Net debt on track to blow out to $1.3 trillion after pandemic
The nation’s governments are on track to spend almost $330 billion dealing with the coronavirus pandemic while trebling the country’s net public debt to $1.3 trillion within three years.
As the Morrison government confirmed another $1.3 billion in assistance would flow this week to millions of pensioners, retirees and families, figures collated by the independent Parliamentary Budget Office show how quickly budget bottom lines have deteriorated due to the pandemic recession.
The nation’s governments are on track to spend $327 billion dealing with the coronavirus pandemic.Credit:iStock
The office said the economic support packages put in place by federal, state and territory governments had been of an unprecedented scale, with combined spending commitments of $327 billion between 2019-20 and 2023-24.
The federal government accounts for the bulk of the spending at $267 billion. During the global financial crisis, the federal government spent about $90 billion.
The extra spending is on top of the deterioration in government finances due to the recession.
Over the four years to 2022-23, the office estimates the combined net operating balances of all governments will deteriorate by $671 billion compared to what had been forecast ahead of the pandemic.
The drop in revenue and the increase in spending means cumulative net national debt will climb from $393 billion or 20 per cent of GDP in 2018-19 to $1.3 trillion or 59 per cent of GDP in 2023-24.
“The increase in national net debt is caused by the cumulative deficits resulting from the COVID-19 pandemic, as well as revaluations of government assets and liabilities such as Australian government securities,” the budget office said.
“While national net debt has increased, forecast public debt interest payments are forecast to remain around 1.3 per cent of GDP until 2023-24 due to lower interest rates.”
In 2019-20, the federal government forecast net debt at $361 billion and falling over the next three years. Due to the pandemic, it is now expected to reach $951.7 billion by 2023-24.
At the state level, Victoria will end up with the largest net debt burden. After reaching $16.7 billion in 2018-19, it is now expected to hit $154.8 billion in 2023-24.
Late last month, ratings agency Moody’s downgraded Victoria’s rating to AA1 from AAA, noting the state was unlikely to stabilise debt in the near future.
Ahead of the pandemic, net government debt in NSW was negative. It is now forecast to reach $96.7 billion by 2023-24.
Data this week showed the economy roaring back from the pandemic, the December quarter national accounts revealing a 3.1 per cent lift in GDP. That followed growth of 3.4 per cent in the September quarter.
The household savings ratio is at 12 per cent with analysts expecting consumers to dip into their savings over coming months.
But the federal government is continuing with some of its stimulus measures.
Treasurer Josh Frydenberg on Thursday confirmed the fourth economic support payment package would soon start flowing. Payments of $250 will go to 5.1 million families, pensioners, carers, veterans and people with concession cards.
In total, the four payments have cost the budget $12 billion.
“As we move towards a more optimistic and stronger recovery this year, this latest payment will provide further support to millions of low-income households recovering from the impacts of COVID19,” he said.
Shadow treasurer Jim Chalmers says poor politically motivated decisions is inflating government debt.Credit:Alex Ellinghausen
Shadow treasurer Jim Chalmers said the level of debt being carried by the federal government was being inflated by poor or politically motivated spending decisions.
“The Morrison government doesn’t have enough jobs and opportunities to show for their trillion dollars in debt because the budget is riddled with rorts,” he said.
“There’d be less debt, or more room to support jobs, if the government didn’t treat taxpayer money like it belonged to the Liberal Party.”
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