Guy Woods, Statistics and Mapping Section
Around the world the budgetary response to the Global Financial
Crisis (GFC) has significantly increased the level of government
The economic recession the GFC precipitated has reduced
government revenues. For example, in Australia, Treasury cut its
forward estimate for taxation revenue in the 2008–09 budget
by $110 billion in the latest budget.
At the same time, the state take-over of collapsing financial
institutions, increases in welfare payments to the unemployed and
economic stimulus packages have increased the expenditure side of
the ledger. This has brought about an increase in public debt
levels not seen in some countries since the 1940s.
In terms of measuring public debt (sometimes referred to as
national debt) there are two key indicators that analysts focus on.
The first is gross debt, which is, essentially, the sum of all
interest bearing loans with a specified repayment date. In
Australia this is mostly government securities on issue. The other
measure is net debt, which is gross debt less financial assets,
such as the holdings in the Australian Future Fund. These measures
are usually expressed as a percentage of gross domestic product
International comparisons usually focus on gross debt as this is
easier to calculate on a comparative basis. A comparison of net
debt is much harder due to the way different governments define
financial assets. However, analysts at the International Monetary
(IMF) have recently calculated estimates for both these indicators
for a wide range of countries. It should be noted that most
countries in the IMF survey include debt from all levels of
government, whereas the Australian data only looks at central
The IMF data shows that Australia has the lowest level of gross
debt, after Chile, when compared with other member states in the
Organisation of Economic Development and Co-operation (OECD). In
terms of net debt, only Chile, Denmark, New Zealand, Norway and
Sweden have lower levels.
Over the course of the GFC Australia’s net debt position
went from a low of minus 3.8 per cent of GDP in 2007–08 to a
projected high of 6.0 per cent in 2012–13. In comparisons,
the average in the G7 countries (Canada, France, Germany, Italy,
Japan, United Kingdom and United States) went from a low of 53.0
per cent in 2007 to projected 94.2 per cent in 2015. By 2015,
Japan’s net debt is projected to reach 154.7 per cent of GDP,
America’s 85.5 per cent and the United Kingdom’s 83.9
The IMF is urging the high public debt developed nations to
reduce their net debt to levels of 60 per cent of GDP. Without this
fiscal adjustment it has warned that they face adverse
macroeconomic consequences. IMF research has found that if the G7
countries do not take measures to rein in their debt levels their
interest rates could rise by two percentage points and potential
growth could be half a per cent lower. This could also have a
detrimental impact on the world economy and affect even low debt
countries such as Australia.
In sum, Australia has negligible levels of debt (see graph)
which pose little threat to the country’s economic outlook.
However, Australia could be affected by the international
implications posed by the G7.
Excludes Norway, Sweden and Chile
which have negative net debt.
(a) Australia refers to financial year 2009–10. Figures from
11 May Budget.
Sources: International Monetary Fund, Fiscal monitor:
navigating the fiscal challenges ahead, 14 May 2010;
and Treasury, Budget strategy and outlook, Budget paper
no. 1, 2010–11.
Library publications and key documents
Australian Government, Budget strategy and
outlook, Budget paper no. 1, 2010-11, Commonwealth of
Australia, Canberra, 2010.
C Cottarelli and A Schaechter, Long term
trends in public finances in the G-7 economies, International
Monetary Fund (IMF) staff position note no. SPN/1013, September 1
2010, Washington, 2010, p. 13 – 14, viewed 6 September
International Monetary Fund (IMF), Fiscal
monitor: Navigating the fiscal challenges ahead, 4 May
2010, IMF, Washington, 2010, http://www.imf.org/external/pubs/ft/fm/2010/fm1001.pdf
S Kompo-Harms, Commonwealth, state
territory gross and net debt 1998–99 to 2012–13,
Background note, 7 April 2010, Parliamentary Library,
Canberra, 2010, http://www.aph.gov.au/Library/pubs/BN/eco/GrossAndNetDebt.pdf