The Albanese Govt Faces $1 trillion Debt After Twenty Years
Synopsis
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Twenty years after being announced debt-free, Australia is now weighed down by $1 trillion in debt. With the May budget approaching, the government is considering deep cuts to the NDIS as well as changes to taxes to cover surging interest payments.
Key Highlights
- Australia’s gross debt has soared near to $1 trillion
- Interest Payments Are Now $28 Billion Per Year
- The NDIS will cost more than Defence or Education, with a projected cost of $62 billion by 2026–27
- Changing capital gains tax (CGT) is on the table to fix the budget
No Longer Debt-Free, Now a Trillion-Dollar Debt
Twenty years ago, federal treasurer Peter Costello paid off the last of the $96 billion in public debt and announced Australia was debt free. Today, the Albanese government is confronted by a much-changed reality with gross debt just below $1 trillion. Public debt, Mr Wilson said, was now 20.1% of GDP and had previously been 18.1 when the Coalition came to power nearly a decade ago since which years of reckless spending helped fuel this inflation fire.
Cracking Down on NDIS ‘Rorts’
This budget pressure comes mainly from the rapid expansion of the National Disability Insurance Scheme (NDIS). The scheme’s price tag has now outstripped the entire national budgets for Defence and Education, with the scheme set to cost $62 million in the 2026–27 financial year. But Assistant Treasurer Daniel Mulino said a sweeping revamp would be announced this Wednesday to keep the scheme sustainable.
Fraud, price gouging are among key targets for the government. A new ACCC report found shocking examples of providers deceiving NDIS funding for luxury items such as cruises and flights. Through various measures the government intends to maintain assistance for those that require it whilst ending systemic rorts which have cost the taxpayer billions. The Coalition has indicated reforms are welcome, acknowledging simply that demand has outstripped the ability of the budget to match it.
The Road to Budget Repair
Ahead of the federal budget on 12 May, the government is also considering unpopular tax changes. Assistant Treasurer Mulino said intergenerational fairness would be a line of the attack, warning property investors to expect changes to the Capital Gains Tax (CGT) discount. One measure would consist of re-implementing a system based on tax inflation over an asset's lifetime.
FAQs
- What was Debt Free Day?
The Howard-Costello government extinguished the last remaining $96 billion of Australia’s public debt on 21 April 2006, leaving Australia formally a debt-free nation.
- Is Australia's debt high?
Over 20 years of service funding and responding to economic crises has left successive governments with a near $1 trillion debt.
- Is the NDIS being cancelled?
Not really, but it is being completely revamped. It will therefore be a matter of economic longevity, making sure that the Government is not financing new schemes out of fresh air funding, and that they are able to afford it for the long-term for potentially expensive support for people with disabilities.
- How does this affect my Capital Gains Tax?
More recently, slashing the 50% CGT sweetheart deal for investors has been flagged by the government as a possible reform, but no final call has yet been made ahead of May’s budget.
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