The danger, as the continuing depression in Europe illustrates, comes if politicians take seriously the sort of cant about debt pushed by News Ltd and start treating budget outcomes and debt reduction as ends in themselves, rather than tools of economic management. A fiscal policy that goes beyond addressing the structural problems of our tax and spending frameworks to a cut-debt-at-all-costs policy not merely has the potential to drive the economy into recession, but it would risk thereby increasing what little debt problem we have through reduced economic growth and tax revenues.
But Eslake doesn’t see much danger from austerity-driven politicians. Instead, he is concerned that an incoming Coalition government, should one eventuate, will repeat the mistakes of the Fraser years and fail to use its position to drive necessary fiscal discipline. “Like the Fraser government, an Abbott government may be divided between a leader who distrusts markets, has little interest in economics and is actually contemptuous of economists, a National Party that has reverted to its traditional agrarian socialism, and reformist liberals like Hockey, Robb, Turnbull and Sinodinos.”
As it turns out, the world of debt is a lot more complicated than journalists and editors might have us believe.