Former Australian Treasurer Peter Costello
By Andrew Bolt ~
Former Australian Treasurer Peter Costello confirms we have a spending problem that will leave us with debt for many years:
So we’ve now had 10 years of deficit. Cumulatively that means: to cover that we’ve had to borrow about $370 billion. We went from having no net debt to borrowing about $370 billion.
That money doesn’t go away, Leigh. It’s going to be there. We’re going to be paying interest on it until somebody pays it back…
The debt as a proportion of the GDP is about 19 per cent. It’s about the same as it was when I became treasurer. It took us 10 surplus budgets to pay it off last time.
You would be doing well to pay of it off in 10 surplus budgets this time. You are looking at a decade at least; maybe beyond… I think the probabilities are: we will never get back to where we were. You and I will die before that happens…
It means that future generations will be paying interest on the debt that’s been run up on their behalf over the last decade. And they will probably be paying for the rest of their lives.
So what has got us to this? It’s the spending, stupid:
Well, look: we’re nearly at the peak of income tax collections which are sustainable, in my view. The Government said it is going to cap it at 23.9 (per cent). I think that’s right.
What it has got to do is: it has got to cap expenses at the same amount. You can’t run expenses at 25 per cent of GDP and revenues at 24 and balance a budget. You can’t do it, let alone pay off debt.
So if you are going to cap tax-to-GDP at 23.9 per cent, which I think is good – that’s kind of the marker, if you like – you have to get your expenses down to about 24 per cent. That’s where they were. We should try and have a cap on them as well.
And if we could get them back down to 24 per cent, we could start balancing budgets and we could pay off debt. But we are a long way away from that.
It might just sound as if, you know, one per cent of GDP – 25 per cent today, they should go down to 24 per cent – one per cent of GDP is not that much.
It’s about $18 billion. And until we get our spending under control, we’re never going to be in a position to pay back our debts.