Tonight is the night. After most reporters will have knocked off for the week, Treasury will quietly announce that Australia’s gross debt has clicked over $500 billion. This will signal three things. Hardship for citizens ahead, a decline in Australia’s global standing, and monumental hypocrisy from the Coalition.
Before the 2013 election, Coalition MPs were scathing about Labor debt levels, cutting no slack for the global financial crisis (GFC) — the worst economic downturn in 80 years.
As the gross debt approached $250 billion in mid-2012, then-shadow treasurer Joe Hockey pontificated solemnly about “the burdening issue of government debt” and “the issue of sovereign risk in the Australian economy”.
Virtually all shadow ministers attacked Labor at every turn and faithfully promised “to stabilise and to pay down government debt”.
Those two falsehoods were widely believed — that debt was too high under Labor, and that the Coalition would eliminate it. In fact, the ABC claimed this was the critical 2013 election issue: the “Coalition’s main line of attack on the economy is based on the mantra of ‘debt and deficit'”.
The forlorn facts
A week ago, Treasury’s office of financial management showed gross debt at $499.2 billion. Additions since then mean the half trillion will be exceeded tonight.
In 2007, when the Rudd government took office, gross debt was $58.0 billion. At the 2013 election it was $270.0 billion. So Labor added $212.0 billion. The Coalition has therefore added more than $230.0 billion. So far.
Rate of gross debt increase
Trends over time by Labor and the Coalition contrast dramatically. In calendar 2009, during the depths of the GFC, Labor borrowed $4.96 billion each month on average.
This reduced steadily each year until 2013, when Labor added just $1.02 billion monthly up to the September election.
Since then, under the Coalition, the trend has reversed. Monthly increases were $4.47 billion in calendar 2014, slightly less in 2015, then $5.51 billion in 2016.
So far this year, gross debt added has been $6.40 billion per month. But with no global recession.
Debt per person
Then-opposition leader Tony Abbott was scathing in 2012: “Labor has turned a $20 billion surplus into $167 billion in accumulated deficits … That is $6,000 for every Australian man, woman and child.”
Tonight, net debt for every Australian man, woman and child will be above $13,000. Gross debt will be $20,415 per person.
In 2012, Abbott wailed about the “ongoing $6 billion a year in Commonwealth interest payments. That is money that will not be available to … fund better roads, schools and hospitals.”
The annual bill this financial year is $16.0 billion. Next year, it will be higher even without interest rate rises. It definitely won’t be available to fund better roads, schools and hospitals.
Second worst outcome in the developed world
Of the 35 wealthy, developed nations comprising the Organisation for Economic Cooperation and Development (OECD), Australia has always been one of the low-debt countries. Until now.
In 2013, Australia’s gross debt was 30.8% of gross domestic product (GDP). Only five smaller economies had lower levels: Chile, Estonia, Luxembourg, New Zealand and Norway. But they were not much lower. Norway’s was 29.7% and New Zealand’s 25.5%.
According to the latest data at tradingeconomics, Australia has had the second greatest debt blow-out of all OECD countries since 2013. Australia has gone from 30.8% to 41.1%, a rise of 10.3% of GDP. Only Mexico has fared worse, increasing from 35.3% to 47.9%.
Of the 35 developed countries 14 have reduced their debt since 2013, two have kept it steady and 17 have increased it marginally — by less than 10% of GDP.
No hope for a turnaround
There is no sign that the Turnbull government can reverse this. Data from Treasury, the Finance Department and the Bureau of Statistics confirm that most key indicators — hours worked per person, wages, productivity, building and construction, capital investment, economic growth and tax revenue — are not improving. This is despite company profits now at all-time record highs.
The reason is obvious to non-partisan observers — that failing to collect adequate company tax is sending most of the current mega profits straight offshore.
Mainstream media coverage
Throughout Labor’s term, debt milestones were emblazoned across the front pages. Labor’s “debt and deficit disaster” and “debt spiralling out of control” were dominant themes.
When gross debt was only $296 billion in 2013, a Herald Sun shock-horror editorial screamed that “the massive debt Australia now faces is due, absolutely, to Labor’s financial mismanagement”.
We shall see tomorrow how many of these newsrooms regard half a trillion as massive debt — due, absolutely, to the Coalition’s financial mismanagement.