Even as Australia runs a budget deficit, the country has never tried to reduce expenditure. This is despite what the politicians would lead us to believe when they preach fiscal responsibility. Expenditure increases by 3% to 7% each year. When we have a recession, the automatic stabilizers (welfare payments) kick the annual increase to above 10% (1991, 2000 & 2007-10). What Australia and the politicians rely on is a bullish assessment of future growth. The rhetoric of the current Government is that they are promising a balanced budget. If the red line doesn't go down, then the blue line must go up. All by next year. The danger for our economy is if growth doesn't rapidly increase then the Government might cut expenditure. And that would not make them very popular, and is something to watch out for in the future.
Look at America and a graph of similar data. The gap is still a $1.2 Trillion deficit, but the US have not really made any inroads into cutting expenditure. There was a period in 2009 where expenditure dipped, but that was only after the 15% expenditure growth rate induced by the GFC. Expenditure growth is currently running at 2% to 3%. That certainly doesn't seem to correlate with the impression that the GOP controlled Congress is trying to curtail expenditure.
Then there is the UK. They have been in negative expenditure growth for 12 months. Unsurprisingly, the UK recorded negative 4th quarter 2011 GDP growth of minus .2%.
The UK's strategy of cutting expenditure and expecting the economy to expand has proven to be a failure. The Euro region is committed to enforcing austerity measures on debt loaded countries. This might save the debt holders, but it will be a burden on growth.
The US economy is showing some signs of recovery, but the politics of both the US and Australia could promote austerity measures requiring expenditures to be cut in the face of tepid world growth.
Update: BUCHAREST, Romania (AP) Romania's government has collapsed following weeks of protests against austerity measures, the latest debt-stricken government in Europe to fall in the face of raising public anger over biting cuts. Emil Boc, who had been prime minister since 2008, said Monday he was resigning "to defuse political and social tension" and to make way for a new government. Thousands of Romanians took to the streets in January to protest salary cuts, higher taxes and the widespread perception that the government was not interested in the public's hardships in this nation of 22 million. In 2010, Boc's government increased the sales tax from 19 percent to 24 percent and cut public workers' salaries by a quarter to reduce the budget deficit. Jeffrey Franks, the head of the IMF mission to Romania, said Sunday he is confident that economic reforms the fund demanded in exchange for the loan would continue, even if the current government steps down.