- Prices are skyrocketing in Australia along with increasing debt.
- Australia is one of the topmost pandemic era spenders, operating at an almost 0% interest rate.
- The recent budget revealed that taxpayers wouldn’t be burdened with extra taxes despite high debts.
- The budget primarily focused on relieving Australians of high living cost.
Since 1901 Australia has largely been under a budget deficit. According to several economists, a budget deficit is not always bad; however, magnitude sets the difference. As the federal government released the budget on March 29, let’s see how Australia’s debt looms and what it means for the taxpayers.
Before jumping to numbers, let’s first understand what is meant by a country’s debt? - A country’s debt is defined by its budget deficit. When a government’s expenditure (on transfer income, defence, etc) exceeds its earnings (through taxes and other measures), it leads to a budget deficit. So, if the deficit exceeds, governments either cut down on their spending or try to increase the taxes.
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How bad is Australia’s debt?
Australia is among the top seven pandemic-era spenders globally, and the country’s central bank hasn’t increased its interest rate yet. The nation is still functioning at an interest rate near 0%. However, initial lockdowns imposed in the country have caused massive economic losses.
Despite the extra government expenditure in schemes such as the JobKeeper scheme, in 2020, the Australian economy slipped into recession for the first time since the ‘90s. Since 2020, the federal government increased their spending to stimulate the economy and have subsequently piled up an extra debt of nearly AU$300 billion.
According to Australia’s treasurer, Josh Frydenberg, Australia is expected to experience a deficit of AU$78 billion in the upcoming financial year, 3.4% of the GDP.
What is a budget deficit ?
What does it mean for taxpayers?
Several economists expected that the government would increase taxes to maintain a lower debt. However, the budget was rather primarily focussed on relieving the mounting living cost expenses.
Australia’s inflation is rising because of the supply chain woes caused by the pandemic, and the Russian invasion is yet another nail in the wall. Grocery, petrol, iron, coal, and nickel prices have been skyrocketing.
In the budget announcement, a temporary fuel excise cut and one-off AU$250 payment to 6 million low-income Australians were announced. Some say that most of the relief strategies announced by the government in the budget for citizens are only short term. The reliefs are just an attempt which the Scott Morrison government made to win the vote bank in the upcoming federal elections. However, the treasurer said, the government is rather “banking the dividend of a strong economy”.
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So, at least for the time being, the burden of high debt does not seem to be heavily imposed on Australian taxpayers. However, it is yet to be seen how the policies play out following the upcoming federal elections in May 2022.