By the end of this financial year the Turnbull government will have added $80 billion in gross debt, and smashed the $500 billion barrier.
Curious that these budget details weren’t highlighted in the Treasurer’s speech or by the commentariat.
Eighty billion extra – from the administration elected on “Labor’s debt time bomb” and “debt and deficit disaster”.
Continuing debt expansion
It now seems clear that the recent good debt vs bad debt narrative is cover for the Coalition’s intention to increase borrowings substantially. The next generation – or the one after – can deal with repayments and the interest bill.
There was a consensus through the Labor years that paying off the debt incurred as a result of the global financial crisis (GFC) was essential.
Virtually all the GFC borrowings constituted good debt. It maintained economic activity and built infrastructure and other assets. The most Labor added in any year was $46 billion in 2009-10. That quantum then reduced progressively, down to just $23.4 billion added in 2012-13, Labor’s last year.
Even at this low level, the Coalition and the media sustained a frenzied campaign of apocalyptic rage. This succeeded in destroying the Labor administration.
Voters then knew what to expect from the Coalition. Tony Abbott had promised $30 billion in debt reduction straight away, continuing steadily thereafter.
So what has happened since?
These are the annual increments, the total in dollars at year end, then as a percentage of gross domestic product (GDP) and interest paid:
Actual budget deficits
Analysis of the deficits – the excess of spending over revenue – confirm that what the Treasurer says on budget night and what he delivers are unrelated.
A year ago, Scott Morrison delivered his first budget with assurances he could be trusted. So how did his first forecasts turn out? Headline cash balance is in the first line, with outcomes below:
The delivery failure is already $25.1 billion, almost 23 per cent. That’s despite his overly pessimistic forecast for 2016-17. And despite the current global trade and growth boom.
Comparisons with earlier periods
Peter Costello routinely delivered better than forecast surpluses because of the buoyant global and domestic economies.
Wayne Swan routinely delivered worse than forecast deficits because of the disastrous global economy through the GFC.
Even so, Mr Swan reduced the headline cash balance from a deficit of $47 billion in 2011-12 down to $20.9 billion in 2012-13. He was on track to reduce it further, according to the heads of Treasury and the Finance Department. In their 2013 pre-election economic and fiscal outlook they said that on Labor’s settings the budget would be in surplus in 2016-17.
There is no excuse for the headline cash balance to be in deficit today.
Australia’s net worth
Traditionally this has cycled in and out of positive territory, depending on global conditions. Now, however, despite the boom times, this is set on a downward spiral.
Net worth is the measure of the federal government’s total assets less liabilities.
Peter Costello left $15 billion in net worth when the Howard government lost office in late 2007. Mr Swan built it up to $78 billion by July 2008, just before the GFC hit.
Thereafter it soon fell into the negative and fluctuated through the Labor period, hitting a low of -$259 billion in December 2012. Labor steadily rebuilt it until by the September 2013 election it was just -$206 billion.
Since the change of government it has been all downhill. Instead of returning to positive in 2014, it fell to -$263 billion. It reached a new low of -$426 billion last year and is now forecast to stay below -$300 billion as far as the forward estimates extend.
Company tax revenue shortfalls
It is clear this government has no ambition to generate surpluses, repay the debt, rebuild net worth and curb the interest outgoings – now running at $46.7 million each day.
It could do so, of course, as most other well-managed developed Western democracies are now doing. But that would require asking corporations to pay tax at a fair rate by ending the rampant tax evasion.
A year ago, Mr Morrison said he would collect $70.1 billion in company taxes this year. Then the profits boom took off. The Bureau of Statistics showed recently that December 2016 quarter company profits were 65 per cent higher than in December 2015.
So how much extra company tax has the Tax Office collected? None. It collected just $68.9 billion.
Asking corporations to pay their share is not on this government’s agenda.