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Debt ‐ Is It Still A Problem?

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  • Des Moore

Abstract

The argument that once the public sector ceases to be a net borrower levels of external debt should cease to be a policy concern, overlooks two key points. First, private savings behaviour may be distorted due to government intervention, leading to excessive drawing on overseas savings. Second, given this, a potential externality exists to justify government intervention to prevent overseas borrowing reaching the point where a financial crisis and loss of confidence occur, leading to a recession or an extended period of stagnation, or both. The Australian situation fits this scenario.

Suggested Citation

  • Des Moore, 1990. "Debt ‐ Is It Still A Problem?," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 23(3), pages 17-32, September.
    • Handle: RePEc:bla:ausecr:v:23:y:1990:i:3:p:17-32
    DOI: 10.1111/j.1467-8462.1990.tb00357.x
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    References listed on IDEAS

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    1. Tracey Horton & Jenny Wilkinson, 1989. "An Analysis of the Determinants of Imports," RBA Research Discussion Papers rdp8910, Reserve Bank of Australia.
    2. Ian R. Harper & G. C. Lim, 1989. "Is Monetary Policy Too Tight?," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 22(2), pages 15-24, June.
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    Cited by:

    1. Neil Dias Karunaratne, 2008. "The Polemics and Empirics of the Sustainability of Australia's Current Account Deficit - Revisited," Discussion Papers Series 364, School of Economics, University of Queensland, Australia.
    2. Cashin, Paul & McDermott, C John, 1998. "Are Australia's Current Account Deficits Excessive?," The Economic Record, The Economic Society of Australia, vol. 74(227), pages 346-361, December.
    3. Tony Makin, 1992. "Interventionism, Microeconomic Reform and the External Deficit," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 25(1), pages 15-21, January.

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