The International Monetary Fund has slapped down a line of argument run by Prime Minister Tony Abbott ahead of a visit to Australia by its chief, Christine Lagarde.
Dr Lagarde will attend the G20 finance ministers meeting in Sydney on Thursday and Friday and take part in an ABC Q&A special on Thursday night. In an interview with Fairfax Media's Good Weekend, Dr Lagarde urged Mr Abbott not to abandon Australia's role as a ''pioneer'' in the debate on climate change, saying previous Australian governments had played an important role.
In a working paper released separately in Washington on Saturday IMF staff take issue with claims made by leaders including Mr Abbott about high levels of government debt. Titled Debt and Growth: Is There a Magic Threshold? the paper fails to find any evidence of a threshold above which medium-term growth is dramatically compromised.
Mr Abbott told the World Economic Forum at Davos in January that stronger growth required ''getting government spending under control''. ''You don't address debt and deficit with yet more debt and deficit,'' he said.
The IMF working paper takes issue with those who say high levels of debt are associated with ''particularly large negative effects on growth''.
A much quoted series of papers by US economists Carmen Reinhart and Kenneth Rogoff found that above 90 per cent, the debt-to-GDP ratio was associated with dramatically weaker growth. But other economists found the apparent threshold vanished when the study was corrected for a coding error and the weighting of data.
The IMF study assembles more than a century's worth of data on GDP per capita and the debt-to-GDP ratio from 34 member nations. The Australian data goes back to federation. It finds that, rather than weakening growth as is sometimes claimed, high levels of debt seem to weaken ''the association between debt and medium-term growth''.
''We find the debt trajectory can be just as important, and possibly more important, than the level of debt in understanding future growth prospects,'' the paper says. ''Indeed, countries with high but declining levels of debt have historically grown just as fast as their peers.''
But all is not lost for leaders including Mr Abbott who argue that high debt impedes economic growth. The study finds that high levels of debt are ''weakly associated with higher output volatility''.