We’re entering the decade of deficits
$8.3b $4.1b 5.8% 7.3% $85.3b 4.4% 16.7% 18.9%
TAXPAYERS face a decade of rising debt despite the federal government borrowing far less than it expected during Australia’s economic rebound from the pandemic.
While this year’s deficit of $161bn is $52.7bn less than the $213.7bn forecast in October, the government will continue to spend about $100bn more than it receives in each of the next two financial years.
And deficits are projected $224.9b 11.3% 35.6% to continue until at least 2031-32, pushing gross debt to $1.5 trillion.
Treasurer Josh Frydenberg said Australia’s debt was “low by international standards”.
“Net debt will increase to $617.5bn or 30 per cent of GDP this year and peak at $980.6bn or 40.9 per cent of GDP in June 2025,” he said. “As a share of the economy, net debt is around half of that in the UK and US and less than a third of that in Japan.”
Economists said Australia’s debt remained affordable, but that could change.
AMP Capital chief economist Shane Oliver said a stronger economy meant “more tax revenue going to Canberra and less welfare payments”.
He said the government’s interest bill was lower than it had been in recent years, despite the record debt.
“For much of the last year the federal government has been able to borrow money for 10 years at about cent,” Dr Oliver said.
“In normal times you would be paying 4 to 5 per cent on government bonds.”
The big-spending budget forecasts deficits of $106.6bn in 2021-22, $99.3bn in 2022-23 and $79.5bn in 2023-24, as higher income from tax receipts is offset by extra spending in areas such as aged care and mental health.
These combined deficits are greater than forecast in 1 per last year’s budget. Gross debt is forecast to hit $1.06 trillion in 2022-23 and continue rising.
PwC Australia chief economist Jeremy Thorpe said while much of last year’s budget spending to combat COVID was temporary, this year’s was locked in.
“That’s not a concern when interest rates are low and iron ore is at record high prices, but it’s more of a challenge as we move forward,” Mr Thorpe said.