Conservative U.S. politicians continue to press for austerity, but on the other side of the world, Australia’s government is moving in the opposite direction. That country largely escaped the economic downturn thanks to its abundant natural resources. But now Australia anticipates an economic contraction, and the government is adjusting its priorities accordingly.
Treasurer and Deputy Prime Minister Wayne Swan announced the shift from deficit reduction to economic investments in a speech to parliament, Bloomberg reports:
Australian Treasurer Wayne Swan will eschew European-style austerity as a stronger currency slows growth, wagering the government can win a Sept. 14 election fought on jobs and absorb the pain of a broken surplus promise. […]
“To those who would take us down the European road of savage austerity I say the social destruction that comes from cutting too much, too hard, too fast is not the Australian way,” Swan told parliament. “The alternative, cutting to the bone, puts Australian jobs and our economy at risk.”
Swan outlined a longer path back to the black that funds pledged spending on infrastructure, education and disability care, while saying restraint gives the Reserve Bank of Australia scope to cut record-low interest rates even further.
The reversal, forecast in December, acknowledges the economic reality that rapid austerity exacerbates economic troubles.
Meanwhile, the American fiscal policy debate has veered the other direction since 2011. Without the austerity measures Republicans have pushed and President Obama has signed over the past two years, economists say the U.S. unemployment rate would be a full percentage point lower. Obama’s American Jobs Act was projected to spur over two million new jobs when the White House proposed it in the fall of 2011, but Republicans blocked the bill. The U.S. will create 700,000 fewer jobs this year alone thanks to House Republicans’ decision to go ahead with massive “sequestration” cuts.
Congress shouldn’t need the Australian example, though. The contrast between the American recovery under fiscal stimulus and Europe’s austerity-driven return to recession is widely reported. The economic research Republicans have cited as motivation for immediate and sharp deficit reduction was proven entirely bogus just weeks ago.