Ricardian Equivalence in Australia

Shane Brittle has completed a PhD thesis that is the most comprehensive examination of the issue of Ricardian equivalence and related questions in an Australian setting. Brittle estimates a long-run private saving offset to changes in public saving of around one-half. One interesting conclusion from the thesis is that around 80% of the Howard government’s tax cuts were saved, an empirical refutation of the ‘tax cuts lead to higher interest rates’ nonsense of a few years ago.