The debt crisis has been in the foreground of much of Australia’s domestic political debate over the last four years. Whether we’re in one, not in one, heading towards one, or viewing the decline of other countries as they experience one, it’s an ever-present factor of the political landscape. And it’s undoubtedly an issue riddled with scare tactics and fear mongering among all stakeholders, no matter which side of the debt crisis debate you may fall, rendering it difficult to make sense of the problem confronting us.
Recent media commentary is enough to prove this as the public is increasingly bombarded with information regarding the status and credibility of Australia’s debt woes. The Guardian’s Tony Abbott achieves the impossible: unity among economists states that economists who agree with the government’s commentary about the present budget emergency and debt crisis, is the same as the number of people who want to see Clive Palmer don a budgie smuggler; zero. This article was buoyed by Business Day’s midyear economic survey that touted 25 of Australia’s leading economists who appeared to agree with the condemnation.
Taking a closer look at the figures proposed by the renowned economists from industry, academia and consultancy, however, in an attempt to identify the source of their optimism, isn’t straightforward. Looking specifically at the Budget figures relating to the underlying cash deficit, we see certain consistencies in the economic outlook figures, between those crying crises and those condemning them. Specifically in the short to medium term government and external forecasts match up according to the 2013/2014 MYEFO, 2014/2015 Budget Estimates as well as the midyear survey. All reports consistently identify the 2013/2014 and 2014/2015 budget figures as approximately $50billion and $32billion respectively. So if in the short-term and moving towards the medium term there’s consensus on the position that we’re in (we’re all dead in the long term) how can there be such a wide margin on the outlook for the future, and necessary action now. And what are we to make of the information before us given the consistency in data and inconsistency in conclusions?
One resounding similarity in the commentary included in the Guardian’s and The Age’s article is the concession made by leading economists that we are in some kind of trouble. Bank of America Merrill Lynch chief economist Saul Eslake “[doesn’t] question for a moment the seriousness of the long term problem”, while Paul Bloxham, chief economist at HSBC, agrees “[work] needs to be done in the medium term”. Chris Richardson of Deloitte Access Economics supports “getting back to sustainable fiscal finances over the long term”.
Hence there is a problem with our structural position, which will need to be addressed over the next couple of years, yet that our fiscal position now shouldn’t worry consumers into crisis mode seems to be the overarching conclusion.
Thus, yes, Australia is experiencing some structural issues but it’s not an urgent problem so perhaps the phrase ‘ongoing debt concern’ or the ‘debt situation that makes me slightly worried but in the scheme of things not too worried’ is more appropriate than ‘debt crisis’. By all accounts this seems to be the conclusion of the IMF report that’s plugged in Hockey’s conclusion on debt that Australia is experiencing an increasing government debt but will remain the lowest in advanced economies.
So overall we might conclude that debt is important, just not the most important thing right now, and even when it will become important in the global context, we’re not that important at all.
It’s no wonder it’s difficult to gain any political and economic transparency when it comes to the debt situation when it appears that the Australian situation falls in such a unique and vague niche that public opinion finds itself driven to the two extremes. This has been aptly described by Rob Taylor in his article Australia Debates Whether It Has a Debt Crisis where he posits debt discussion in Australia “is rooted more in hard-nosed politics than economics, and a two-decade struggle between the two main political blocs on the left and right for the mantle of economic prudence”.
Perhaps what we don’t need is further discussion of the supposed credibility of any kind of debt situation that only seems to perpetuate confusion and extremism about our structural position. It seems what we need instead is more constructive political and economic discussion about the future we’re aiming for – is it one that prides itself on being amongst the lowest debt holders and hence pioneers of financial responsibility of developed nations, or is it one that prides itself on heralding the most robust health, aged care and education framework amongst developed nations? Because we can’t have everything, but we can have priorities – and it’s about time we straightened ours out to offer transparency and vitality to the political process, which has thus far been shrouded in political and economic clout about a crisis that may or may not exist and a budget that may or may not serve the interests of the Australian public.