Sharon Zollner: ANZ Chief Economist discusses the government's rapid increase in national debt

The government's debt has shot up as our collective total gets closer to one trillion dollars. 

The country's overall debt rose to $870billion dollars for the year to May, 5.4-percent higher than last year’s $830billion. 

Central Government debt sits at nearly $239billion, rising 11-percent on last year. 

ANZ Chief Economist Sharon Zollner says it's worrying if it's getting frittered away, instead of going into key things like infrastructure.  

She says the trouble with the increase is the Government doesn't have a lot to show for it. 

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Episode Transcript

Speaker 1 (00:00):
So the Herald this morning and running a nation of
debt series, and the bit that's designed to get the
clicks is the part that tells us we're nearing a
trillion dollars in debt and you're supposed to go, oh, trillion,
my word. Currently it's eight hundred and seventy billion. That
importantly is across private and public. It's everybody's debt, of course,
So what does it actually mean? Sharon Zolna is the
ainsed Chief Economist of Courses, back with a Sharon morning,
good morning. What am I supposed to make of this?

(00:21):
Are we worried? Is the trillion dollars a thing or not?

Speaker 2 (00:24):
Well, it is a thing, but it's a nominal thing.
So yeah, you're quite right. They're just comparing nominal numbers
over time, don't It doesn't tell you a lot. You've
got to at least inflate it deflated by the price level,
or even better, consider it relative to incomes or relative
to wealth, and then you start getting some numbers that
are a bit more meaningful and less scary.

Speaker 1 (00:42):
Right, And when you do that, are we in good shape?
Reasonable shape? Shocking shape? What sort of shape are week?

Speaker 2 (00:48):
Well? Things are deteriorated. Over the last ten years or so,
our total debt to GDP has gone from about one
hundred and ninety percent to two hundred and eight percent,
so a bit under double to a bit over double.
And if you look at what's caused, that is all
government debt. So household debt had a bump with the
massive housing bubble we had, but it's actually come back.

(01:09):
It's about half the debt, and then corporate debt and
government debt each about a quarter of the total. But
the big increase has been in government debt, of course
with the COVID.

Speaker 1 (01:20):
Here, see what I worry about if I worry about anything,
is that who borrowed it, what did they borrow it for,
and are they paying it back? So business debt I
don't worry about because I am assuming they're smart enough
to borrow some money for expansion. That's a good sign.
I look at central government, but they're not even running
a surplus on an annual basis, so I worry more
about that. Then I look at local government debt up
fifteen percent, and all I'm doing is seeing my rates
bill go up. So are there sort of different sorts

(01:43):
and levels of.

Speaker 2 (01:44):
Debt absolutely, whether a household affirm or a government. When
if you borrow money, then whether that's a good idea
depends very much on what you're spending it on. So
taking government for example, if you're buying infrastructure that will
make your country more productive in the future, great, If
you're frittering away, not great. And the same goes for

(02:04):
household concerns. The trouble is the course of that massive
in trees and government, yet we don't necessarily have a
lot to show for it, unfortunately.

Speaker 1 (02:14):
The student loan, which is at eleven point nine billion,
I also think is that going to get paid back?
I mean, that's on the books as a debt that
will be paid back, but in I mean will it.

Speaker 2 (02:25):
Good question? Yeah, I think there's obviously question marks around that.
The decision to make the first year of study fees
free perhaps up the ante a little bit on that score.
You had people who were sort of untested in the
university and environment. Obviously we've had a lot of young
people gone overseas as well. So yeah, we'll wait and see.

(02:47):
But I think it's fair to say that it's probably
got a higher fault rate than the house. Indeed, I
would imagine put it that.

Speaker 1 (02:53):
Way exactly just while I've got you RB this week
twenty five.

Speaker 2 (02:57):
That's a lock looking like it as much as a
lock of these things get. They gave a very strong
signal to that extent, and everyone's expecting it, so it
certainly would be a big shock if they didn't deliver.
Big question, as always is what comes next, So a
big focus on the forecast and the.

Speaker 1 (03:13):
Words they use exactly good to see. Sharon Zona owns
in chief Economists. For more from the Mic Asking Breakfast,
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