Australia’s national debt: Former Treasurer Peter Costello tells Labor to ‘get spending under control’
In 2006, then Treasurer Peter Costello celebrated Australia becoming debt-free. Now, 20 years on, he has issued a warning as the country’s national debt nears $1 trillion.
Former Treasurer Peter Costello, one of Australia’s most respected treasurers, has issued a grim warning on the country’s spiralling debt position.
His warning comes 20 years after Mr Costello oversaw the Budget success that made Australia debt-free. On April 21, 2006, Mr Costello celebrated Debt Free Day, feeling the hard work of the Liberal Government had provided a gift for future Australians: Financial freedom.
That financial freedom is now a distant memory as Australia financial position sits shattered, having around $1 trillion in debt.
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By continuing you agree to our Terms and Privacy Policy.By the end of this financial year, the Government’s debt is expected to reach $993 billion, with the tip over the $1 trillion mark expected in 2028/29.
The former Liberal treasurer, who worked alongside John Howard to pay off Australia’s debt, said it was “heartbreaking” to see the country’s financial strength go down the drain.
“It’s heartbreaking to have worked so hard and to have got Australia into such a good condition. We were strong. We were admired around the world,” he told Sky News.
“I mean, the Americans couldn’t do this, the British couldn’t, the French couldn’t do this. The Germans couldn’t, the Japanese couldn’t, but Australia stood out.
“We got our Budget under control. We’d eliminate Commonwealth debt. We’re a shining example of a success story, right?”
Mr Costello’s budgets benefited from the wild success of Australia’s mining boom, which put the Government into a very fortunate position. However, many still argue that Mr Costello’s fiscal management is what gave the Australian economy confidence to prosper.
Mr Costello firmly pointed the finger of blame at Labor, who he said borrowed and spent up big as soon as Kevin Rudd won the 2007 election.
“In fact, what happened is the year after we left (office), they (Labor) started borrowing again and have been borrowing ever since,” he said.
“The thing about it is this, it’s making the future for young Australians harder. Because, as I said before, the debt doesn’t disappear, you’ve got to pay the interest bill on that every year. It comes out of their taxes.
“Because we can’t meet our expenses, we just borrow some more. And young Australians are in a significantly worse position today because of this debt.”
The Rudd government spent big after Mr Howard was defeated at the 2007 election. This included two stimulus packages in response to the global financial crisis, the first at $10.4 billion, the second at $42 billion.
Liberal governments that followed though also racked up the national debt, including the the Morrison government’s spending in response to the COVID-19 pandemic.
Regardless of exactly where the blame exists for things going wrong remains up for debate, but Mr Costello said the position today showed Australia was “lost”.
“I started talking about inter-generational equality 20 years ago, and it was all about restricting your spending so you didn’t need higher taxes, that’s what they should have been doing,” he said.
“We lost the sense that we could do this. We lose the sense we could be special. We lost the sense that we were prepared to work to make our country better,” he said.
“In economic terms, you’re either building the pie up or you’re running the place down. And we’ve been running the place down.”
Mr Costello said that young Australians are sadly the ones who will be worst impacted by Australia’s dangerous debt position.
“For 20 years, their opportunities have been diminished. And you won’t turn it around with higher taxes,” he said.
“You’ve got to get your spending under control. You know the best thing you could do for young people is actually cut their taxes. That’s the best you could do for them.”
Mr Costello conceded that the damage was “not irreversible”, adding that Australia’s rich deposits of resources were key to recovering and changing the direction of Australia’s future.
“We’ve still got wonderful natural endowments, if we were prepared to actually utilise them,” he said.
“We have wonderful natural endowments we could recover. But, gee, we’ve got to change direction.”
