Budget surplus goal experiments in Australia and Sweden

ABSTRACT

From the mid-1990s until the 2008 financial crisis, two countries, each with different political, administrative and capitalist traditions, embarked on a radical macroeconomic policy experiment. Australia and Sweden took earlier New Public Management reforms to an ideological extreme, and pursued a profit-like goal for the public sector, in promising and delivering annual budget surpluses. From a historical institutionalist perspective, we challenge existing public choice theories and the guardian-spender framework to show how fears of crisis, party dynamics and ideological reassessments on the centre-left, and the elevation of finance and economics ministers and ministries resulted in an unlikely political and electoral consensus. Furthermore, this occurred without constitutionalised or officially strict rules, as has been the trend in other countries, but was achieved through less formal yet influential ‘rules of the game’ with stricter interpretations. What is even more perplexing is that Australia and Sweden do not have superior economic records to show for this experiment and experienced the same challenges as other countries during the 2008 financial crisis. Yet, they are still reluctant to definitely abandon the policy.

KEYWORDS:

• Budget surplus
• public sector finance
• macroeconomic policy
• Australia
• Sweden

Acknowledgements

Our colleague Jenny de Fine Licht provided insightful comments on an early draft, which really helped sharpen our arguments.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes on contributors

Scott Brenton is a Senior Lecturer in Political Science and Public Policy at the University of Melbourne. His research interests include comparative government and policy, particularly Anglophone and Northern European countries, ethics, accountability and democratic engagement. His recent books include The Politics of Budgetary Surplus: Ideology, Economic Governance and Public Management Reform (Palgrave Macmillan, 2016) and Constitutional Conventions in Westminster Systems: Controversies, Changes and Challenges (co-ed with Brian Galligan) (Cambridge University Press, 2015).

Jon Pierre is Professor of Political Science at the University of Gothenburg, Sweden, and Professor of Public Governance, Melbourne School of Government, University of Melbourne. He is also adjunct professor at the University of Pittsburgh. He has published extensively on governance, urban politics and public administration. His most recent books in English include Governing the Embedded State (Oxford University Press, 2015) (with Bengt Jacobsson and Göran Sundström); The Relevance of Political Science (co-ed with Gerry Stoker and B. Guy Peters) (Palgrave, 2015); (ed.) The Oxford Handbook of Swedish Politics (Oxford University Press, 2015); and Comparative Governance (Cambridge University Press, 2017) (with B. Guy Peters).