Government debt was never paid off by the Howard government, even though it gave the idea consideration in 2002.

In the 2003-04 budget, Treasurer Peter Costello committed the government to maintain a borrowing program for Commonwealth Government Securities (CGS) noting:  “the Government has decided to maintain the CGS market. This will entail ensuring sufficient CGS remains on issue to support the Treasury bond futures market.”

He added, “Retaining the CGS market to support the Treasury bond futures market will require ongoing issuance of Treasury bonds, both at the middle and long-end of the yield curve.

Some of the reasons why Costello wanted the government to keep borrowing were as follows:

it was more likely that closing the CGS market would lead to slightly higher interest rates given the development of Australia’s financial markets and current lack of effective alternatives to CGS. This would result primarily from the higher costs associated with managing interest rate risk without a Treasury bond futures market. Further, the Australian financial market may become less diversified and more vulnerable during periods of instability. Accordingly, on the basis of these findings, the Government has decided to maintain sufficient CGS on issue to support the Treasury bond futures market.”

Full details of the decision from Costello to keep government debt is in the following link: 

END NOTE: As late as the 2003-04 Budget, the Howard government did not have a commitment to keep the budget in surplus, only that it had a “fiscal strategy of maintaining budget balance, on average, over the course of the economic cycle”.