00:01So what we can see is that the Commonwealth and the states are all collectively in deficit
00:07at the moment.
00:08So, in other words, they're spending more than they're bringing in.
00:11Over the next four years, that position does improve somewhat for the states.
00:16They get into a surplus position, but the Commonwealth remains in deficit over that
00:20period of time.
00:22It also shows that revenue is expected to remain below expenses for that next four years.
00:28So, what we're seeing is a gap between the two, and that gap is at about 3% of GDP,
00:36so it's actually quite big.
00:37And it means basically that we're not getting into a position where the government is effectively
00:41kind of paying out as much as it's bringing in for that foreseeable future.
00:46I mean, is this essentially a case of, you know, we're spending beyond our means and
00:50getting into debt traps?
00:53It certainly means that the fiscal position doesn't remain good for a long period of time.
01:00And what we're seeing is, while there is a slight improvement, it's probably not enough
01:04of an improvement.
01:05So with that comes higher debt bills, as you point out.
01:09And also, importantly, higher interest bills.
01:12And so, that is effectively the government saying that, you know, we're going to have
01:18to continue to pay this interest bill, which means that they have less money to pay for
01:21other things.
01:22So when we look at some of the numbers, if we can get into them, when it comes to total
01:26debt, one of the headlines was that we're going to collectively surpass $2 trillion by
01:31the end of the decade.
01:34That's right.
01:35That's right.
01:35So that's obviously a fairly large figure, and it's up from $1.7 trillion in the current
01:40year.
01:40So it is growing.
01:42And that equals about 58% of one year's GDP.
01:47So it's quite a large number.
01:50We'll put it in context, though, and say that compared to other countries, which, and over
01:54the OECD average, it's about 127% of GDP.
01:58So it's not as bad, however, it is rising, and I think that's the focus, the fact that
02:03it's moving up so quickly.
02:05Yeah.
02:05And I guess then it prompts the question then, is it sustainable?
02:09That's right.
02:09And I mean, it depends what you define as sustainable.
02:12If it means can we pay our interest, then yes, we can.
02:15We've been able to pay our interest bills in the past, and even with these kind of numbers,
02:21we would continue to be able to do so.
02:23However, there is a cost.
02:25And that cost is that rising interest bill, which is getting bigger every year.
02:30And of course, with inflation being a problem and interest rates going up here in Australia
02:34and around the world, the cost of the debt is growing too.
02:38And so, of course, when you pay interest bills, you're not paying for other things.
02:42And just to give you some context, the size of the interest bill through to the end of the
02:48decade is projected to be about as large as the amount of money we spend on the age pension.
02:54So, it's significant.
02:56At the moment, it's about the size of what we spend on the NDIS, for example.
03:00So, it is something that clearly would benefit a lot from being brought down, because then
03:05governments would have more flexibility.
03:07And it's not just to pay for these ongoing programs, it's to pay for the new things that
03:10we don't even know about yet, the new problems that are inevitable.
03:13Well, these are cumulative numbers that are shared by the Feds, the states and territories.
03:18When you break down to a more granular level and look at the states and territories, which
03:23ones are perhaps getting the worst rating when it comes to racking up debt and interest repayments?
03:29So, Victoria has the largest debt levels in level terms.
03:36When you put it on a per capita basis, which is probably a more even-handed way of dealing
03:41with it, you actually see that this is the territories, the smaller territories in this
03:47case, which have the largest per capita debt, so Northern Territory and the ACT, which to some
03:53extent reflects the fact that, of course, they are less able to pay for themselves.
03:56They have a smaller revenue base, so that's perhaps to be expected.
04:00But yeah, in level terms, it's definitely Victoria that's sitting at the top.
04:03And when you'll have a government looking at its budget, how does this outlook inform budgets
04:11and forward estimates?
04:13Well, what it should do is warn governments that they have to kind of slow down on the spending,
04:18because we don't have a revenue problem as such.
04:21In fact, quite consistently, we've had revenue numbers, so from taxes, stamp duty,
04:27royalties, income taxes, et cetera, come in stronger than expected.
04:31But it's that pace at which expenditure is growing across all of the governments that's
04:35the real concern.
04:36And that is something that is, I guess, more inside government's control as well.
04:40It's hard to predict revenue to do much about it, but spending they have a little bit more
04:45say over.
04:46So, what it says to us is that they really need some fiscal rules in place, some things
04:50that say, you know, we're only going to spend X percent of GDP or X percent of revenue.
04:55And that way, they could at least get a handle on this.
04:57At the moment, what we're seeing is that they're consistently underestimating their expenses,
05:02particularly public sector wages, which are one of the biggest parts, of course, of spending,
05:07particularly in the States.
05:09They're consistently underestimating these, and that's not doing them any favours when
05:12it comes to that long-term fiscal projection.
