Professor Kates added the debt required to pay for the stimulus spending will curb economic growth and increase the cost of funds for lenders, forcing up market interest rates.
The economists agree the Rudd government should have avoided fiscal stimulus and left room for the central banks to lower interest rates.
Because of the Rudd spending spree last year, the Australian economy is expected to carry a $315 billion debt within years. This is more than three times the $87 billion national debt incurred by the Hawke and Keating governments before 1996, when it lost the election to John Howard.
Griffiths University professor Tony Makin told the Senate inquiry this week “the fiscal stimulus had led to unproductive spending that did not justify substantial public debt.”
Mr Makin said interest rates in Australia would be much lower, if the fiscal stimulus were smaller.
The Rudd government spent all the former government’s surplus, and then some, on two rounds of cash handouts, cheques of which were sent out from last Christmas. It has also committed to a controversial school building renovation program and a substantial increase in the number of commission flats it will build.