Australia warned off pursuing austerity course

21 Aug 13
Australia risks being plunged into recession if the government adopts a European-style policy of cutting public spending, a report has warned.

By | 21 August 2013

Australia risks being plunged into recession if the government adopts a European-style policy of cutting public spending, a report has warned.

The Unmasking austerity: lessons for Australia report, prepared for the Public Service Association of South Australia, said recessions in European countries could be replicated if federal government spending was cut.

The report comes after the country’s Labor government warned last week that the economy faces a ‘difficult landing’ that could require a tightening of public spending.

However, report author Dexter Whitfield, the director of the European Services Strategy Unit, said austerity policies across the European Union had ‘fuelled the fire of recession rather than stimulated growth’.

He added: ‘As a consequence nearly 5.5 million young people are now out of work in Europe and unemployment has reached crisis levels. Negative or weak economic growth rates have prevailed on the back of very low private sector investment levels in Europe and the US.’

Australia currently has ‘a much better policy mix’, Whitfield said, due to the government choosing stimulus policies over austerity policies,

Commenting on the report, the executive director of the Australian Workplace Innovation and Social Research Centre John Spoehr stated that unemployment would rise sharply in Australia if a future federal government embarked on a radical programme of cost cutting.

‘We could reach a recessionary tipping point very quickly if a large scale program of public sector expenditure cuts was implemented,’ he said.

‘I am deeply concerned that the economic storm we have weathered better than most, might engulf us if austerity policies are adopted in Australia.’

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