Forum expert shares Australian responses to economic crisis

A Forum of Federations expert gave a talk recently in Gütersloh, Germany, on how the Australian federation responded to the economic crisis.

Prof. Alan Fenna from the John Curtin Institute of Public Policy, based at Australia’s Curtin University, spoke to 30 senior staff at the Bertelsmann Foundation, Germany’s largest non-profit foundation dealing with political issues. Alan Fenna was on a research and interview trip for the Forum project on benchmarking in federal systems, which brought him to five European countries.

According to Prof. Fenna, the financial crisis has confirmed the federal government’s dominant role in economic management. Canberra responded quickly with bank guarantees to underwrite confidence in the financial sector and with two nation-wide economic stimulus packages, in part funded through the states. With some variations, the states have headed in the same direction in their own stimulus packages, but with an emphasis on longer-term investment in infrastructure.

Also, Australia’s budgetary position is among the healthiest in the developed world. Thanks in large part to the resources boom, Australia entered the recession with no net federal government debt. As in other developed countries, budget deficits are expanding, although net government debt is expected to peak at a comparatively modest 13.8 per cent of GDP in 2013-2014.

While the country undoubtedly is in recession, current forecasts indicate it will be less severe than in most other developed nations. And if China’s emerging recovery is sustained, it should help support the demand for Australian commodities. In this case, Prof. Fenna argued, the stimulus packages could prove to be counterproductive since they might actually have a pro-cyclical, instead of an anti-cyclical effect.

The event was held Nov. 25, 2009.

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