Australia’s Economic Development Committee says budget ‘reset’ needed after pandemic debt binge

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Federal government debt will exceed $1 trillion in coming years, largely due to $337 billion in direct COVID-19 fiscal support, while combined state and territory net debt will reach $500 billion. dollars this year.

“State governments have also significantly increased their debt levels during the crisis. The long-term picture of fiscal sustainability will be incomplete without an assessment of the substantial spending and revenue pressures facing states,” Ball said.

Combined state and territory public debt as a percentage of GDP is projected to more than triple, from less than 5% in 2018-19 to more than 15% by 2024-25.

Supply-side challenges

Over the IGR’s 40-year horizon, federal government net debt is projected to hover between 30% and 40% of GDP through 2060, based on current policies. However, if governments are included, net debt is expected to reach 70% of GDP, largely due to population ageing.

“Looking ahead, we can see that all of the challenges are on the supply side of the economy and that these challenges are colliding headlong with aging and the rising costs of climate change,” he said. said Mr. Ball.

CEDA wants a full review of the government’s fiscal framework after the federal election scheduled for May. This would come at the same time as the Reserve Bank of Australia would be subject to external scrutiny.

Treasurer Josh Frydenberg and his Labor counterpart Jim Chalmers have pledged to conduct a post-election review of the RBA and Australian monetary policy settings.

“There has been a lot of attention on the proposed review of the RBA and the monetary policy framework, but a review of the fiscal policy framework is badly needed to complement this if we are serious about the full range of macroeconomic levers. “, said Mr. said Boule.

Part of that would be a deep dive into the budget honesty charter introduced by Howard-era treasurer Peter Costello (now president of Nine Entertainment, publisher of The Australian Financial Review) and how the independent parliamentary budget office could be more involved.

As pork barrel allegations are leveled against both major parties ahead of the May election, CEDA wants more transparency about grant programs and binding principles on how the funds are administered.

Growth in off-budget spending is also a concern, prompting CEDA to call for standardized accounting rules. Labor, for example, has pledged to spend $47.4 billion which will not appear in the budget result due to its accounting treatment.

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