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Australia’s Budget Is Built on Pure Hope
How a country assumed its way out of a crisis
The Australian federal budget is long-awaited, not just because we finally get a glimpse of the immediate fiscal cost of the pandemic but because we now have a clear articulation of the government’s assumptions about how the pandemic will evolve and what the recovery will look like.
Australia is running one of the most bifurcated policy experiments of the pandemic, with some states close to fully easing restrictions, and others still sweating anxiously over the numbers. The state of Victoria has embarked on one of the harshest and longest lockdowns in the developed world, and many of the special measures announced in the federal budget are a direct result of the situation there.
Like many countries, Australia’s fiscal response to the virus has been extraordinary. An equally extraordinary effort will be needed to repair the budget. Unlike the United States, whose dollar enjoys reserve currency status globally, making it easier to support the federal government through monetary policy, smaller countries like Australia must take the job of budget repair much more seriously.
A great deal depends on how long the virus will last and the ability of state governments to contain it. The key assumptions embedded in the budget are…
