Fiscal Reform and Fiscal Sustainability: Evidence from Australia and Sweden

This paper examines how the adoption of a fiscal rule affects the sustainability of fiscal policy in two OECD countries; Australia and Sweden. While recent fiscal reforms undertaken in both these countries are useful for ensuring the sustainability of government budgets, there are a few differences. In Australia, we show that government revenues are not necessarily growing at a faster rate than government expenditures, at least from the viewpoint of a statistical long-run relationship. In contrast, in Sweden, we show the reform is more beneficial for the attainment of a budget surplus.