MYEFO: Josh Frydenberg vows to eliminate nation’s $392bn debt bill

Labor says the Coalition had breached a promise to eliminate the debt bill within a decade.

Josh Frydenberg has pledged to pay down the nation’s $392.3bn net debt amid attacks from Labor that the Coalition had breached a promise to eliminate the debt bill within a decade.

The Mid-Year Economic and Fiscal Outlook released on Monday revealed gross debt levels will peak at $576bn by the end of the forward­ estimates and were expect­ed to be 27.7 per cent of GDP at the end of 2019-20.

Despite growth forecasts contracting, prudent spending measures led by Finance Minister Mathias Cormann and lower growth in welfare payments have provided the Treasurer with an opportunity to tackle debt in ­future budgets.

 

The government’s mid-year budget update said net debt was expected to be 19.5 per cent of GDP ($392.3bn) this financial year. “Net debt is then projected to decline as a share of GDP to 16 per cent in 2022-23, and further decline­ over the medium term to 1.8 per cent of GDP in 2029-30,” the budget papers said.

“Gross debt, measured as the face value of Australian Government Securities on issue, is expected to be 27.7 per cent of GDP ($556bn) at the end of 2019-20 before­ increasing to 25.5 per cent of GDP ($576bn) by the end of the forward estimates.

“By 2029-30, the total face value of AGS on issue is projected to fall to around 14.6 per cent of GDP ($474bn).”

Mr Frydenberg defended debt levels under the Coalition and shifted blame to Labor over its ­“record spending” between 2007 and 2013. “When Labor came to office after the Howard-Costello years, there was zero government debt … there was a pristine balance sheet,” he said. “Labor … took that balance sheet and engaged in a whole lot of record spending and the debt was increasing rapidly. It’s taken us six years to get the budget back under control.”

Opposition Treasury spokesman Jim Chalmers said the govern­ment had thrown away its promise of eliminating net debt in 2029-30. “In the last budget update, they said there would be no net debt whatsoever by 2029-30. They have failed that test and have had to walk it back,” he said.

“The budget update confirms that net debt has more than doubled­ under the Liberals to $392bn, with gross debt crashing through a record $556bn.”

The government’s fiscal strategy outlined in the budget update included a priority to “reducing gross debt and eliminating net debt” and “strengthening the govern­ment’s balance sheet by reducing government borrowing as a share of the economy over time”.

“Maintaining debt at prudent levels is an important element of improving the strength and sustainab­ility of the government’s fin­ancial position,” the budget pape­rs said.