Jeff Kennett: Australian governments’ addiction to debt weakens their position in rapidly changing world

The federal government is heading to a trillion-dollar debt. Victoria is an even worse position. Without a drastic course correction, our day of reckoning will soon arrive.

I am an optimist. But I am increasingly depressed by the way politicians and some others are discharging their responsibilities. They think and act that the way to the promised land is simply through increased expenditure on borrowed money.

The federal government is heading to a trillion-dollar debt.

Both major parties during the election campaign promised massive new expenditures. Neither offered any restraints, or fundamental reforms that would reduce expenditure to encouraging genuine growth.

In Victoria, it is substantially worse. A debt heading towards $200bn, without access to revenue streams available to the federal government or the royalties of Western Australia or Queensland.

The Victorian government is slowly snuffing out the flame of hope, economic activity and growth.

All governments in Australia, except Western Australia, at the moment, are marching onwards to a future of indebtedness.

Even Tasmania, with a population of just over 500,000 people is planning to build an AFL demanded stadium for $1.3bn, that will add to its projected $10bn debt that simply cannot be afforded.

The AFL’s decision to force a $1.3bn publicly funded stadium onto the Tasmanian public is a contentious issue. Picture: Nikki Davis-Jones

Much of this increasing expenditure on infrastructure and the provision of services started well before Covid, but has increased at a pace in the last three years.

There will be a day of reckoning, and it may not be far away.

Equally absent has been the identification and exercise of restraint, and the oversight of controls to ensure all expenditures are delivered according to contracts and in the best interests of the public they are or were intended to advantage.

We now are part of a world that has rapidly changed since the inauguration of Donald Trump as President of the United States, where so many of his decisions seem increasingly based on disruption and personal vendetta.

The consistent announcements by Presidential decree, and then the reversal, in whole or in part, is causing untold damage within the world order, and Trump’s Big Beautiful Bill will add another $4 trillion of debt to the United States’s current $36 trillion debt.

So the world is heading to a correction or worse.

For instance, Victoria is not in a position to defend our economic position. There are no “nuts in reserve for the winter” as we used to say. The government keeps increasing the tax we pay.

In the face of rising debts and international uncertainty, all Australians must recognise the threats and be prepared to accept some responsibility for starting to live within our means.

Jim Chalmers should immediately reverse course on a new tax on unrealised profits. Picture: Martin Ollman

Where we will accept the provision of services but in the most cost-effective manner. Where all new infrastructure projects except the most essential are postponed until we get our budgets under control.

But the greatest responsibility lies with those in office, our governments who must accept responsibility for how they manage the public’s money.

Federally, the government among other things must stop the growth in the cost of the NDIS. The principle underling the scheme is excellent, the implementation a disgrace.

Health Minister Mark Butler must act quickly and decisively.

Prime Minister Anthony Albanese must override his Treasurer’s pursuit of the introduction of a new tax on unrealised profits. Cumbersome and self-defeating in terms of confidence among Australian business and families.

While I hate continuing changes to superannuation rules, I equally hate abuse of the system.

To avoid abuse, a better change would be taxing income into super funds up to $3m at 15 per cent. Tax income into super funds between $3m and $20m at 30 per cent. Any super fund in excess of $20m taxed at the highest rate of 45 per cent and the removal of any of the current benefits that are attached to super funds below $20m.

If Victorians want a new direction, Jacinta Allan is not the woman to deliver it. Picture: Andrew Henshaw

The $3m must be indexed in recognition of young people’s earnings over their lifetime.

Some allowances would have to be made for farmers and small businesses where those enterprises have been in super funds, in many cases for generations.

I hope the Prime Minister will again indicate he leads the government not the Treasurer.

In Victoria, the state is on a path to nowhere good. Nor can the direction be changed by the current government, because having created the diabolical position we find ourselves in, there is no time for them to change direction that will produce a positive outcome.

That said the alternative government, the Opposition continues to eat itself.

If an election were held tomorrow, the government would be overwhelmingly defeated, but it would not be the Coalition that would be the beneficiary of their loss, but a gaggle of independents, who sadly would not have the experience or the unity to provide the focus and leadership required to undertake the management task that Victoria so desperately requires.

So, we all have a responsibility, governments and community. But we need to act quickly as I suspect the hourglass is quickly emptying.

Time to stand up one and all.

Originally published as Jeff Kennett: Australian governments’ addiction to debt weakens their position in rapidly changing world