Ask any politician if governments should run surpluses and the answer is likely to be a resounding yes, with the rationale being that governments should “live within their means”.
Precisely this reason was given by the Australian National Commission of Audit, which has been charged by the Abbott government with the task of suggesting ways to rein in government spending. Its first report gave as the very first of its “Principles of good government” the mantra that governments should:
Live within your means. All government spending should be assessed on the basis of its long-term cost and effectiveness and the sustainability of the nation’s long-term finances (Executive Summary, National Commission of Audit).
The analogy behind this principle is that governments are like companies, and should therefore have strong balance sheets:
For governments, as with companies, a strong balance sheet is important (What should governments do?, National Commission of Audit).
To achieve this strong balance sheet, the Australian government’s goal is to achieve a surplus equivalent to 1 per cent of GDP within a decade and presumably to maintain it from then on…
Click here to read the rest of this post.
