Friday night’s news arrived much sooner than anyone expected. Posted downpage on a Treasury website was the news Australia’s gross debt was now above $450 billion. Another Finance Department document released quietly that night showed net debt had smashed through the $300 billion barrier. Both have been met with deafening media silence.
These confirm the Turnbull government has lost control of Australia’s revenue, deficit and debt. Or at least, that’s what the news means to those who understand it.
Recent sudden surge
In less than four months this financial year, the gross debt blow-out has been more than $30 billion. That’s more than $8 billion per month. In comparison, the Rudd government’s borrowings from 2007 to 2010 to deal with the onset of the global financial crisis averaged only $2.79 billion per month. The Gillard administration also borrowed to manage a smooth recovery from the GFC. Its monthly average was $3.42 billion overall, but down to $1.19 billion over its last six months.
Despite solemn promises to reduce debt, the Abbott government’s borrowings rocketed after the 2013 election, averaging $4.85 billion per month until both the PM and his hapless treasurer Joe Hockey were ejected. The central reason for Turnbull’s leadership challenge was that Abbott “has not been capable of providing the economic leadership our nation needs”.
The dismal data
Gross debt is now $450.79 billion. This is $173.4 billion higher than the $277.4 billion Labor left in September 2013 — up 62.5%.
Net debt was $312.3 billion at the end of August. This is $137.7 billion above Labor’s $174.6 billion legacy — up 78.9%.
Interest bill doubled
Taxpayers paid $1.26 billion in net interest in July and again in August, or $40.7 million per day. It will be higher henceforward.
In its last financial year, 2012-13, Labor paid $8.28 billion. The Coalition paid $12.0 billion in the year just ended, an increase of 45.3%. Budgeted interest expense for this financial year is $16.64 billion, more than double Labor’s last full-year bill.
Looking abroad, most well-managed economies are steadily reducing their debt. Only 11 of the 34 wealthy members of the Organisation for Economic Cooperation and Development (OECD) have increased debt in each of the last three years. Of these, only five have expanded it by more than 5.5% since 2013: Finland, Japan, Mexico, Slovenia and Australia.
Outside the OECD, the Philippines, Vietnam, Hong Kong, Taiwan, Libya and several others are steadily reducing debt and interest payments as the global recovery gathers pace.
Which brings us to the craven hypocrisy of Australia’s mainstream media.
Throughout Labor’s term, significant debt milestones were emblazoned across the front pages. Labor’s “debt and deficit disaster” and “debt spiralling out of control” were recurrent and dominant stories.
Sydney’s Daily Telegraph ran an attack in 2013 headed “The Labor Party’s debt timebomb” with former treasurer Peter Costello “forcing this debate into the public forum”.
The Herald Sun headed a shock horror editorial “Labor’s debt bomb”. The 2013 pre-Christmas fiscal outlook, it claimed, gave Australians “a shocking insight into the state of the national economy. The news is not good. It’s terrible.”
Gross debt then was only $296 billion. But, still, “the massive debt Australia now faces is due, absolutely, to Labor’s financial mismanagement”.
Curiously, no screaming headlines today, no calls for public debate and no hint that this might be a shocking insight into anything.
It is quite acceptable for most countries, including Australia, to have some gross borrowings. Even Norway, with its net surplus above 188% of GDP, carries some gross debt. Some net debt is also acceptable. But condemning one administration when debt reaches $250 billion during the worst recession in 80 years, but ignoring another notching up $450 billion during the global recovery is not acceptable.