Global Macro Service > Research Briefings > Australia

What could a fiscal response look like?

The Federal Government is facing increasing pressure to ease fiscal policy. Domestic demand is subdued, monetary policy is reaching its limits, and debt financing conditions are highly accommodative. Moreover, the Federal budget is in a sound position after several years of providing a drag on growth. However, the question of how exactly the government should pursue a fiscal expansion remains. Three scenarios are considered: a boost to government consumption, and increase in government investment, and lower income tax rates. We find that public investment is the most effective lever available to the government.

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