modern monetary theory

The old monetary theory was based on the idea that we all paid taxes to cover government spending which was articulated in a budget which ideally was in surplus. As with household spending, we should not spend more than we have as income.

 But modern monetary theory (also known as MMT) says that, with a monetary sovereign government, that is, one that has its own currency, the goal should be to balance the economy rather than the budget. The government can run deficits to promote full employment and to put pressure on the private sector to build up its saving. It is not possible to apply the analogy of household budgets to government spending.

 MMT is not the darling of the Australian economists yet, although Australia has pretty consistently run deficit budgets until we arrived at this current obsession with a budget surplus.