In Australia the stimulus helped avoid a recession and saved up to 200,000 jobs. And new research shows that stimulus may have also actually reduced government debt over time. Evidence from the crisis suggests that, when the economy is weak, the long-run tax revenue benefits of keeping businesses afloat and people in work can be greater than the short-run expenditure on stimulus measures. That means that a well-targeted fiscal stimulus might actually reduce public debt in the long run.

Australia may have successfully dodged the global crisis, but some politicians seem to have missed the lessons it taught the rest of the world. In this election, the conservative side of politics has foreshadowed substantial cuts to the government budget. This would be a grave mistake, especially now.

Recent experience around the world suggests that austerity can have devastating consequences, and especially so for fragile economies. Government cuts have helped push Britain, Spain and Greece's economies deeper into recession and led to widespread public misery.

The youth unemployment rate in Spain is above 50 per cent and the figure for Greece is above 60 per cent. Their tragic experience should be a warning to the world. But even seemingly healthy Germany was pushed into a recession from which it is just now emerging - but it is an economy that is still weaker than it was before taking the "dose" of austerity.

Proponents of austerity ignore the fact that national debt is only one side of a country's balance sheet. We have to look at assets - investments - as well as liabilities. Cutting back on high-return investments just to reduce the deficit is misguided. If we are concerned with long-run prosperity, then focusing on debt alone is particularly foolish because the higher growth resulting from these public investments will generate more tax revenue and help to improve the long-term fiscal position.