Debt and deficit disasters are so 2014.
When Tony Abbott and Joe Hockey attacked Labor for its profligacy and failure to maintain control over its budget, the nation's gross debt was about $310 billion. The first Coalition budget since John Howard and Peter Costello warned that, without measures to bring spending under control, the budget would be "in deficit for at least the next decade".
Treasurer Josh Frydenberg has released the government's economic statement.Credit:Alex Ellinghausen
Fast forward six years. Prince Philip has been knighted but there has still been no surplus, debt is on its way toward $1 trillion and the economy is in its first recession in 30 years.
Unemployment is tipped to reach 9.25 per cent by Christmas. Excluding those on JobKeeper and who have left the jobs market altogether, that's an additional 240,000 people looking for work on top of the 992,000 currently without employment.
The numbers unveiled by Josh Frydenberg and Mathias Cormann are butt-clenchingly large: a deficit this financial year of at least $184.5 billion that will probably nudge $200 billion by the time of the October budget and its extra spending measures; gross debt that will go through the government's recently increased limit of $850 billion some time in 2021-22 with no idea how it will be paid down.
Frydenberg likened the effort ahead to climbing a mountain. But this ain't no day-trip to Kosciuszko or even a planned assault on Everest. It's more Olympus Mons, the 25-kilometre high mountain on Mars.
Back in 2014, Hockey introduced a budget repair strategy that included the commitment to offset every new spending measure with a saving proposal and to bank any economic improvement to the budget.
That strategy disappeared in the midyear budget update as it would have curtailed the government's election spending plans.
Pressed on revisiting the strategy, given the size of the deficit now facing the government, Frydenberg signalled a massive change.
"We're in a very difficult and different time and so it requires a different approach," he said.
The best we know of that different approach is to get the economy growing a full percentage point above trend (which is about 2.75 per cent) for five consecutive years. You have to go back to the 1960s for such a run.
Debt repayment in the past has been built upon strong wage growth, high inflation and population booms. None of those factors is likely in the near future, made worse by the fact the Reserve Bank is unable to slash interest rates to introduce another pulse of growth into the broader economy.
In the coronavirus recession, the government has been delivered a problem that would challenge even the best administrations.
Its policy responses – from the JobKeeper wage subsidy to providing extra support for emergency food relief – have been largely well calibrated and targeted. That's been aided, bar the past weeks in Victoria, by success on the health front.
That's the reason for the deficits and debt. But it's no free pass.
Frydenberg should know. In November 2011, he told Parliament how the then Labor government had "turned a $20 billion budget surplus, $50 billion in the bank and record low inflation and unemployment into a $107 billion debt, a $250 billion debt ceiling and an interest bill of $20 million per day".
Wayne Swan had turned a "rolled-gold guarantee" of a budget surplus into a "pious objective".
He finished his spray by noting that "it has got to a point where nobody can believe an economic promise from this government".
The man who told Parliament last year he was pleased to be "reducing the debt and interest bill" with his own "$7.1 billion surplus" better start putting on his mountain climbing boots and a spacesuit.
Shane is a senior economics correspondent for The Age and The Sydney Morning Herald.
Most Viewed in Politics
https://news.google.com/__i/rss/rd/articles/CBMifGh0dHBzOi8vd3d3LnNtaC5jb20uYXUvcG9saXRpY3MvZmVkZXJhbC9uby1sb25nZXItYS1kaXNhc3Rlci1idXQtYS1kZWJ0LWFuZC1kZWZpY2l0LW9mZi1wbGFuZXQtbW91bnRhaW4tMjAyMDA3MjMtcDU1ZXM5Lmh0bWzSAXxodHRwczovL2FtcC5zbWguY29tLmF1L3BvbGl0aWNzL2ZlZGVyYWwvbm8tbG9uZ2VyLWEtZGlzYXN0ZXItYnV0LWEtZGVidC1hbmQtZGVmaWNpdC1vZmYtcGxhbmV0LW1vdW50YWluLTIwMjAwNzIzLXA1NWVzOS5odG1s?oc=5
2020-07-23 04:50:00Z
52780944678914
Bagikan Berita Ini
0 Response to "No longer a disaster but a debt and deficit off-planet mountain - Sydney Morning Herald"
Post a Comment