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ow Big Was the Effect of Budget Consolidation on the Australian Economy in the 1990s?

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  • Lei Lei Song

    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)

  • John Freebairn

    () (Department of Economics, The University of Melbourne)

Abstract

This paper evaluates the effects of budget consolidation on the Australian economy in the 1990s by using a modified version of TRYM. By identifying the effects on long-term interest rates of the expected reduction in budget deficits in the 1996/97 financial year, the paper simulates the model for would-be impacts on the economy, had interest rates not fallen due to no budget consolidation. It is found that the program of budget consolidation did have a sizable impact on the economy, raising GDP by up to three quarters of a percentage point and reducing unemployment by 0.3 percentage points in two to three years.

Suggested Citation

  • Lei Lei Song & John Freebairn, 2004. "ow Big Was the Effect of Budget Consolidation on the Australian Economy in the 1990s?," Melbourne Institute Working Paper Series wp2004n30, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
  • Handle: RePEc:iae:iaewps:wp2004n30
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    File URL: http://melbourneinstitute.unimelb.edu.au/downloads/working_paper_series/wp2004n30.pdf
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    References listed on IDEAS

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    Cited by:

    1. Marika Karanassou & Hector Sala, 2010. "Labour Market Dynamics in Australia: What Drives Unemployment?," The Economic Record, The Economic Society of Australia, vol. 86(273), pages 185-209, June.

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