IDEAS home Printed from https://ideas.repec.org/a/bla/ausecr/v53y2020i4p557-565.html
   My bibliography  Save this article

Should We Worry about Government Debt? Thoughts on Australia's COVID‐19 Response

Author

Listed:
  • Chris Edmond
  • Richard Holden
  • Bruce Preston

Abstract

No. While the COVID‐19 crisis has required a dramatic increase in debt‐financed government spending, in the current conditions the benefits from this debt are unusually high and the costs unusually low. While conditions can change, the Australian Government can right now hedge against these risks by lengthening the maturity structure of government debt, even at the cost of a modest increase in its current servicing costs.

Suggested Citation

  • Chris Edmond & Richard Holden & Bruce Preston, 2020. "Should We Worry about Government Debt? Thoughts on Australia's COVID‐19 Response," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 53(4), pages 557-565, December.
    • Handle: RePEc:bla:ausecr:v:53:y:2020:i:4:p:557-565
    DOI: 10.1111/1467-8462.12402
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/1467-8462.12402
    Download Restriction: no
    File URL: https://libkey.io/10.1111/1467-8462.12402?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Olivier Blanchard, 2019. "Public Debt and Low Interest Rates," American Economic Review, American Economic Association, vol. 109(4), pages 1197-1229, April.
    2. Del Negro, Marco & Giannone, Domenico & Giannoni, Marc P. & Tambalotti, Andrea, 2019. "Global trends in interest rates," Journal of International Economics, Elsevier, vol. 118(C), pages 248-262.
    3. Giovanni Caggiano & Efrem Castelnuovo & Valentina Colombo & Gabriela Nodari, 2015. "Estimating Fiscal Multipliers: News From A Non‐linear World," Economic Journal, Royal Economic Society, vol. 0(584), pages 746-776, May.
    4. Olivier J Blanchard, 2019. "Public Debt: Fiscal and Welfare Costs in a Time of Low Interest Rates," Policy Briefs PB19-2, Peterson Institute for International Economics.
    5. Rachael McCririck & Daniel Rees, 2017. "The Neutral Interest Rate," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 09-18, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Basse, Tobias & Wegener, Christoph, 2022. "Inflation expectations: Australian consumer survey data versus the bond market," Journal of Economic Behavior & Organization, Elsevier, vol. 203(C), pages 416-430.
    2. Gigi Foster & Paul Frijters, 2024. "Hiding the elephant: The tragedy of COVID policy and its economist apologists," Australian Economic Papers, Wiley Blackwell, vol. 63(1), pages 106-144, March.
    3. Wu, Julia Yonghua & Opare, Solomon & Bhuiyan, Md. Borhan Uddin & Habib, Ahsan, 2022. "Determinants and consequences of debt maturity structure: A systematic review of the international literature," International Review of Financial Analysis, Elsevier, vol. 84(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Alexander Beames & Mariano Kulish & Nadine Yamout, 2022. "Fiscal Policy and the Slowdown in Trend Growth in an Open Economy," Working Papers 143, Red Nacional de Investigadores en Economía (RedNIE).
    2. Kuvshinov, Dmitry & Zimmermann, Kaspar, 2020. "The Expected Return on Risky Assets: International Long-run Evidence," CEPR Discussion Papers 15610, C.E.P.R. Discussion Papers.
    3. Stolyarov, Dmitriy & Tesar, Linda L., 2021. "Interest rate trends in a global context," Economic Modelling, Elsevier, vol. 101(C).
    4. Ferreira, Thiago R.T. & Shousha, Samer, 2023. "Determinants of global neutral interest rates," Journal of International Economics, Elsevier, vol. 145(C).
    5. Westerhout, Ed & Meijdam, Lex & Ponds, Eduard & Bonenkamp, Jan, 2022. "Should we revive PAYG? On the optimal pension system in view of current economic trends," European Economic Review, Elsevier, vol. 148(C).
    6. Atanas Pekanov, 2020. "Die Europäische Währungsunion im Wandel," WIFO Monatsberichte (monthly reports), WIFO, vol. 93(3), pages 165-175, March.
    7. El Mostafa Bentour, 2022. "The effects of public debt accumulation and business cycle on government spending multipliers," Applied Economics, Taylor & Francis Journals, vol. 54(19), pages 2231-2256, April.
    8. Gaetano Bloise & Pietro Reichlin, 2023. "Low safe interest rates: A case for dynamic inefficiency?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 51, pages 633-656, December.
    9. Kulish, Mariano & Yamout, Nadine, 2024. "The fiscal arithmetic of a slowdown in trend growth," European Economic Review, Elsevier, vol. 168(C).
    10. Christian Breuer, 2020. "Goverment Debt Post COVID-19: Back To Golden Rules," Chemnitz Economic Papers 041, Department of Economics, Chemnitz University of Technology, revised Feb 2020.
    11. Javier Andres & Oscar Arce & Jesus Fernandez-Villaverde & Samuel Hurtado, 2022. "Deciphering the Macroeconomic Effects of Internal Devaluations in a Monetary Union," International Journal of Central Banking, International Journal of Central Banking, vol. 18(5), pages 1-47, December.
    12. Ludger Schuknecht, 2019. "Fiscal-Financial Vulnerabilities," CESifo Working Paper Series 7776, CESifo.
    13. Daisuke Miyashita, 2023. "Public debt and income inequality in an endogenous growth model with elastic labor supply," International Journal of Economic Policy Studies, Springer, vol. 17(2), pages 447-472, August.
    14. Schuster, Florian & Krahé, Max & Sigl-Glöckner, Philippa, 2021. "Wird die Konjunkturkomponente der Schuldenbremse in ihrer heutigen Ausgestaltung ihrer Aufgabe noch gerecht? Analyse und ein Reformvorschlag," Papers 277885, Dezernat Zukunft - Institute for Macrofinance, Berlin.
    15. John Cochrane, 2022. "The fiscal root of inflation," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 45, pages 22-40, July.
    16. Karl Whelan, 2021. "Central banks and inflation: where do we stand and how did we get here?," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 18(3), pages 310–330-3, December.
    17. Max Krahé & Florian Schuster & Philippa Sigl-Glöckner, 2021. "Wird die Konjunkturkomponente der Schuldenbremse ihrer Aufgabe noch gerecht? [Is the Cyclical Component of the Debt Brake Still Up to Its Task?]," Wirtschaftsdienst, Springer;ZBW - Leibniz Information Centre for Economics, vol. 101(8), pages 621-628, August.
    18. Langenmayr Dominika & Mittermaier Ferdinand, 2021. "Nachhaltiges Wirtschaften, nachhaltig finanziert: Herausforderungen für die Politik in den 2020er Jahren," Perspektiven der Wirtschaftspolitik, De Gruyter, vol. 22(3), pages 176-190, September.
    19. Battistini, Niccolò & Callegari, Giovanni, 2020. "Public spending at the effective lower bound: how significant are the sustainability risks?," Research Bulletin, European Central Bank, vol. 67.
    20. Narayana R. Kocherlakota, 2023. "Public Debt Bubbles In Heterogeneous Agent Models With Tail Risk," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 64(2), pages 491-509, May.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:ausecr:v:53:y:2020:i:4:p:557-565. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/mimelau.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.