Is there still a budget emergency?
Despite the fact that the level of national debt continues to rise and the possibility of a yearly budget surplus to counter it still seems a long way away, the language used to describe the national economy has changed dramatically since Malcolm Turnbull’s ascension to the leadership.
While it seems a fairly common sense that a national leader seeking to stimulate investment in his country should not seek to talk down his country’s economy, if the time comes that Australia’s economy needs a significant and immediate intervention that may involve a short term decrease in my quality of life, then I will welcome some plain talking from the government about it. So (in the words of children in the back seat of cars everywhere) are we there yet?
Australia’s national debt is approaching 500 billion dollars and projected to reach closer to 600 before it is envisaged that it can start to be reduced. There is no sugar coating that this is a lot of money. It is actually more that the entire Australian yearly budget. Of course a full year’s budget cannot be simply thrown into paying off debt, so this is not the most useful way of comparing levels of national debt. Usually it is done by calculating the percentage of GDP the national debt is equivalent to. Our national debt is around 30-40% depending on what figures you look at, which is hardly ideal. However there are over 100 other countries, including Germany, USA, UK and Canada whose debt is a significantly higher proportion of their GDP so we need to keep this in perspective.
But there is still a situation that needs to be addressed. The fact that it will take several years just to stop our national debt increasing is not ideal. As anyone with a mortgage knows, when you owe a lot of money, the interest of that debt can quickly become a problem all of its own. Luckily governments seem to get much better interest rates than I do for the money they owe, usually between 2-3%. But even so, 2% of 500 billion dollars is 10 billion every year. That is hardly going to break the national budget, but wouldn’t it be great if weren’t paying it every year? Imagine what else it could pay for.
So while we are far from a ‘budget crisis,’ as Joe Hockey liked to describe it, as someone who likes to minimise my own debt, I would be quite happy to see governments start taking some steps to rectify our level of debt. The problem is that each side of politics seems insistent on doing it their way and work hard to undermine any progress by their opponents. They also waste a lot of resources starting and scrapping policies as governments change.
Democratic government is recognised as a far from perfect arrangement. Perhaps the paradigm of oppositional partisan politics between the left and right is past its use by date. It were a true emergency, both parties would have to come together to agree on what really had to be done to prevent the situation getting out of control. There would have to be some negotiation to allow for what each set of ideologies could tolerate, but then they could go to the electorate with a united long term plan for the good of the country that could be worked through without being undermined by election year pork-barrelling and negative scare campaigns. It would be quite a different experience and one that I don’t think has to wait until we reach a crisis. I wrote recently about the possibilities for a centrist government made up of moderates from both sides of the political spectrum to take control of the centre and isolate the extremists of both parties.