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Debt won’t hurt us 453.01 KB

Treasury forecasts unemployment rising to 10 per cent in the June quarter and that without the JobKeeper allowance unemployment would be 5 per cent higher at 15 per cent. The Government responded with a series of spending packages with a cumulative total of $193.6 billion. That inevitably means more deficit spending over and the next six months and probably well beyond that.

This paper presents the analysis that shows why we should not fear the likelihood of further debt.

Key findings:

  • There is no evidence to suggest higher debt-GDP ratios are associated with adverse economic outcomes.
  • Public and private finances have become confused in Australia, with debt concerns that apply to private finances being incorrectly extended to public sector finance.
  • Every dollar of debt is matched by a corresponding dollar in financial assets which means the notion of intergenerational debt burdens is false. For example: One person’s debt is another person’s asset and that is as true today as it will be tomorrow – if tomorrow’s debts are a burden, then tomorrow’s financial assets must be equal and opposite – a negative burden.
  • Additionally, any physical assets financed by government will remain as a net benefit for use in the future, such as Australia’s iconic ocean pools, built during the Great Depression.
  • Australia’s debt figures are very modest when compared with Australia’s own history or other OECD countries. Government debt is currently at 20% in Australia, while the rest of the OECD countries range from 50% - 150%.
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