Government debt deepening rapidly – well before COVID-19

by | May 17, 2020 | Finance & Tax

The Coalition won the 2013 federal election beating their chest about Labor’s “debt and deficit”. Thanks to COVID-19, we’re unlikely to see a surplus in our lifetime or our children’s. But, let’s not forget that the current debt blow-out occurred well before the coronavirus impacted the economy. Alan Austin checks how Australia shapes up against other OECD countries.

We now have government debt figures for nearly all the highly developed capitalist economies for 2019. Two stand out as having stacked on far more debt than the others. They are Chile and Australia.

Of the 36 wealthy members of the Organisation for Economic Cooperation and Development (OECD) the majority has taken advantage of the recent global boom in investment, trade and government revenue to pay back debt amassed during the global financial crisis (GFC).

Ireland increased its debt as a percentage of gross domestic product (GDP) through the GFC to 119.9% by 2013. Since then, through the recovery phase, it has reduced it to a manageable 58.8%.

Similarly, the Czech Republic increased its debt to GDP through the GFC to 44.9% by 2013. It has now reduced it to 30.8%.

Other OECD economies with similar declining debt trajectories include these Euro Area countries: the Netherlands, Germany, Portugal, Austria, Belgium, Slovakia, Latvia, Slovenia and Lithuania. Plus these countries with their own currencies: Hungary, Denmark, Iceland, Israel, Poland, New Zealand and Sweden.

In stark contrast to these well-managed economies, Australia’s gross debt has continued to soar through the recovery period from 2013 to 2019.

Within the 36-member OECD, 23 countries have reduced government debt, ten of them by more than 10% of GDP. Only 13 have increased borrowings over this period, with Chile and Australia alone doing so by more than 10% of GDP. See green chart, below.

Australia’s gross debt has increased from 30.5% to 45.1%, an increment of 14.6. Chile is only marginally higher, rising from 12.7% to 27.9, up 15.2.


(i) Most data is from Trading Economics, supplemented by updates from Statista, as required.

(ii) Four countries have not yet provided debt figures for 2019 — Canada, Japan, Mexico and South Korea. We can determine from 2019 budget figures that South Korea’s debt will likely have deepened, but the other three will not have changed significantly from 2018. We have adjusted South Korea’s debt by 0.5% of GDP accordingly.

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New Australian debt records

Readers who experienced the 2008 global financial crisis will recall the furious anger with which the Coalition and virtually all the mainstream media attacked the Gillard Government when gross debt breached $150 billion in July 2010. The screams of outrage were even greater a year later when the debt hit $200 billion. That’s despite the fact that Australia’s debt back then was close to the lowest among developed countries.

Curiously, however, the media virtually ignored gross debt breaching both $300 billion in Tony Abbott’s first year and $400 billion in late 2015, shortly after Malcolm Turnbull had replaced Abbott. Deathly silence in mid-2017 when the debt exceeded $500 billion and barely a whisper when it smashed through $600 billion earlier this month.

Three points to note here. First, debt is not always intrinsically bad. Almost all economists now agree the debt Labor took on during the GFC was entirely appropriate. Second, Australia did not need to take on any further debt after 2013, as is shown by the experience of the rest of the developed world.  And third, the recent debt blow-out in Australia occurred well before the coronavirus impacted the economy.

“the recent debt blow-out in Australia occurred

well before the coronavirus impacted the economy”

The Coalition’s legacy

Applying the Coalition’s strategy of looking at ratios to GDP when it suits and raw dollars when more convenient, the pie chart, below, updates contributions to Australia’s total dollar debt — which first started to accumulate in 1854. The current Coalition is responsible for more than 57% of this — well over half.

Net debt also ballooning

When the Coalition took office in September 2013, Australia’s net debt – gross borrowings minus interest-bearing loans – was a modest $161.3 billion. That was matched, however, by the strong increase over the preceding five years in national assets, including school and community buildings, roads, railways, ports, building insulation, defence housing and other infrastructure.

Since then, net debt has risen above $430 billion — more than two and half times higher. But with no significant infrastructure or other benefit to show for it.

As has been shown elsewhere, the losses to Australia’s budget – and its citizens – as a result of the failure to retain a fair share of the exported wealth, continue year after year.

Factchecking Frydenberg’s gloss

On this topic, Federal Treasurer Josh Frydenberg continues to make assertions inconsistent with the evidence:

“Australia entered the coronavirus crisis from a position of economic strength. The Government returned the Budget to balance for the first time in 11 years, while government debt to GDP was about a quarter of what it is in the United States or United Kingdom, and about one seventh of what it was in Japan.”

Three problems here. Australia has not been a position of economic strength since the first Coalition budget in 2014. Since then, debt has deepened, the Aussie dollar has weakened, wages have been reduced in real terms, economic growth has fallen relative to comparable countries and the jobless rate has tumbled down the global rankings.

The budget has not been returned to balance. Yes, a promise was made in April 2019 that there would be a surplus by June 2020. But the late 2019 bushfires soon stymied that. The closest Australia got to surplus was the deficit of $9,669 million recorded in last August’s monthly finance statement. The latest statement, for March, has the deficit blown out to $22,359 million. Already. Before any coronavirus impacts.

