Question

The Australian government has recently announced a raft of fiscal expansionary/stimulus measures that will lead to a significant increase in the level of Australian government debt. Given the material presented in this course cover the pros and cons of government debt, we know that one view put forward is that ‘government debt is bad’. Do you agree or disagree with this statement? Briefly justify your answer.

Answer 1

No, looking at the present situation government debt is not bad as the demand is subdued due to the endemic in the world. a higher government debt right now will increase the demand and bring employment in the market, this will also fastened the economic recovery in the market.

Debt is bad when its overdone, i.e. used is just expendiutre that do not create any value for the economy i.e. only for consumption then it lead to crowding out and increases the burden on the tax payers.