The 2020-21 Budget will plunge Australia into a record $1.1 trillion of debt by 2023-24, with no commitment from the government to return the budget to surplus.
“The test for the Morrison Government beyond the COVID-19 pandemic is to double down on budget repair to ensure our grandchildren aren’t left to pick up the tab for today’s expenses,” said Cian Hussey, Research Fellow at the IPA.
The annual interest on this debt will be $17 billion, which is equivalent to half of annual government spending on defence.
IPA estimates published on 1 April 2020 highlighted that Australia was on track to reach $1 trillion of debt within three years as a result of COVID-19 and devastating lockdown measures.
Before COVID-19, total debt was $556 billion. This figure will double as a result of COVID-19 and lockdown measures, leaving Australians with a federal government debt burden of almost $43,000 each.
“Lockdowns have robbed Australians of their lives, livelihoods and freedoms. Governments must abandon the fanciful elimination strategy which has plunged Australia into the highest level of debt on record,” said Mr Hussey.
“This debt will take a generation to pay back, and governments must look beyond the short-term cost of borrowing. If interest rates return to their long-run average, which they inevitably will, the cost of this debt will rise rapidly, threatening the stability of future budgets and the prosperity of the country as a whole.”
“Higher debts mean more money is spent on interest payments, rather than essential services like hospitals, schools, and defence. Around 60% of interest payments are sent overseas – high levels of debt leave us economically weak and unable to respond to future economic shocks.”
“The Morrison government must pursue an agenda of rapid economic growth if there is to be any hope of eliminating debt within the next half a century.”
“Bringing forward Stage 2 of the income tax cuts is welcome, but the government must bring forward Stage 3 tax cuts to give households a much-needed boost. They should also slash the corporate tax rate to make Australia an attractive place for capital investment and cut onerous red tape which costs our economy $176 billion each and every year,” said Mr Hussey.