Reserve Bank governor Glenn Stevens says prudent budget measures are needed now to avoid the potential of draconian measures later.
Mr Stevens says Australia should be having a conversation about medium-term fiscal accounts now, to avoid catastrophe later.
"It's in the medium term where we as a community have decided we want to do some very big and very costly and very good things in the public space but we haven't actually taken the decisions to secure the funding for those things," Mr Stevens said in his semi-annual testimony to parliament on Wednesday.
"That's not catastrophic today, but it is going to be a medium-term issue if we don't address it."
Mr Stevens suggested a prudent and sensible strategy that recognised the imperative but also recognised that "draconian" fiscal tightening was not needed right now.
"The economy doesn't warrant that," Mr Stevens said.
"You try to design some measures that will build up over time."
The government is currently facing stiff opposition in the Senate to some of its budget measures.
Treasurer Joe Hockey has repeatedly stressed the need for tough budget cuts to help reduce Australia's surplus.
He has warned he may be forced to take emergency action if his budget reforms are blocked.
Share
