The importance of fiscal discipline As I just said, fiscal discipline is another crucial element in enhancing sustainable non-inflationary growth. Sound public finances create a macroeconomic environment in which uncertainty about long-term macroeconomic developments is reduced. This encourages economic agents to increase long term investment and therefore it is favourable to growth. Fiscal discipline will also enhance confidence in general amongst entrepreneurs and households.
Greater confidence in sound economic policies may have a positive effect on the economy via higher private consumption and investment, even now. One particular challenge when it comes to fiscal discipline is the effect that ageing populations will have on government spending in the decades ahead.