At last! A start on reducing the national debt
It is a common situation in Australia and elsewhere for a new Leftist government to implement big new spending policies without raising taxes to pay for them. New welfare programs are popular but new taxes are not. So the Left just borrow the money and pile up debt year after year. And it is left to the next conservative government to clear up the mess.
In 2007 the Labor party inherited a treasury from the conservatives that had ZERO federal debt. When they were finally booted out, the debt had ballooned to $400 billion. So in a vicious circle, a lot of taxpayer money had to go to the banks in interest payments and so made constructive spending even more difficult to fund.
The incoming conservative governments under Abbott and Turnbull found it politically difficult to abandon all the new spending that the Left had put in train so had to continue borrowing for some time. That has now come to an end
IT’S a tiny figure of a few decimal points but it represents a change the Government says will save taxpayers billions of dollars over a few years.
In fact, the savings could reach $1 billion a year, Treasurer Scott Morrison will argue today.
The Treasurer will release the Midyear Economic and Fiscal Outlook (MYEFO) — the half-yearly progress report on the Budget delivered last May.
The updated calculations will highlight a projected fall in government debt, compared to the total announced in the Budget. That debt currently stands at just over half a trillion dollars and has steadily been rising.
But today, the Government will boast that by keeping “expenditure under control” it no longer has to borrow to pay for the recurrent bills of the business of government such as wages.
Its new calculations raise the prospect of a $40 billion cut in debt over 10 years, a reduction necessary for Prime Minister Malcolm Turnbull to fund in part at least promised income tax cuts and massive tax relief for big business.
Net debt is now expected to peak next financial year — in 2018-19 — at 19.2 per cent of GDP, or national output.
This would be a 0.6 percentage point improvement on the 19.8 per cent forecast in the Budget. And the difference amounts to $11.9 billion.
The Treasurer will forecast that in three years gross debt will be $2.3 billion lower than calculated last May.
The smaller debt will mean the Government’s interest bill will be lopped by $2.3 billion over three years, reaching $1 billion a year in savings by 2020-21, the Treasurer will announce.
Mr Morrison said in a statement yesterday the MYFO figures would show the Government was “deliver on our prudent and responsible economic management, staying the course to keep expenditure under control and return the Budget back to balance”.
“We are making real headway, bringing down our expected gross debt by $23 billion, meaning lower interest payments of up to a billion dollars a year,” he said.
“In the years ahead we intend to make further progress on bringing down the debt as we get the Budget back into balance as promised.
“In MYEFO, over the next 10 years we expect gross debt to be $40 billion less than we were projecting in May.”
Mr Morrison said the debt reduction this financial year was the equivalent of putting the national grocery bill on the credit card.
“Our responsible budget management means we are now in a position to no longer be borrowing to pay for everyday [recurrent] expenditure, like schools funding, Medicare and welfare, a year earlier than forecast,” he said.
“We are acting, as we promised, in a fiscally responsible way to reduce our debt so that we can sustainably fund the essential services like health, schools as well as infrastructure, that Australians rely on.”
Labor leads the Coalition on a two-party preferred vote by 53 per cent to 47, representing a national swing against the Government of three per cent, the last Newspoll for the year shows.
The poll of 1669 voters across the country, conducted exclusively for The Australian, shows the Coalition has made no ground in the past two weeks with Labor maintaining a one point primary vote lead of 37.
The poll conducted over the weekend shows the major parties have not shifted since the last poll held between November 30 and December 3. The Greens remained steady on 10 per cent while One Nation dropped a further point to seven per cent.
Prime Minister Malcolm Turnbull maintained his narrow lead over Opposition Leader Bill Shorten as preferred prime minister, lifting two points to 41 per cent while the opposition leader lifted a point to 34 per cent.