In the fight for smaller government, sometimes it's a case of one step forward, one step back, and so it was this week.
On the good side, the Federal Government announced a Commission of Audit into government spending (as called for in our TARGET30 foundation paper). On the bad side, Treasurer Joe Hockey announced he would seek to raise the debt ceiling to $500 billion in the first few sitting weeks of the new parliament.
While it is important to distinguish between the debt ceiling (which is a legislative limit on total borrowing) and actual debt incurred, the debt ceiling has an important role from an accountability perspective. The need to go to the parliament and have a debate on increasing debt levels focuses public and media attention on the continual increases in government spending.
Australia doesn't have the intractable political problems with the debt ceiling that the United States has; we don't need to massively increase our debt ceiling. Australia is at no real risk of defaulting on its debts.
Yet Australia is fast developing a debt problem. Only a couple of months ago, the Pre-election Economic and Fiscal Outlook predicted total government debt would peak at $370 billion; it is now expected to exceed $400 billion.
This increase, while not disastrous in isolation, continues a worrying trend of spiralling debt. Gross debt will have increased from less than 10% of GDP at the start of 2008 to more than 25% of GDP by the next election. Unfortunately there is little to show for our hundreds of billions of dollars.
The government has committed to taking any major spending cuts arising from the Commission of Audit to the next election before they are implemented. This means our deficit problems (and consequently our debt problems) are likely to get worse before they get better.
It is a good thing that the Commission of Audit will look at the role of government and address some of the structural issues that have led to the massive increase in the size of government over the last four decades. It is also a good thing that the government is committed to honouring its election promises.
However, there is a lot of wasteful spending that needs to be cut now – we shouldn't have to wait until after the next election to get the budget back into shape.
Simon Cowan is a Research Fellow at The Centre for Independent Studies.
Home > Commentary > Opinion > Of debt ceilings and Commissions of Audit
Of debt ceilings and Commissions of Audit
On the good side, the Federal Government announced a Commission of Audit into government spending (as called for in our TARGET30 foundation paper). On the bad side, Treasurer Joe Hockey announced he would seek to raise the debt ceiling to $500 billion in the first few sitting weeks of the new parliament.
While it is important to distinguish between the debt ceiling (which is a legislative limit on total borrowing) and actual debt incurred, the debt ceiling has an important role from an accountability perspective. The need to go to the parliament and have a debate on increasing debt levels focuses public and media attention on the continual increases in government spending.
Australia doesn't have the intractable political problems with the debt ceiling that the United States has; we don't need to massively increase our debt ceiling. Australia is at no real risk of defaulting on its debts.
Yet Australia is fast developing a debt problem. Only a couple of months ago, the Pre-election Economic and Fiscal Outlook predicted total government debt would peak at $370 billion; it is now expected to exceed $400 billion.
This increase, while not disastrous in isolation, continues a worrying trend of spiralling debt. Gross debt will have increased from less than 10% of GDP at the start of 2008 to more than 25% of GDP by the next election. Unfortunately there is little to show for our hundreds of billions of dollars.
The government has committed to taking any major spending cuts arising from the Commission of Audit to the next election before they are implemented. This means our deficit problems (and consequently our debt problems) are likely to get worse before they get better.
It is a good thing that the Commission of Audit will look at the role of government and address some of the structural issues that have led to the massive increase in the size of government over the last four decades. It is also a good thing that the government is committed to honouring its election promises.
However, there is a lot of wasteful spending that needs to be cut now – we shouldn't have to wait until after the next election to get the budget back into shape.
Simon Cowan is a Research Fellow at The Centre for Independent Studies.
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