal policy credibility is likely to be a powerful tool that policy makers should exploit to minimise the costs related to debt stabilisation.