Australia’s Debt must be staunched

April 17, 2018

The Australian Conservatives have been warning about Australia’s exploding debt since South Australian Senator Cory Bernardi founded the party last year.

The nation’s debt is rising at an unsustainable rate, as evidenced by the real-time debt clock you can see here.

An opinion piece in today’s The Australian illustrates the danger such irresponsible fiscal management poses to the national economy:

“In the US, China and Germany, leading indicators are softening. Pundits may scoff, but the “synchronised global expansion” seems to be in the rear-view mirror. In the world’s largest economy, real consumer spending, the engine room of economic growth, has stagnated since November. Notwithstanding tax cuts, the highly-regarded Macroeconomic Advisers sees real gross domestic product growing at a weak 1.7 per cent.

And, late into the longest economic expansion on record, we find US personal savings at a 12-year low, household debt never higher and American companies never more highly geared. Credit defaults are rising rapidly as inflation and the Federal Reserve are putting upward pressure on interest rates. These conditions are not conducive to global growth re-accelerating, which, despite Wall Street’s attempts to keep alive the most overvalued stockmarkets on record, is a point investors are starting to accept.

Australia is unprepared for a global slowdown. More than a quarter-century of uninterrupted growth has created arrogant leaders who “don’t read all the negative stuff” and show contempt for the laws of economics and unintended consequences.

Nowhere is this more evident than in energy policy, where naivety and disrespect for markets have resulted in Australian families paying the highest electricity prices in the world — two to three times more than US households.

Unsurprisingly, as the full effects of this protracted misallocation of assets play out, we watch households struggling to make ends meet while businesses downsize, close or relocate to more welcoming jurisdictions. Canberra is largely unmoved.

And while the banking inquiry may be popular politically, it is having serious unintended consequences. Predictably, embattled bankers have begun limiting credit. This, like central bank tightening, is a head wind to growth. This risk aversion comes as, during the next four years, about $480 billion in interest-only mortgages will convert to principal and interest loans, affecting 30 per cent of mortgage holders.

With home loan commitments rising at the fastest pace in more than seven years and other non-discretionary expenditure growing faster than incomes, a worrying proportion of mortgage holders has become hostage to job security and rising house prices. Now is certainly not the time to consider ending negative gearing.

Australia today is a testament to political irresponsibility. What other conclusion can be drawn when in peacetime, after a decade of strong growth and mainly full employment, we continue to generate such high budget deficits?

On becoming Prime Minister, Turnbull promised an “economic narrative”, yet in office he has delivered nothing that remotely resembles a comprehensive, internally consistent manifesto based on sound economics and market liberalisation. Instead, his government is looking increasingly inward and relying on misguided policies to garner support from special interest groups.

Not only has this divided society on economic grounds, it has undermined belief in a value system that gave us resilience, long a feature of the Australian economy. Come the next recession we will miss that resilience and there will be no China or Howard-Costello surplus to shelter us.

Changing prime ministers will not fix this. It requires a philosophical change of direction that is beyond the comprehension of Turnbull and, seemingly, most of Canberra’s political class.

This leaves hapless voters with the profitless task of choosing between bitter experience and implausible hope.

To read Maurice Newman’s full article click here.

To see Senator Bernardi's attack on exploding government debt from his 2017 Budget Reply Speech, click the box below:

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