Economy: Tough budgets won't work

IMF Gross Funding Needs April 2011

The IMF figures above show how hysterical is talk of needs for cuts in Australia. With less than 3% of GDP required to fund debts the Australian economy is in better shape than that of most of the comparable nations.

Austerity measures in Greece, Portugal and Ireland have had devastating effects on those economies. In each case they reduced growth, pushed up unemployment and ultimately increased the debt burden on the afflicted economy leading to a loss of market confidence.

Ireland adopted austerity measures in 2008 and was eventually forced into seeking a bailout last year. In the past year, since tougher measures were adopted, Greek growth has collapsed, unemployment has soared and the interest rate on government bonds is consequently much higher.

Tough austerity is a self-defeating strategy. It will push up unemployment and make the lives of the least well off more precarious. If there are to be cuts start at the top and encourage those who shout loudest for them them lead the way.