Professor John McHale:

Paying down the debt is equivalent to running budget surpluses. While I am sorry about the technical jargon, there is this objective to get the structural deficit down to 0.5% of GDP.

If we can do that, we will be following the framework and we will have a fairly fast rate of reduction in the debt-to-GDP ratio. If we were to follow the framework over a long period of time, we would get our debt-to-GDP ratio down to 20% of GDP. It would take us a long time to get there. That would be done without ever running a budget surplus. I think that would be fine in normal circumstances, although my colleagues might disagree with me. We do not need to pay down the nominal debt and we do not need to run budget surpluses. I would like to make one qualification to that. If there are signs that growth is strong and the economy is overheating - let us hope in a way that this happens - it may be necessary for cyclical management purposes to run budget surpluses. That is how I interpret the Minister for Finance's proposal for a rainy day fund. His approach seems to be that if there are signs that the economy is overheating, he will run budget surpluses and put the money away into a rainy day fund so that it can be used for cyclical management purposes in the event of an economic downturn. While it may be necessary to run budgetary surpluses, this would be done for cyclical management purposes. If we follow the framework and get close to a balanced budget, it should be sufficient to let the debt-to-GDP ratio fall, largely through growth. That should get us to quite a safe place.