Former treasurer Peter Costello has lamented the astronomical rise in Australia’s net national debt on the 20-year anniversary of his announcement that Australia was debt-free, urging the Albanese government to restrict its spending.
Mr Costello, who served in the Howard government, said the public debt of nearly $1 trillion has left young Australians in a “significantly worse” financial position.
Speaking to Sky News host Peta Credlin, Mr Costello said it was “heartbreaking” to see his hard work so catastrophically undone by successive governments.
On April 21, 2006, the former treasurer paid off the final $96 billion in public debt on what has since been dubbed “Debt Free Day”.
But gross debt, accumulated by successive governments, has since reached almost $1 trillion – with around $28 billion being spent on interest payments alone each year.
“It’s heartbreaking to have worked so hard and to have got Australia into such a good condition. We were strong. We were admired around the world,” Mr Costello said.
“I mean, the Americans couldn’t do this, the British couldn’t, the French couldn’t do this. The Germans couldn’t, the Japanese couldn’t, but Australia stood out.
“We got our budget under control. We’d eliminate Commonwealth debt. We’re a shining example of a success story, right?”
Mr Costello said he had hoped the reduction in debt would be a “gift” to future generations, including the establishment of the Future Fund.
However, the year after the Howard government left office and the Rudd government took over, Australia started borrowing again and has been “borrowing ever since”.
“Since I left government, the tax take has been going up about 1 per cent per annum, per person. We’re collecting more tax than ever before, but spending has been going up about 2 per cent, per person – outstripping tax,” he said.
“And that’s why the government says, ‘oh, we need higher taxes’. You wouldn’t need higher tax if you’d kept your spending under control.”
Mr Costello said the increasing size of government, too, was a big reason why productivity was “so poor”.
“You know, we used to lead the world in productivity. We were a shining example of how to grow an economy and increase wages in real terms off the back of doing things better and smarter,” he said.
But now, Australia was “celebrating Debt Free Day with a debt of $1,000 billion, a trillion dollars”.
“That’s where we’ve gone over the last 20 years,” Mr Costello said.
“The thing about it is this, it’s making the future for young Australians harder. Because as I said before, the debt doesn’t disappear, you’ve got to pay the interest bill on that every year. It comes out of their taxes.
“Because we can’t meet our expenses, we just borrow some more. And young Australians are in a significantly worse position today because of this debt.”
Mr Costello said he has heard the Albanese government talk about “intergenerational equity” as meaning higher taxes, but that was a misconception.
The former treasurer said it was the government that was obliged to spend less, not tax people more.
“I started talking about inter-generational equality 20 years ago, and it was all about restricting your spending so you didn’t need higher taxes, that’s what they should have been doing,” he said.
Mr Costello said Australia has “lost our way”, with two markers proving the nation had lost its sense that “we could be special”.
“In economic terms, you’re either building the pie up or you’re running the place down. And we’ve been running the place down,” he said.
“We lost our way, you know. Let me give you two markers: April 2006, no debt. April 2026. A trillion dollars. We lost our way. We lost the sense that we could do this. We lose the sense we could be special.”
Mr Costello said he felt “sorry for young people” that Treasurer Jim Chalmers thought it was a “good idea” to tax people more.
“But I do feel sorry for them, because I think for 20 years, their opportunities have been diminished. And you won’t turn it around with higher taxes,” he said.
“I do feel sorry for young people. I don’t think Chalmers’ idea to give them higher taxes is a good idea … you won’t turn it around with higher taxes.
“You’ve got to get your spending under control. You know the best thing you could do for young people is actually cut their taxes. That’s the best you could for them.”
However, the former treasurer said Australia’s natural gas and oil reserves could be the path of redemption.
“Now, it’s not irreversible. We’ve still got wonderful natural endowments, if we were prepared to actually utilise them,” he said.
“We should be developing oil and gas reserves in Australia, to me it’s obvious. The reason you run a strong economy is you know challenges are going to come.
“You know the international winds are blowing ill. You know there are financial crises around. You know that there are potential commodity price rises around. You know, that there is an energy shortage. So you strengthen the economy while you can.
“We have wonderful natural endowments we could recover. But, gee, we’ve got to change direction.”