CHART OF THE DAY: Why Joe Hockey's Budget Cuts Might Be Dangerous

The Government – when in opposition – was critical of the big spending of the Labor party and vowed to rein in the budget deficit and make substantial cuts to spending.

For an economy trying to transition away from the mining investment boom and struggling to get domestic demand going again, it seemed – still seems – a dangerous strategy.

As many have written about Europe, can you really cut spending and austerity your way to growth? Probably not, as the chart below from Credit Suisse via Twitter shows:

Europe – which has forced austerity and spending cuts on the region – has seen a collapse in domestic demand while the US and Japan, yes Japan, have seen demand recovery strongly.

It’s a cautionary tale for Australia’s Government and our Treasurer’s planned spending cuts.

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