Ten years ago today Australia celebrated an unusual milestone – the federal government announced that its debt had finally been paid off.
“Debt-free day,” treasurer Peter Costello called it in a speech celebrating the event. “The day we pay off the mortgage.”
As last week’s warnings of a credit downgrade ring in our ears, it is worth considering a few lessons from that special moment in history.
In mechanical terms, the $96 billion debt was essentially paid off by a combination of the government living within its means – creating and then sustaining budget surpluses over many years – and using asset sales to retire debt.
The biggest spending cuts occurred in the first budget, while political capital was high and the attachment to programs was low.
David Alexander is Federal Managing Director at Barton Deakin and a former senior adviser to Peter Costello.
David Alexander, Sydney Morning Herald, 21 April 2016. The full article can be accessed here.