Yes, debt to GDP is now 42% of the level in the USA and 19% of Japan’s level. But the Coalition and its mendacious enablers in the media cannot have it both ways. Back in 2010, Australia’s debt was only 22% of the US level and just 9.8% of Japan’s. If that was a “debt and deficit disaster” and “Labor’s debt timebomb” and “debt spiralling out of control” back then requiring the dismissal of the Labor Government, it cannot be justly claimed that all is well today.

Alan Austin’s defamation matter is nearly over. Readers are warmly urged to support the final crowd-funding push. The latest update is here; the GoFundMe page is here.


Australia’s economic growth improves, but hold the champagne


Alan Austin

Alan Austin

Alan Austin is a freelance journalist with interests in news media, religious affairs and economic and social issues. You can follow Alan on Twitter @alanaustin001.


  1. Avatar

    Thanks Alan – a professional presentation of economic facts that embarrass the LNP and its consistent claims. Our media largely avoids the OECD comparisons, which tend to undermine the self congratulatory but mythical claim of the LNP to be superior economic managers. Thought your ending was extraordinarily polite though.

    It is outrageous that Frydenberg / Cormann claim, no, ASSERT the budget was in balance, when this was a budget forecast only, and their semantics were questioned at the time. We all know how budget forecasts go. The budget was in deficit prior to the corona virus, and you define the ballooning debt they mismanaged.

    Imagine the uproar and the rabid media fever if this was claimed by an ALP government.

    • Avatar

      Good response Pollie! Just Tweeted your comments out!

  2. Avatar

    And the big question is, with nothing to show for it, where has all the money gone???

  3. Avatar

    The Liberal Party have always been loose with the facts. Their credential for economic management are a fraud.
    You can see at the link that the much vaunted Howard-Costello government paid down no debt.

  4. Avatar

    The debt and deficit bullshit is wearing thin, the government is not borrowing to fund the stimulus they are printing the money, there`s no gold standard anymore so sovereign governments can print money to cover any debt, there`s no debt to pay back, as far as the surplus bullshit goes Menzies was PM for 17 years and never once had a surplus budget, debt and surplus was created by Howard and Costello, the 2 biggest con artists ever till Scomo and Frydenbrain come along, the debt and deficit line was to convince the sheep that labor could not run an economy, another lie , Labor has been far more successful in running Australia`s economy since federation and are always called in to power in times of war or economic emergency to fix the conservatives stuff ups, Scomo could`nt run a tourist bureau let alone a national economy, thats why Howard had to sack him from that job and the missing millions sti;; haven`t been accounted for .

    • Avatar

      And, don’t forget, Costello balance his budget by selling 2/3rds of Australia’s Gold Bullion 167 tones @US$306/oz. The price in todays terms is US$1750/oz. ie 5 times what WE got for it.
      I emailed the Reserve Bank and asked who bought the gold, and was told that, that information is not available. I wonder why that is??

      • Avatar

        Like when Jeff Kennett privatised energy in Victoria. Like your comment. Just Tweeted it out!

    • Avatar

      One thing that seems to be ignored in all this is that the economy and economics are not just about money and budgets; but the quest for the optimum distribution of resources. Clearly a resource not optimally deployed is the 10-20% who are un- or under-employed, even before the virus..

      It is good to see the Opposition shadow treasurer Dr Chalmers talking about the need to move to a full employment economy, as was initiated by the Labor government to drive the recovery from WW2. In that environment, budget deficits became irrelevant, as economic growth increased.

      This approach is in stark contrast to the austerity policies of the Lyons Menzies government during the great depression which maintained unemployment to over 10% right up to the beginning of WW2. A complicating factor was that while we had our own currency, it was effectively tied to Sterling and the gold standard. Who can forget Menzies famous words: ‘Rather than that Australia should fail to pay her honest debts to her bondholders, I would prefer to see every man, woman and child in Australia die of starvation in the next six months’ (May 3, 1931).

      The reality is that the Australian budget has only shown a surplus, and very small ones at that, four times since federation. Once straight after federation, when we did not have our own currency, one during the depression, then Keating’s attempt to keep inflation down by reducing demand and investment, which worked quite well in leaving the economy unprepared for the tech stock driven crash in 1990. Howard’s surpluses around 2000 were enabled by a minerals boom and asset sales, with very regressive tax and middle-class welfare largesse, and a dramatic rise in private debt; a time bomb about to go off.

      It is quite clear that the debt incurred by the Rudd governments intervention in the GFC effectively disappeared relative to GDP as the economy recovered; ranked Number 1 in the OECD.

      Compare that to the performance of the ATM government. Despite their ‘debt and deficit disaster’ rhetoric, they allowed the debt to triple, produced by polices that reduced demand, raised unemployment, and reduced the rate of economic growth to close to zero. While Mr Frydenberg keeps banging on about how strong the economy is, despite international ‘head winds’, the fact is the rest of the world has maintained higher growth than Australia, and our international ranking has slipped to twenty something. We are not in good shape, and a new approach is essential.

  5. Avatar

    But libtardturds will blame CV19 and most will agree unfortunately



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