Why our fiscal situation is much worse than you think | The Spectator Australia

spectator.com.au
3 min read
fairly difficult
According to the latest International Monetary Fund data, Australia's budget deficit and level of public debt are set to reach record highs this year.  The pandemic-induced national budget deficit for…
According to the latest International Monetary Fund data, Australia's budget deficit and level of public debt are set to reach record highs this year. The pandemic-induced national budget deficit for calendar 2021 will be 10.4 per cent of GDP, significantly higher than last year's deficit of 9.9 per cent.

Budget deficits, the difference between government revenue and expenditure, attract attention because they signify a government's annual borrowing needs, with Australia's deficit predicted by the IMF to stay higher for longer into the future than for the advanced economy group on average.

Canada, Denmark, Norway, Portugal, Singapore, Sweden and Switzerland, for instance, are expected to have balanced their budgets by 2025, though Australia by then will still be running a deficit of over 3 per cent of GDP.

Historically sizeable budget deficits are also being chalked up by emerging, middle income and developing countries, with no end in sight for most. These deficits have commandeered a massive pool of global private saving and diverted it from funding private investment which augurs poorly for future long-term growth of the world economy.

Australia's fiscal outlook may look grim on these numbers. But it is actually worse because the standard annual budget deficit measure understates the government's call on private saving and its attendant risks. Deficits only convey new government borrowing for any year in question. Another annual budget indicator, rarely if ever reported, adds in government borrowing required to refinance maturing public debt run up previously that has to be rolled over in that year.

In…
Tony Makin, James Macpherson, Kurt Wallace, Rocco Loiacono, Flat White Quick Shots, Scott Hargreaves, Ian Williams, Katja Hoyer, Dominic Green, John Keiger
Read full article