The federal government’s net debt was $342 billion at the end of 2017-18, which equates to 18.6% of GDP. While this is relatively low compared with many nations, Treasury secretary Philip Gaetjens yesterday warned in a speech marking the 10 year anniversary of the global financial crisis (GFC) that debt needs to be reduced to ensure that Australia is prepared for potential economic shocks in the future. He also noted that Australia’s healthy fiscal position in 2007 helped the economy to ride out the GFC:
In response to the GFC, we were able to delve into a conventional toolkit of liquidity support for the financial system, and swift monetary and fiscal stimulus. While discretionary fiscal policy was based ex ante on a high-level framework of ‘timely, targeted and temporary’ there was also a focus on exit strategies in addition to the measures themselves. It remains evident today that those countries which were forced to consider newer, less conventional responses have found it harder to exit…