Be a responsible government and manage the economy and budget well

Comments on Alan Wood “There's plenty to borrow, but Rudd will need to cut debt”, 13/08/2009, http://www.theaustralian.news.com.au/story/0,25197,25920869-5013578,00.html

There are several issues raised in this article. Firstly, it is not just the level of budget deficit and government debt but also the quality of government spending that leads to the deficits and debts that will matter. While it is difficult to judge the level of the projected budget deficit is the appropriate or not at the time of the budget being made, it has now been shown that some of the government spending in its budget measures are wasteful and could have been better targeted and managed to either reduce the size of deficits or achieve greater and better outcomes.

Secondly, Australia is a small country internationally, so the impact of its borrowing internationally will not have a significant impact on the international capital market, although the costs of borrowing both publicly and privately will be higher due to tightening internationally capital market. That impact may be sizeable in terms of the dollar amount, but that should not be a worry itself.

Thirdly, it is absolutely an imperative for any government especially the Rudd one to guard against unnecessary government spending and be smarter, highly focused and well targeted in its fiscal policy to minimise spending and maximise the budget impact on growth and employment. The government must wind down its deficits and reduce the debts as early as possible and stand ready at any time when and if appropriate to do that.

Rudd and his government, have a huge responsibility to return the trust the Australian public has given them and do a better job than they have done so far. They paid some learning fees in how to manage the economy. They should learn rapidly enough to get on top of their jobs, starting from now.