About a decade ago then leader of the opposition, the incomparably inept Tony Abbott pointed at the Labor government’s budget deficits in dealing with the Global Financial Crisis (GFC), and the consequent increase in net and gross government debt and claimed that it was a “debt and deficit disaster”. The GFC response by the Rudd government was huge, with stimulus packages totalling well over $50 billion1. This led to a rapid rise in net government debt from about 1.2% of Gross Domestic Product [GDP]) in 2009 to about 16.0% of GDP by 2013 when the Abbott government was elected. They ran on a ticket of fiscal responsibility. However, gross government debt continued to rise, reaching 27.6% of GDP in 20192, before the Covid-19 pandemic hit the world and Australia. The current government’s stimulus package from the 2020-21 budget currently amounts to about $300 billion, with another $200 billion in the 2021-22 budget. The net government debt in 2020 was 39.4% of GDP, and is expected to increase to 43.8% of GDP by 2023-24. That net debt is likely to be almost $1 trillion3.
What did the Abbott government say when they were in power? Even though the debt continued to climb, it was all sweetness and light; nobody mentioned the words debt and deficit4. The same is true now when the debt is skyrocketing. While some of this is due to the pandemic, a large proportion of this debt was borrowed before the pandemic hit5.
So, what are many of the pundits saying? Not much, actually. Shane Wright, in an allusion to Dr Strangelove, even quipped that the 2021-22 budget might need to be titled ‘How I learned to stop worrying and love debt’6. Back in 2015, he was much more concerned about debt levels, and stated that the country needed to have a serious debate about how to deal with government debt, taxation and spending7. At that time debt levels were half what they are now.
David Crowe simply noted that as a result, in part, of the 2021-22 budget, the debt burden “will reach $1.2 trillion in 2025 and see the country’s finances remain in deficit for at least a decade”. However, during 2009, early in the GFC, he stated that the problem of debt could lead to a “Potential blow-out in inflation or currency collapse due to debt fears [that] could force interest rates up sharply just when the economy is recovering. An even larger debt burden would undermine economic growth for many years and preclude tax cuts for even longer.” It seems that is not too much of a concern now.
Is it economics that is so bereft, or is it journalism? Given Alan Austin’s analysis of the difference between the economic story spread by newsrooms before the 2019 election and that afterward9, it seems to be the latter.