A monetary sovereign government such as Australia’s does not need to balance its budget or borrow the currency it creates, provided total spending does not exceed the economy’s real productive capacity.

Governments of countries with monetary sovereignty, including Australia, do not have to balance their national budgets and do not need to borrow the currency they create.

Conventional (i.e. neoclassical) economics is presented to the public as a science. Like science, it has complicated mathematical models, but these do not necessarily make a science. They are tools that can be applied to a wide range of subjects, including gambling, linguistics, and traffic engineering.

The real basis of science is observation, either direct, or indirect via controlled experiments. To be useful, mathematical models and their underlying theoretical structure must be consistent with observation.

Neoclassical economists inform us that the Australian economy must have a balanced budget over the business cycle. Otherwise, they claim, the deficit will cause inflation and will also compete with private investment. Also, the cumulative effect of many deficits is a huge debt for future generations to service. Some suggest that the country could go bankrupt.

This conventional ‘wisdom’ is repeated endlessly by politicians, public servants and the mass media. However, none of these alleged disasters is necessarily true, although they may occur in particular cases due to poor government management.

The alleged inflation mechanism is contradicted by real data from ABS, Treasury and RBA. It shows that, for most years since Australia floated the dollar in 1983, budget deficits have been the norm – exceptions occurred under Hawke Labor, Howard Coalition, and Albanese Labor. There is no correlation between budget deficits and inflation, which only exceeded 6 per cent in 1985-1990 after floatation, in 2000 due to GST introduction, and in 2022-2023 following Covid. Real inflation, not transitory price increases, can originate from either the domestic private or public........

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