The last four Federal budgets left Australia poorer — not much is new in 2018. Alan Austin reports on the nation’s debt and deficit figures.
EACH OF THE LAST four Federal budgets has left Australia poorer than before.
Unfortunately, this one – the third from Prime Minister Malcolm Turnbull and Treasurer Scott Morrison, and the Coalition’s fifth – continues that trajectory.
This week’s Budget confirms yet another deep deficit. It also enables us to calculate the actual loss to the nation under the Coalition. So far.
This could be grim reading. But the numbers are irrefutable and the conclusions compelling. So stay with us.
Wonder Down Under
Through the Global Financial Crisis (GFC), Australia had the world’s strongest overall economy. It was the clear stand-out among the 35 wealthy capitalist economies comprising the Organisation for Economic Cooperation and Development (OECD).
The average annual growth in gross domestic product (GDP) for all OECD members in 2011 was a dismal 1.7%. Six countries were in recession that year — Greece, Italy, Portugal, Slovenia, Spain and Sweden. Australia, in contrast, notched an impressive 3.3% growth.
2012 was even tougher, with another seven OECD countries slipping into recession. But while the average GDP growth slumped to 0.35%, Australia maintained 3.0%.
Things improved markedly in 2013, with only Greece, Italy in Spain still in recession. The OECD average growth firmed to 2.07%. Australia beat that easily with 2.4%.
Dismal decline
Since the Coalition was elected in September 2013, it has been downhill all the way. In 2014, the global recovery yielded a remarkably improved OECD average growth of 2.8%. Australia slumped to 2.2%. The 2015 average for the OECD rich club was stronger at 3.0%, as the global upsurge advanced. Australia managed just 2.7%. In 2016, the OECD slipped to 2.7%, while Australia continued to lag at 2.5% — that ranked 16th among developed countries.
Last year, with the global boom accelerating, OECD economies surged to 3.1% growth. Australia fell back further with a dismal 2.4% to rank equal 23rd out of the 35 economies. Equal with Portugal.
Deterioration on jobs matched that with growth. Australia now ranks a lowly 17th in the OECD on unemployment.
Three data sets enable us to measure the quantum of the loss of wealth following all these failed Coalition budgets. They are deficits, government debt and the nation’s net worth.
Accumulated deficits
Before the 2013 election, the heads of Treasury and the Finance Department issued their non-partisan forecasts based on the settings in place. The 2013 'Pre-Election Economic and Fiscal Outlook' report estimated deficits for the four years from 2013-14 to 2016-17 — as shown in the table below.
Estimated deficits from the 2013 'Pre-Election Economic and Fiscal Outlook' report (table supplied)
They did not forecast 2017-18, but the 2014 Budget papers did.
We can see the total deficits to the end of the 2017-18 financial year should have been $57.4 billion over the five years. That’s based on the settings for taxes, other revenue, spending and investment before the first Coalition budget took effect.
We can see from this week’s 2018 Budget figures that the deficits actually delivered totalled $177.3 billion. That’s a difference of almost $120 billion. The outcomes are 309% of forecasts — more than three times worse.
Unlike previous periods in recent history, however, this occurred during extraordinary global expansion, as shown by the GDP growth figures for the rich countries, mentioned earlier.
Net government debt
The 2018 Budget predicted net debt at the end of June this year to be $341.0 billion. It will then rise to a peak of $349.9 billion in June 2019, before declining ever so gradually.
They will have to work at this, it seems, as the total at the end of March this year was already $350.7 billion.
The increase since the 2013 election is $179.8 billion.
That, by the way, is against Tony Abbott’s undertaking before the 2013 election that the Coalition had
'... identified $50 billion of savings, for ... a reduction of $30 billion in net debt.'
Gross government debt
This is now forecast to reach $533.0 billion by the end of June this year, then peak in 2019-20 at $579.0 billion. The increase from Labor’s 2013 level of $270.0 billion just to June will be $263.0 billion; Labor increased gross debt over that left by the Howard Government by just $211.3 billion to deal with the worst recession in 80 years.
National net worth
The loss to the national estate is measured by the Finance Department’s monthly reports. Net worth is the balance of the total Federal Government assets minus liabilities.
At the time of the 2013 election, net worth was -$205.9 billion, having recovered strongly from deeper than -$250 billion a year earlier during the GFC.
It has plummeted since then to an appalling -$407.3 billion in the March figures, which makes this week’s budget forecast to end this financial year at -$325.2 billion simply not credible.
Assuming no deterioration between March and June, that is a loss over the Coalition journey of $201.4 billion.
The conclusions are stark. The accumulated deficits measure a loss of $119.9 billion. Net debt measures a loss of $179.8 billion. Gross debt measures a loss of $263.0 billion. And net worth measures a loss of $201.4 billion
Clearly, the harm done has extended to many billions worth of non-budget assets squandered.
So where has all this wealth gone? What were the policy decisions which allowed such extraordinary losses to accumulate? And what can be done to reverse this?
Read Part Two HERE.
You can follow Alan Austin on Twitter @AlanAustin001.
Fmr treasurer Peter Costello says most of us will be dead before Australia's national debt is paid off. #abc730 #Budget2018 #auspol pic.twitter.com/SoXuCLdCHY
— abc730 (@abc730) May 7, 2018
Former Treasurer Peter Costello discusses the likelihood of paying off the national debt anytime soon (video via Twitter).
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia License
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