There are many who want you to believe that Australia’s public debt level is “low”, and nothing to be concerned about.
The truth is, there are a lot of lies told about our public debt. Usually, they are lies of omission. A deliberate choice to not give you the truth, the whole truth, and nothing but the truth.
Recently the Australian Financial Review published an article that — unlike politicians’ claims — would hold up in court:
You’ve been grossly misled about Australia’s finances – again.
Getting insight into the true state of the government’s finances is as important as understanding your own. The government’s liabilities are ultimately our debts, and will be paid back by taxing our earnings.
Last time I sunk my teeth into these issues I explained how the ostensibly very low “net debt” figures bandied around by many, including the PBO [Parliamentary Budget Office] are a complete fiction: they assume the debts of wholly owned government companies and state governments simply do not exist.
The net debt numbers are also artificially reduced by taking cash from the Future Fund, which was set up to meet unfunded superannuation liabilities, which are not – surprise, surprise – included in the debt estimates.
It’s the same as ignoring money you owe to someone but recognising the cash you have saved to repay them.
Once you add back in state and wholly owned government entity liabilities, Australia’s net debt almost doubles from 10.6 per cent to over 20 per cent of gross domestic product. Since net debt is open to so much fudging, real analysts focus on true debt. Since 2007 federal and state government debt has exploded from $150 billion to $500 billion, with the actual debt-to-GDP ratio approaching… 40 per cent…
This is precisely what Barnaby Joyce has been saying, since late 2009.
In recent days here at Barnaby Is Right, we have seen how our Treasury department boffins have completely failed to recognise the true reason for Australia’s structural budget deficit.
It is exactly the same reason that Ireland crashed in 2008.
A banking system — and a government — that had become dependent on profits (and taxes) flowing from “an unsustainable boom in the housing sector”:
So our supposedly “low” and ever-rising public debt level does matter.
Because at 40% of GDP (Federal and state debt combined), our true public debt level is now 61% worse than Ireland before it crashed … and bailed out its banks:
You may notice that the chart for Australia shows an apparent small decline in (Federal) government debt in 2013, to 20.7% of GDP (circled in red).
That is the Federal government’s forecast.
We all know what their forecasts are worth.
Labor spending simplified –