The Government’s recognition of the independence of the Reserve Bank has also been an important factor. Monetary policy has, in effect, become depoliticised, and decisions can now be based more on medium-term considerations than in earlier decades. Low inflation, and the fact that it has been maintained without forgoing economic growth, is the clearest testimony to this improvement.
Fiscal policy is also in much better shape. The Budget is in surplus and projected to stay there during the period covered by the forward estimates. Perhaps the best medium-term measure of a country’s fiscal position is the ratio of government debt to GDP. Instead of showing one year’s position, this measure summarises the effect of all previous years’ surpluses or deficits.