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Budget deficit – Ai Group comment

"While the size of the budget deficit and the implied extra debt levels revealed today might seem staggering, it reflects the fact that we are experiencing the deepest recession since the 1930s. There should be little doubt that the economy would be in much worse shape if the Federal Government had not stepped in to stem the tide of job losses and business failures," Innes Willox, Chief Executive of the national employer association Ai Group said today.

"While government outlays are up, the loss of tax revenue is much less than would have been the case without the fiscal support the Government is providing. In all likelihood we would also be looking at further declines in employment and economic activity and a deeper and longer recession. Sometimes you have to spend money to avoid losing more money.  This is one of those times.

"As both the Reserve Bank and the Treasurer have pointed out, Australia’s level of government debt is manageable and is considerably lower than in most other developed countries. With interest rates looking like they will remain low for a number of years, the costs of servicing that extra debt is also low.

"The fiscal measures the Government is taking to ward off a much more damaging downturn makes good sense and indeed further fiscal support will be required in the October Budget," Mr Willox said.


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