Christian Kerr writes:

Back in April, Treasurer Peter Costello wanted us to celebrate “Debt Free Day
– the day the Commonwealth eliminated its net debt. Yet debt remains an
issue. Indeed, the Government seems to have privatised it.

Yesterday’s credit data from the Reserve Bank shows an increase in the amount of debt people are willing to take on for personal items.

Treasurer Wayne Swan says eight separate expert opinions in the past
fortnight had all mentioned the threat posed to the country by
increasing debt:

  • Macquarie Research Economics, Economic Spotlight (30/5/06)
  • Glenn Stevens, Deputy Governor of the Reserve Bank of Australia (27/5/06)
  • Alistair Jeffery, Bluestone Mortgages (27/5/2006)
  • Paul Braddick and Ange Montalti, ANZ Bank (19/5/06)
  • Reserve Bank of Australia Statement on Monetary Policy (5/5/06)
  • ANZ Bank Economic Update (28/4/06)
  • ABN AMRO Australian Economics Weekly (28/4/06)
  • Access Economics Business Outlook 2006 (24/4/06)

of these experts has raised concerns about specific elements of
Australia’s spiralling household debt or Australia’s half a trillion
dollar foreign debt,” Swan says. “All eight agree that the
unprecedented level of household and foreign debt in Australia is a
threat to the Australian economy if economic conditions decline.”

also a threat to the Government. Highly leveraged voters will want to
protect their position. “The longer we are in office, the more people
take prosperity for granted”, the Prime Minister told the Government
Party Room meeting on Tuesday.

If interest rates are heading up
anyway, many voters will be less likely to listen to scare campaigns on
economic management at the next campaign – and more inclined to tune in
to scare campaigns that warn about threats to their take home pay.