Products – The Centre for Independent Studies

The Looming Iceberg: Australia’s post-pandemic debt risk

Robert Carling
28 January 2021 | PP35
The Looming Iceberg: Australia’s post-pandemic debt risk

After many years with low public debt, Australia is seeing a much higher debt burden as a result of the coronavirus pandemic. In the years ahead, according to recent budget estimates, it will reach close to $2 trillion in aggregate at the Commonwealth and state/territory levels of government. This poses a risk to economic growth in the longer term and reduces fiscal flexibility and the capacity to respond to future crises. Much of the increase since the pandemic has been unavoidable, but reversing it should be a policy priority once its underlying causes have passed.

The confidence often heard expressed that the debt burden will be manageable in the long-term should be heavily qualified. A steep decline in the debt burden such as was seen after World War II will depend on vigorous economic growth, continuing very low interest rates and the exercise of fiscal discipline, none of which is assured.

Among the states and territories, the largest deterioration in public finances is occurring in Victoria.

Latest Publications

Worlds Apart: Remote Indigenous disadvantage in the context of wider Australia
Jacinta Nampijinpa Price
25 January 2021 | PP34

Remote and very remote Indigenous communities have become victims of a ‘wicked problem’. A combination of high impact factors that, when pooled together, are having devastating effects on communities. Education and employment rates in remote and very remote Indigenous communities put them on par with countries such Afghanistan, a nation devastated by over 19 years of war. Poor health outcomes…

READ MORE
Planning restrictions harm housing affordability
Peter Tulip
03 December 2020 | PP33

Planning restrictions reduce the supply of housing and hence raise its price.  This paper summarises recent research on this topic, focussing on Australia’s largest cities. The severity of planning regulations can be gauged by the difference between sale prices and the costs of supply.  This wedge represents what people would pay for the legal right to provide extra dwellings at…

READ MORE
The Economic Challenge of Covid-19
Robert Carling
08 July 2020 | PP32

Even before the Covid-19 pandemic struck, the Australian economy was under-performing its potential and in need of reinvigoration. Economic growth in per capita terms had slowed to a crawl and business investment and productivity growth were depressed. Policy changes that were previously desirable have now been rendered crucial by the pandemic. The shock to the economic system since March has…

READ MORE
Lower Company Tax to Resuscitate the Economy
Jeff Bennett, Michael Potter, Tony Makin
06 July 2020 | PP31

In response to the economic contraction of the COVID-19 pandemic, the federal and state governments have dramatically expanded the scope and scale of state involvement in the economy. This massive spike in government spending continues to be funded by increased government borrowing that has put Australia on a path to having about a trillion dollars’ worth of public debt, mostly…

READ MORE
A Fiscal Vaccine for COVID-19
Tony Makin
10 June 2020 | PP30

The fiscal response to the Covid-19 crisis ensures that the federal and state governments will experience large budget deficits and escalating public debt for the foreseeable future. Federal government debt could for instance conceivably double to over $1 trillion within a few years in the absence of substantial budget repair. Many economic questions arise about Australia’s policy response to the…

READ MORE