Australian Federal and State Budgets – An Overview
developments influencing the capacity of governments to raise revenue. The recent global financial crisis (GFC), which unfolded in 2008 with the collapse of Lehman Brothers, is one factor that has affected the capacity of the current NSW government to meet the targets of the 2005 legislation. From an international perspective, the GFC has also seen governments embracing a policy of fiscal deficits.88 This approach was endorsed by the International Monetary Fund, with an IMF staff report stating that:
it is essential, in our view, that public authorities play their appropriate role in preventing a collapse of confidence in the private sector that might lead to a vicious downward spiral. . .it is particularly important for fiscal policy to take on an increased share of the burden during the period in which the financial sector is recovering. . . 89
From a NSW perspective, in his budget statement for 2009-10 the current state Treasurer (Eric Roozendaal) itemised the government’s progress towards the targets established in the Fiscal Responsibility Act, as follows:
Refer to NSW Treasury, State Infrastructure Strategy: 2008-09 to 2017-18 (NSW Treasury, Sydney, 2008), pp.3-4,10.
In late 2009 the Obama administration (USA) had a budget deficit of 11.2 per cent of GDP and the Brown government (UK) had a budget deficit of 12.6 per cent of GDP. See Organisation for Economic Co-operation and Development, Economic Outlook No. 86 (Organisation for Economic Co-operation and Development, Paris, 2009), p.93.
Charles Freedman, Michael Kumhof, Douglas Laxton and Jaewoo Lee, The Case for Global Fiscal Stimulus (International Monetary Fund, Washington DC, 2009), p.17. In an address to the annual dinner of the Australian Business Economists, in December 2008, the governor of the Reserve Bank of Australia (Glenn Stevens) remarked that “One of the striking features of the recent G-20 meetings was the way the need for fiscal stimulus, where debt levels permitted, was readily agreed between participants, and actively encouraged by the IMF.” See Glenn Stevens, “Interesting Times”, address to the Australian Business Economists Annual Dinner, Sydney, 9 December 2008.