By paying off government debts we will free our children, Adelaide Advertiser Online, 13/05/2014
Imagine for a moment that your parents die and, having plunged themselves deep into debt in their twilight years, all of their personal debt transfers to you.
Inheriting these debts may cripple your immediate aspirations. Not only could a home renovation or holiday be put in hold, but the little things like a family trip to the zoo or new work clothes may be subject to second thoughts. You may well curse your selfish parents.
Thankfully, the law doesn't work that way in relation to personal inheritances. But this is exactly the way government debt works. The debts of one government transfer to the next, meaning debts accrued by one generation equally transfer to the next generation, unless repaid.
The more government borrows, the more interest future taxpayers pay on those debts. The longer it takes to pay off the principal of those borrowings, the more interest future taxpayers pay. When government chooses to live off of excessive debt today, we should be under no illusion that we are really asking our children to foot the bill for our profligacy.
In 2007 the Australian Government enjoyed net savings. Today, the level of government debt is already resulting in around $10 billion in interest repayments annually.
Treasury estimates indicate that, without action, we will add another $123 billion in cumulative deficits over the next four years, with gross debt projected to hit at least $667 billion. We face the third largest increase in net debt among 17 advanced economies, with debt growing faster than the United States and Canada.
The choice in this budget is stark. Do we make tough decisions to rein in the size of budget deficits now, or do we pass the buck to the next generation? There are several good reasons to act now.
Firstly, there's the matter of inter-generational equity. Like me, many Australians may not like the way the previous government splashed money around. But insofar as there were benefits, we received them and we should pay for them. And we, the current crop of taxpayers, should also pay for the mistakes of our governments, not handball the bill to our kids.
Take the one off cash payment of $900 Labor sent to nine million Australians, including many who were overseas or dead. It turns out it was a gift the country couldn't afford and all came from borrowed money. We either start paying it back now, or the next generation will have to pay back more.
Secondly, there's the scale of the problem. Australia's debt is bad but not yet crippling. Left untouched it will reach a point where debt controls us, rather than us controlling the debt. Right now we can still afford to make gradual changes to safety nets like the age pension, ensuring its long term viability without detrimental impacts on current pensioners.
Countries that ignored their debt problems for too long ended up with little choice but to make dramatic changes, like immediate cuts to the size of pensions, with profound social consequences.
Finally, reversing budget deficits forces both governments and voters to focus on what really matters. For too long we have encouraged a belief where too many people ask what they can get from government.
Around seven million Australians receive some type of government assistance, about a third of our population. This is simply unsustainable. We need to return to a world where government helps those only in genuine need; delivers services of only the greatest community good; and is as lean as it can be.
People often say that they'd do anything for their children. This budget is a good place to start. By paying our debts we free them to chart their own course.
Senator Simon Birmingham is the Parliamentary Secretary for the Environment