With today’s $700 million borrowing by the Abbott government, the cumulative total of all borrowing since the election stands at $70.95 billion. Not bad for a government that prior to the election was hell bent of paying off debt but to date has only had policies in place to increase borrowing.
The $70.95 billion of borrowing includes funds to cover maturing bonds and T-Notes, as it always does, as well as covering the Commonwealth government’s budget deficit which at the time of MYEFO was assumed to be $47 billion in 2013-14.
Allowing for the borrowing to cover maturities, gross government debt has increased by $46.7 billion since the 2013 election to now stand at $319.925 billion.
To be sure, this level of debt is mere chicken feed for an economy the size of Australia and given the budget balance is already on a fast track to surplus. There seems no threat to the triple-A rating from the three main ratings agencies and the decent economic growth momentum that is seeing Australia all but lock in a 23rd year of unbroken economic expansion means servicing that debt is child’s play.
Which begs the point about the tightening in fiscal policy that is likely in next week’s budget.
As noted before, many of the spending cuts and tax in the budget will merely cover the quite massive cost of Abbott government pet projects such as paid parental leave, extra defence spending, abolishing the mining tax and carbon price, all of which have to be coversed by cuts elsewhere or tax hikes before any ground is made at reducing the budget deficit.
What we are seeing is the Coalition government returning to type – that is having a high taxing strategy to cover high spending in its pet sectors of the economy. The Fraser government did it, Howard did it in spades, and it now looks like Abbott is following suit.
Get set for a big footprint from the Abbott government into the economy as the tax to GDP ratio approaches new highs to match a spending level not much smaller than Abbott inherited from Labor.