From Chris Joye, one of the few ex-MB commentator in Australia that has a clue:
Australia faces its biggest fiscal challenge in 60 years and does not deserve an AAA credit rating.
…Worryingly, the cumulative Commonwealth deficits since the GFC have been far deeper than the two other fiscal shocks experienced in the post-war period.
…Australia’s gross Commonwealth government debt-to-GDP ratio is now at the highest level since the ABS’s quarterly records began 27 years ago and exceeds the 22.9 per cent record set in December 1995 after the 1991 contraction.
Because state governments have been relatively thrifty, the 42.2 per cent gross total government debt-to-GDP ratio remains below the 47.3 per cent high-water mark touched in December 1993, although this may be short-lived.
There are two critical differences in 2015 that make Australia’s current debt burden much more troubling than that serviced by previous generations. Back in the 1977 and 1983 recessions, the household debt-to-income ratio was only 34 per cent and 37 per cent, respectively. Even in the 1991 recession, it was just 48 per cent, which is one reason why home loan arrears were so benign.
Yet by 2015, the household debt-to-income ratio had jumped 3.2 times to an incredible 154 per cent, which is above its pre-GFC climax because families haven’t deleveraged.
…Australia suffers, therefore, from a potent combination of unprecedented public sector and household debt.
With fiscal and monetary policy all but completely spent, we have scant policy ammunition left to combat a real downturn.
And the rating agencies are smoking dope if they think Australia is a better “credit” today than it was in the 1980s and 1990s.
Yep (charts used with permission).
