Debt disaster leads world, says International Monetary Fund

Australia’s public finances have deteriorated more than those of any other large developed nation, according to the IMF’s latest set of ­global comparisons.

PwC chief economist Jeremy Thorpe says lifting workforce skills was one way for Australia to ‘grow out’ of its debt.

Australia’s public finances have deteriorated more than those of any other large developed nation, according to the International Monetary Fund’s latest set of ­global comparisons.

Combined state and federal budget deficits are set to increase to the equivalent of 11.4 per cent of GDP this year — a bigger deficit than any other major advanced or developing country except for the US (11.8 per cent) and South Africa (12.2 per cent).

Australia is the only major ­nation covered in the IMF’s quarterly Fiscal Monitor whose government budget deficits will increase between 2020 and 2021.

“Australia introduced a JobMaker plan in the fiscal year 2021 budget, with additional stimulus measures during financial years 2021 to 2024, including credits for hiring, full investment expensing, and income tax cuts,” the IMF ­report notes.

Combined, governments around the world have increased their support since October by $US2.2 trillion ($2.9 trillion), for a total of $US7.8 trillion in additional spending or forgone ­revenue since the start of the coronavirus pandemic, plus $US6 trillion in “equity injections”, loans and guarantees, it states.

“Emergency lifelines should only be rolled back gradually where local transmission has been low and activity has begun to normalise, by reducing the coverage and generosity of programs.”

The Morrison government has resisted calls to extend JobKeeper, its signature wage subsidy scheme due to end on March 28.

Compared to forecasts made in October, Australia’s expected stock of debt by the end of this year as a share of GDP was revised up by 4.6 percentage points to 74.8 per cent of GDP, a bigger rise than for any other nation.

Global public debt reached 98 per cent of global GDP by the end of last year, the IMF estimates, up from 84 per cent a year earlier.

PwC chief economist Jeremy Thorpe said lifting workforce skills was one way for Australia to “grow out” of its debt.

“This has to be one way of growing the economy so the debt shrinks, and it’s not about giant expenditures it’s about improving human capital,” he said

“We haven’t talked much about upskilling in Australia; we talk about labour market reform but this is the lost bit,” he added.

Separate analysis by PwC, in conjunction with the World Economics Forum, found employment in Australia could increase by about 1.7 per cent by 2030 if ­employees’ skills were better matched to the available jobs.

Economic output would be about 5.5 per cent higher too.

“Governments, businesses and educational institutions are not currently helping people acquire the skills they need to succeed,” the PwC analysis concluded.

Mr Thorpe said businesses tended to underinvest in training staff because of the risk employees would switch to a competitor.