Recent economic management in Australia has been abysmal, and a reckoning awaits

States’ and territories’ combined total debt will reach 159 per cent of operating revenuesby 2024, up from 83 per cent in 2019, S&P has forecast.  In dollar terms, debt will more than double in that time from $270bn to $588bn.  “We anticipate Victoria’s debt levels will rise the most, with debt more than tripling from 2019,” the report stated. “Most other states will more than double their debt during the same period.”

Affecting both Commonwealth and State policies, what is happening in our national electricity market is an exercise in mass delusion.  All the major political parties and most of the media are pretending that the move to so-called "renewable energy" will give us lower electricity prices and reliable supplies, when they know that the opposite is happening.  Subsidies hide the real cost of electricity, and Snowy 2 (supposed to cost $2 billion) is developing into a $10 billion white elephant.  The nub of the problem is, while that wind and solar can provide low variable cost electricity for some of the time, electricity cannot yet be economically stored on an industrial scale.  An energy supply and cost crisis is inevitable, when enough coal-fired electricity is shut down.

On a world scale, what is dangerous is that the response to Covid has synchronised all the major world economies.  They all went into Covid downturns and subsequent recoveries in sync.  Most are now heading into downturn together, which will deepen any coming recession.  This time even China, which kept the Australian economy moving during the global financial crisis around 2008, is facing its own economic problems, while rising interest rates will hit the budgets of big debtor nations.

The last time all the major economies went into boom and subsequent bust together was in the early 1970's, when the recession of 1973-74 turned out to be a major one.  In that case US Vietnam war deficits caused a boom later busted by the Oil Crisis of 1973.  The parallels with the present day are notable, except that this time Western governments are carrying a lot more debt.

The head of Treasury, Dr Stephen Kennedy, says inflation and real wages growth can be expected to lead to higher average personal tax rates over time, from the current 23 per cent to almost 27 per cent in 2033.  He predicts that average personal tax rates will increase towards record levels, increasing the fiscal burden on wage and salary earners, and has urged the Albanese government to immediately begin repairing the budget to contain debt and build firepower to confront the coming downturn.

It is obvious that the Australian economy has harder times ahead.  Iron ore and many commodity prices have already started to fall back towards historic levels, and both BHP and Rio Tinto are warning investorsabout the uncertain outlook for commodities.  The run of good seasons and high prices for farmers won't last forever either.

Government royalties (except ironically for coal) are on the way down, and the slowing housing market means that the stamp duty bonanza for state governments is over.  Eventually increasing government outlays and rising interest on public debt (not to mention the effects of Net Zero) will place still more pressure on government budgets.

Somewhere along the line governments will have to tighten spending and raise taxes but despite calls from Treasury officials little in the way of serious budget repair is in sight at federal or state level.  With "progressives" and the Teals recently doing well at the polls, the public is getting what they voted for but will have to pay the eventual cost.

The Morrison Government deserved to be voted out of office on grounds of economic policy alone.  The problem is that Albanese's fiscal policy promises to be even more squandering.