Cut debt levels now or risk our prosperity, warns Treasury head
The Australian 12:00am August 27, 2016
Rebecca Urban
Treasury secretary John Fraser has ramped up his call for the government to make fiscal consolidation its immediate priority, warning that rising debt combined with slowing revenue growth risked the country’s future prosperity.
Mr Fraser also cautioned against “inappropriate tax ¬increases”, which could reduce Australia’s international competitiveness as well as constrain economic and jobs growth.
His comments come as business leaders are planning to lobby crossbench senators to back the federal government’s economic agenda, including a 10-year cut to the company tax rate.
It also follows Scott Morrison’s warning that commonwealth gross debt could hit $1 trillion -within a decade in a “worst-case scenario” but that pressure on tax revenue would not be fixed by lifting tax rates or ¬imposing new taxes on business.
Speaking at an Institute of Public Affairs lunch in Melbourne yesterday, Mr Fraser said Australians should not be fooled by a general feeling of prosperity.
“We need to do something about fiscal consolidation,” he said. “It’s very difficult to stand here and say we’ve got a problem that’s growing. This is a great country; we feel prosperous ... and by and large, along the east coast, we’re not looking too bad.”
But rising debt gave rise to ¬intergenerational issues, Mr Fraser said, with Australia’s high ratio of household debt — the second highest in the world — an ongoing concern. He said tough policy -decisions around productivity, the labour force and competition law beckoned. “(As with) most reforms, the winners are balanced by those that see themselves as losers,” he said. “We need to communicate this.”
Mr Fraser singled out quality infrastructure as a key to sustainable growth, pointing out that Australia needed to “play catch-up” as investment in rail transport had failed to keep pace with development on metropolitan fringes in regional cities and towns.
He said to those who’d previously lived in Europe, such as himself, it seemed strange that a country as vast in size as Australia had neglected rail investment in the past.
“I’d settle for a reasonably quick train,” he said, referring to the recently renewed talk about a fast-rail link between Melbourne and Sydney.