The debt ceiling farce looks all but over, with the Greens last night agreeing to abolish the debt limit in exchange for measures enabling greater public scrutiny of Federal debt.
Under the deal, which will be passed by the Senate today, the Charter of Budget Honesty will be amended so that all economic updates – including the Budget, the Mid-Year Economic and Fiscal Outlook (MYEFO) and the Pre-Election Economic and Fiscal Outlook (PEFO) – will contain a debt statement reporting the total dollar value of debt and its percentage of GDP for the relevant financial year and three years hence.
According to The AFR:
These statements would have to explain the reason for the debt increase, “including the extent to which the increase was caused by lower than expected revenue, higher than expected spending, capital purchases and/or grants to state and Territory governments for infrastructure’’, the agreement letter says.
“The intention of the tabling of these additional debt statements in Parliament would be to allow for future parliamentary debates on this issue.’’
Other transparency measures include a greater breakdown of debt that is related to recurrent expenditure and that caused by investment in infrastructure, for example. The inter-generational reports, which are published about every five years along with budgets, must have a dedicated section on the environment, including climate change and the effect of policies on the economy and the budget.
Abolishing the debt ceiling is a good move. It will end the pointless political point scoring. It would also facilitate borrowing for infrastructure projects at current very low rates, which is precisely what the nation will need as it heads off the mining cliff and in order to cater for the growing population.
