This is a share market forum, so how about the question in the converse. Lets just assume the govt does cut spending and it does tank the economy. The first point of call will be people will remortgage if they have a job, or use the redraw facility in their home loan. But after that, when these monies have been exhausted, when you start getting mortgage defaults what do you think will happen:
a.) Banks are left to fail thus destabilising the economy on the whole, which has significant flow through effects to unemployment rates and the share market as a whole.
b.) Governments bailing out bank sto stop a.).
c.) Investors/wealthy demanding government bailout of some banks/industries to stop a.) as they are to large to fail as occurred in the USA. https://en.wikipedia.org/wiki/Too_big_to_fail
My bet is it will be b) and c) because the recent history out of the USA and Europe after the GFC hit is so called righties, who are also the cut spending people and leave everything alone types, will be the first to demand government handouts of this type (at huge taxpayer expense) when shiite hits the fan. And then what do you get b.) and c.) - well budget deficits go up in those countries - and those same righties then say govt needs to cut spending to balance the budget. How we move to balance the budget is a key IMO and I gave my views on this before this.
