Reserve Bank Governor Glenn Stevens has urged the federal government to take a longer term view on budget outcomes.
“The debate here has, I would have to say, been overly focused on budget outcomes in particular years,” he told a business lunch in Brisbane on Thursday.
“The real issues are medium term ones.
“Put simply, there are things we want to do as a society, and have voted for, that are not fully funded by taxes over the medium term, as is starting to become clear in the lead up to the May budget.”
Mr Stevens went on to repeat a sentiment delivered by Treasury Secretary Martin Parkinson in a speech on Wednesday evening.
“Our situation is not dire by the standards of other countries but neither are the issues trivial,” Mr Stevens said.
“A conversation needs to be had about this.”
Dr Parkinson told a Sydney Institute conference a key challenge for the government’s upcoming white paper on taxation would be to consider the mix of taxes, including whether there was a role for a greater contribution from indirect taxes.
Government revenues cannot “magically” return to the levels seen prior to the 2008-2009 global financial crisis, he said.
At the same time, growth in expenditure on social programs will place added pressures on fiscal sustainability over the decades ahead, Dr Parkinson said.
The RBA governor said the G20 goal of increasing global economic growth by two per cent won’t be achieved by “clever programs of cheap money devised by central banks”.
“Nor is it to be the result of fiscal adventurism,” he said.
“We are trying to shift the conversation away from the growth versus austerity framing of recent years, which is ultimately a rather sterile discussion.
“No one has ever achieved growth simply by austerity, but equally the approach of simply ignoring the gaping hole in public finances in many countries has reached the limits of its credibility.
“We need a refocused conversation, around doing things that spur growth potential, which would mean, among other things, that the accommodative policies of central banks could get more traction,” Mr Stevens said.