Readers will be aware that Australia is facing huge deficits, despite the promise of the previous Government to get into surplus.
As a response to this, the Centre for Independent Studies has proposed some fiscal rules to bind future Governments. They are:
- require the federal fiscal balance to be maintained within a range of +2% to -2% of GDP on both an actual and forecast basis
- limit the net debt to GDP ratio to 10%
- cap the federal revenue and expenditure shares of GDP to 25%
- capping real growth in federal spending at 2% per annum
Fiscal rules are not new for Australia. The Labor Hawke/Keating Government set rules being:
- Not to raise tax revenue as a share of GDP
- Not to raise government expenditure as a share of GDP
- To reduce the budget deficit in absolute terms and relative to GDP
Anyway what I like most of all is their mechanism to encourage Governments to keep to the fiscal limits or rules. They propose:
This would involve cutting federal politicians’ overall remuneration by 1% for every percentage point breach of each fiscal rule for the
duration of the breach.
Now that appeals!