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Colin Brinsden, AAP Economics and Business Correspondent
(Australian Associated Press)
Ahead of next month’s federal budget a new analysis indicates the blowout in government debt in response to funding support for Australians during the pandemic is sustainable.
However, it could be a decade before it starts to steadily decline, the independent Parliamentary Budget Office says in a report released on Wednesday.
Faced with the first recession in nearly 30 years, the Morrison government hurled money at protecting the economy through support measures such as the JobKeeper wage subsidy and JobSeeker coronavirus supplement.
This funding saw government debt as a proportion of the economy expand from 28 per cent of GDP to an expected 40 per cent in 2020/21 and to more than 50 per cent in 2022/23.
It is expected to remain above 50 per cent for at least the next decade.
Government debt is forecast to rise to just over $990 billion in 2021/22 and to over $1 trillion the following financial year.
“Public debt levels may become concerning if they result in governments having to devote an ever-increasing share of their revenue to meeting their interest expenses,” the PBO warns.
This could lead to a need to significantly increase taxes, cut spending, sell assets and/or further increase debt, it says.
Its Fiscal Sustainability report expects Australia should be able to sustainably maintain its debt over the next 40 years.
This is provided future governments are able to implement policies to achieve budget balances similar to historical precedents, even modest deficits.
“Debt is likely to steadily decline … for at least 13 years from 2030/31,” the PBO says.
“The main driver of the debt reduction is the historically low interest rates on debt issued over the past year, coupled with the expectation that interest rates are likely to remain low for the next decade.”
Meanwhile, business, unions and representatives of parents continue to press the case for the May 11 budget to reform early childhood education, while making the workplace free and safe for women.
“Achieving these changes would benefit all in our nation,” the Business Council of Australia, the ACTU, Chief Executive Women, The Parenthood and Goodstart Early Learning said in a joint statement.
They believe the 2021/22 budget is an an opportunity to make safety and economic security of all women a priority, while investing and reforming early childhood education.
They want to see disincentives to increase women’s workforce participation removed and further amendments to the government’s paid parental leave scheme that would see it increase to 26 weeks, and greater flexibility in how it is spilt between parents.
They also want new funding for domestic, family and sexual violence services, and paid leave for victims with a goal towards 10 days.