The debt generated by stimulative government measure will hamper the economy’s ability to grow, says Reserve Bank of Australia director Warwick McKibbin. In an interview with The Australian, McKibbin stated that China’s stimulative actions might be enough to boost his economy due to their heavy demand for many of the minerals that Australia exports.
Furthermore, running large deficits would reduce the availability of private funds to finance new investments, he said. “The danger is you add too much fiscal deficit,” he added. Indeed, “most fiscal policy doesn’t do anything except switch spending from one period to another,” the RBA director said.