How Should One Evaluate Fiscal Conditions - A Study Based on the Comparison between Japan and Australia

Author: 
Jun Ikeda
Description: 
ASIA PACIFIC ECONOMIC PAPERS NO. 364, 2007
JEL codes: 
Abstract: 
In comparing fiscal indicators of Japan and Australia, it is generally perceived that Japans fiscal conditions are very serious and those of Australia are very sound. However, in Australia the rising ratio of foreign liabilities to GDP is the source of anxiety in the market, which in turn reduces the flexibility of fiscal policy. If such economic conditions are considered, the evaluation of Australias fiscal conditions is worse than one based on fiscal indicator alone, while the opposite relationship is the case for Japan. The fiscal conditions of the two countries are a good example to demonstrate that fiscal conditions should be evaluated as part of economic conditions.