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“…Give us a child at 10 and we will show you the debt
A child born in Australia 10 years ago began life in a country whose national government had zero net debt. These children had the great good fortune of starting their lives with the unlimited opportunities of our diverse economy, the freedoms of our liberal democracy and the advantages of our universal education, health and welfare systems. With no net debt, Australians of just a decade ago owed nothing to their forebears but gratitude and nothing to future generations but their diligence.
But each child born this year bears the burden of a net federal government debt of about $13,000 per capita. With any luck these children will aspire to the same opportunities — but, apart from paying for the education, health and welfare systems, they will have to find a way to service and repay a $300 billion debt. This is their generational burden and this is the inequity we grapple with: do we have the right to fund our own comforts through deficit budgets and extended borrowings that merely pass on the burden to future generations?
On the surface, we are going about our business happily enough. The unemployment rate is lower than in most developed economies, interest rates are at historic lows, our dollar is defiantly strong, petrol is relatively cheap and travel has never been more affordable. Despite the GFC, sluggish global growth and the end of the mining investment boom, real estate prices remain buoyant, underpinning personal wealth as the nation notches 25 unbroken years of economic growth. Government services and payments such as the National Broadband Network, National Disability Insurance Scheme, paid parental leave scheme and subsidised childcare have been expanded across the decade while additional funds have been poured into health and education. It may all seem a little too good to be true.
If we dig beneath the surface we can see that our economic and budgetary situation is perilous. Investment levels have plunged from extraordinary highs and in the past year wages growth was 2.1 per cent, the lowest since the last recession. The federal government’s net debt position has deteriorated from zero a decade ago to more than $290bn and will rise to almost $350bn within three years. The interest costs on the debt, even at historically low rates, already total more than $1bn a month. Household debt is at record levels. When state public debt is included, government debt amounts to more than 36 per cent of gross domestic product. The debt situation is not out of control but it will be if it is not arrested.
As a nation we need to think about what benefits and liabilities may confront children born a decade from now. Politicians from both major parties, and Senate crossbenchers, need to consider whether fiscal decline and mounting debt can be left for another generation to tackle. Because nothing is surer than the simple fact this nation will eventually be forced to live within its means. The question now is whether we will roll up our sleeves and make this a national project of considerable priority so we can manage the task sensibly over time, or if we will kid ourselves that all is well enough until we are confronted by calamity, forcing a sudden and ugly reckoning…”