AUSTRALIA faces a debt bomb so huge it will represent half the nation’s entire economy within two decades unless tough action is taken, according to Joe Hockey’s intergenerational report.
The long- awaited report has delivered a stunning warning to Labor, the Senate and voters on the huge challenges the nation faces if political leaders fail to act.
Prime Minister Tony Abbott dropped a hint yesterday the unpopular Medicare co-payment would be dumped, admitting it was “no secret’’ he was rethinking the policy.
However, the intergenerational report warns higher taxes or lower spending on health and education face future generations unless tough action is taken now.
The report, to be released on Thursday, reveals if the Government did not change Labor’s current budget settings, net debt would represent a 50 per cent share of the nation’s entire economy within 20 years.
Currently, Australia’s net debt represents 15pc of gross domestic product.
Modelling by PricewaterhouseCoopers has previously suggested the debt is on track to reach a trillion dollars by 2037, even if savings stalled by the Senate are factored in.
Without change over the next 50 years, net debt will swallow the economy and be equal to 100pc of the entire Australian economy by 2065.
Tony Abbott plans to use the report to help reset his government after weeks of leadership speculation.
Yesterday, he predicted the report would help explain to voters why he had taken tough action in the budget to reduce spending.
“One of the things that you’ll notice when the intergenerational report comes out at the end of the week, you will notice what the impact of last year’s structural reforms would be on our long-term fiscal situation,’’ Mr Abbott said.
“You’ll understand better why we … put forward these long-term structural reforms, but what you will also notice is the extent of the progress that has already been made.
“The extent of the fiscal repair that has already been achieved under this government … At the moment there is an out-of-character tendency on the part of Australians … to focus on the glass half empty.
“What I think we will be able to much more clearly see (after the report’s release) is the glass half full.’’
Labor leader Bill Shorten is blocking $4.5b in budget measures his own party proposed when in government including cancelling tax cuts linked to the carbon price.
According to the budget papers, Australia’s debt was $224 billion. Australia paid $10 billion in interest payments on that debt — around $1 billion a month — last year alone.
But while Australia’s debt is expected to be among the fastest-rising in the world over this decade, it is modest by international standards.
Australia’s gross domestic product (GDP) is a measures of national income and output and is equal to the total expenditures for all goods and services produced.
When the Rudd/Gillard/Rudd Labor government left office it recorded the second largest debt position of all previous governments over the reporting period with only the Hawke/Keating Labor government experiencing a higher debt position.
Source: dailytelegraph.com.au