Our national debt mess must be cleaned up

THE Federal Budget has generated positive buzz for the government, but Anthony Keane warns Australia is not facing up to the stark reality of its financial future.

debt, australian money

PARENTS and grandparents like to leave a lump of cash for the next generation when they can. How would the kids react if that lump was not money, but a big steaming pile of debt?

That’s what we as a nation are doing to our children and grandchildren, and last week’s Federal Budget shows that turning off the debt tap will be tricky.

On current official forecasts, Australia will be spending more than it earns each year until at least 2019.

When households spend more than they earn over a long period, they go bankrupt. Governments are lucky to have millions of taxpayers to help pay the ballooning interest bill, but eventually the wheels will fall off.

A man walks past abandoned buildings with ‘for sale’ signs in central Athens ... Greece is a potent warning for Australia’s possible future. Picture: AFP Photo / Louisa Gouliamaki

Just look at Greece. Deep in debt, it has been juggling its finances this month just to pay its pensioners, and many experts expect total financial collapse there soon.

While Greece is an extreme example, it is worrying for Aussies that our national government debt, close to zero in 2007, is now nearing $400 billion and will keep rising.

It’s also worrying that Treasurer Joe Hockey says the government is still borrowing $96 million a day just to pay the bills. And he’s from the conservative side of politics that traditionally keeps spending and debt under control — who knows what will happen if a free-spending Labor government gets elected again?

Finger-pointing is pointless but it will continue anyway. The Abbott Government correctly claims it inherited the debt mess from Labor and its efforts to fix it have been stymied by a difficult Senate. Labor says it saved us from recession by spending up big during the GFC. The Howard Government has been blamed for squandering the fruits of the mining boom.

No cause for jubilation ... Treasurer Joe Hockey’s second Budget seems to have had a better reception than the first, but at what long-term cost? Picture: Gary Ramage

The simple fact is that everyone needs to take the blame, including Australia’s fickle electorate — that’s us.

We’ve developed a “what’s in it for me” attitude over several years as governments on both sides showered us with cash. Their efforts to woo us with money have failed — pollies are still unpopular — and only created a debt mountain.

Overly-generous superannuation incentives, middle-class welfare, big tax cuts and cash giveaways are just some of the contributors.

When someone today is asked to share in some financial pain, there’s an uproar. The terrible reaction to the 2014 Budget is a good example.

What austerity looks like ... former employees of the national Greek broadcaster ERT enter the broadcaster's headquarters in Athens last month, demanding their jobs back after the Greek parliament abruptly closed the service in 2013 as part of austerity measures. Picture: AFP Photo / Louisa Gouliamaki

Economists say that compared with other countries Australia’s debt isn’t too bad, when expressed as a percentage of our economy. However, $400 billion is a scary number — and even at the low interest rates that governments borrow money at, it’s costing us all billions of dollars a year in interest.

There are much nicer things to do with billions of dollars.

Australia’s people and politicians need to think like successful investors, taking short-term pain for long-term gain. Perhaps the sad and terrible images likely to come from Greece’s financial collapse will motivate us all to look beyond the next government handout or promise they can’t afford.

Debt hangs around like a bad smell, for both households and governments. We shouldn’t leave it to our kids to clean up.

Originally published as Our national debt mess must be cleaned up