I am a strong advocate of counter-cyclical fiscal policy – and just as I think we should push ‘go’ as things soften, I also believe that it’s important to be tight on the way out of a recession, as that enhances your ability to conduct agressive counter-cyclical policy when the need arises.
In the context of budget forecasts, I remain critical of the 2011/12 fiscal settings – however given the the local and global economies look materially weaker than expected, letting the budget slip back into deficit is clearly the right strategy.
Now, if only our Government would man-up, and support confidence by saying that they are willing to take this sensible course.
The IMF has given up on Swan’s surplus and he should too. His perverse surplus fetishism is actually going to make things worse.
Comparing the September and April Fiscal monitors, you can see that they have added ~1.5ppts of GDP to the deficit in 2011 and 2012, and ~0.5ppts from 2013 to 2016.