When it come to public debt I think everyone is talking at each other and not to each other. It is true that the absolute level of debt that the Australian government has is low – it is true that the relative amount of debt that the Australian government has is low. So what? The amount of debt isn’t the issue – it is what you do with the debt that matters.
I am not convinced that the quality of Australian government spending warrants having to borrow to finance that spending.
What is troubling is that the growth in Australian government debt has accelerated very dramatically.
The IMF, which has no political axe to grind, also noted Australia would have the third-largest increase in net debt as a share of GDP among the group of rich countries.
There is another way to look at debt.
Using IMF data for gross debt I compare Australia to the G&, the EU and the Euro Zone. Creating an index = 100 in 2001 I plotted the data through to 2014.
The big fat blue line that declines to 2007 and rapid rises? That’s Australia. The other economies look like they are flattening out – Australia is still rising. To be fair – Australian public debt could rise for a long time before it hits European or American levels. But the threat remains:
Were GFC Mark II to unfurl itself — an ever-present danger given the state of the world’s banks and the as-yet-unknown impact of money printing in the US and Europe — Australia would be far less prepared than it was in 2008.
Unfortunately Joe Hockey talks a good talk but he seems to be in little hurry to reduce Australian government reliance on ever more levels of public debt.