Day three of the government’s economic reform roundtable was about budget sustainability. It’s a slow burn issue. If the Australian government spends more than it raises in revenue, it has to finance the difference (the budget deficit) by borrowing. The most recent budget has forecast deficits for at least the next decade.
It is not an immediate problem. Domestic and overseas investors want to lend to Australia. However, each successive deficit leads to more borrowing – which keeps the interest bill growing. Eventually this debt has to be repaid.
At some point governments have to fix the problem through more tax, cutting spending, or both.
