American Delusions Down Under

For better or worse, economic-policy debates in the United States are often echoed elsewhere, regardless of whether they are relevant. Australian Prime Minister Tony Abbott’s recently elected government provides a case in point.

NEW YORK – For better or worse, economic-policy debates in the United States are often echoed elsewhere, regardless of whether they are relevant. Australian Prime Minister Tony Abbott’s recently elected government provides a case in point.

As in many other countries, conservative governments are arguing for cutbacks in government spending, on the grounds that fiscal deficits imperil their future. In the case of Australia, however, such assertions ring particularly hollow – though that has not stopped Abbott’s government from trafficking in them.

Even if one accepts the claim of the Harvard economists Carmen Reinhart and Kenneth Rogoff that very high public debt levels mean lower growth – a view that they never really established and that has subsequently been discredited – Australia is nowhere near that threshold. Its debt/GDP ratio is only a fraction of that of the US, and one of the lowest among the OECD countries.

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