Coalition government shows stubborn unwillingness to fix debt


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Last budget I proposed that the then treasurer, Scott Morrison, introduce a bipartisan National Debt Commission (NDC) that would take submissions from businesses of all shapes and sizes, unions, academics, entrepreneurs, civil society organisations, state and local governments and be tasked with making recommendations on budget repair and debt reduction that are fair, credible and do not place a disproportionate amount of the burden on working Australians, young or old, or our most vulnerable.


Not unexpectedly, he didn’t take up my offer, but it is precisely the kind of idea which could avoid such wasteful and debt-expanding spending. The now Prime Minister and his Treasurer should seriously consider the NDC along with another tangible move towards tackling debt: reinstating the debt ceiling as a percentage of GDP.


In 2013, Australia’s debt ceiling was scrapped by the Abbott government with the support of the Greens in parliament, a statutory cap on government borrowings passed into law by then-assistant treasurer Chris Bowen in 2008. If we are serious about keeping one eye on long-term fiscal responsibility, then we need the discipline of a debt ceiling.


This should be done so by fixing the ceiling as a percentage of GDP, and if need be reset by the NDC, rather than the government of the day. A reasonable starting point is 20 per cent, which is where health spending as a proportion of GDP will sit over the next decade. It will mean we can afford to pay for what is projected to be the fastest growing budgetary item and avoid the scenario of governments breaking the piggy bank to pork-barrel in times of electoral peril. If it right to cap tax revenue as a percentage of GDP to not exceed 23.9 per cent of GDP why not borrowing? A debt ceiling will incentivise savings over spending. The NDC’s role would take the politics out of raising or lowering the ceiling. Many Liberals support the reintroduction of the debt ceiling. It would receive bipartisan backing and go a long way to achieving surplus on average “over the economic cycle” or in the medium term.


Article source: https://www.smh.com.au/business/companies/billionaire-investor-kerr-neilson-s-fund-comes-unstuck-on-china-bet-20190109-p50qcn.html?ref=rss&utm_medium=rss&utm_source=rss_feed

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