Prime Minister Julia Gillard and deputy Wayne Swan face the press. Source: The Courier-Mail
GILLARD Government debt levels are forecast to blow out by 60 per cent to $165 billion in this term alone - equal to more than $14,000 for every working Australian.
Analysis of Budget documents reveals that between the 2010 election and Federal Treasury's update in October last year, the 2012-13 net debt estimate rose $54 billion to $144 billion.
With Wayne Swan having junked the Government's commitment to a surplus this financial year, Bank of America Merrill Lynch now forecasts Treasury will raise the estimate by a further $21 billion in the May budget.
"The government is starting to develop some form when it comes to over-estimating the improvement in its budget balance," Bank of America Merrill Lynch chief economist Saul Eslake said yesterday.
Ahead of the budget, the Coalition is honing in on a number even larger than net debt - the total value of bonds and other securities issued by the Government, or gross debt, which has ballooned from $151 billion at the 2010 poll to $267 billion now. In the last budget the Government raised the gross "debt ceiling" from $250 billion to $300 billion.
Opposition Leader Tony Abbott believes Mr Swan will increase it again in May.
Mr Abbott told News Limited yesterday: "If Labor is determined to increase the cap on gross debt above $300 billion, if they cannot show a credible and speedy path back to surplus, if they cannot show a plan to start seriously paying off the debt, it will add further weight to our planned No Confidence motion in the Gillard Government.''
Mr Swan's spokesman said the Government had no plans to raise the gross debt limit. Merrills' Mr Eslake said the increase that had already occurred was "troubling".
"If the trends that look increasingly obvious aren't addressed at some point we might cross that threshold from safe territory to dangerous territory very, very quickly," he said.
Monash University Professor of Business and Economics Jakob Madsen said the gross debt rise was "disturbing".
"It's a dangerous trend and it's at the wrong time. It's completely unnecessary to hand out left, right and centre and the way they do it is not very clever," Professor Madsen said.
Business Council of Australia CEO Jennifer Westacott said spending had grown "out of step" with revenue.
"If that doesn't change we are going to have serious public debt problem," Ms Westacott said.
Mr Eslake, Professor Madsen and Ms Westacott all said Australia did not currently have a debt crisis.
But, Ms Westacott said, "we do have a budget management crisis".
In that context, the Coalition is intensifying pressure on the cross-benchers, seeking support for a No Confidence motion.
Independent MP Rob Oakeshott invited Mr Abbott to call him or come to his electorate if he wanted to discuss a no confidence motion.
"Let's have a bike ride, or a surf," he said.
However, Mr Oakeshott added that he was opposed to a no confidence motion in budget week. It would reflect badly on Australia internationally, he said.Between the 2011-12 Mid Year Economic and Fiscal Outlook and the 2012-13 Myefo, Treasury's estimate for this financial year's interest payments on government net debt soared by 20 per cent from $5.9 billion to $7.1 billion.
The Merrills forecast suggest a further increase in interest payments of as much as $1.1 billion.
Government net debt of $165 billion equates to $14,238 for each of Australia's 11.6 million workers, up from $8001 per worker at the last election, an increase of $6237.
Mr Swan's spokesman said Australia's net debt levels were "dramatically lower" than those of every single major advanced economy: "Our current net debt is 10 per cent of Gross Domestic Product, compared to around 80 per cent for the US and UK and around 35 per cent for Canada.
"The Government will reduce net debt in a sustainable way that ensures our economy remains one of the strongest in the world and protects Australian jobs and economic growth,'' the spokesman said.
To repay the debt, cuts were required "almost everywhere", Professor Madsen said, and the GST rate could need to be raised.
Mr Eslake said not only would spending have to be reined in, but the current $111 billion a year in tax concessions could have to be wound back.
Ms Westacott advocated reducing the current number of government agencies from 932 and making "health dollars work harder".
