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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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    1. repec:bla:ecorec:v:74:y:1998:i:227:p:346-61 is not listed on IDEAS
    2. 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.
    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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