The debt you didn’t know you had

Not so long ago, politicians were furiously point-scoring over how much debt was owed by the Federal Government. Which is curious, as the official figures are released each year in what’s officially known as the Budget Outcome. At the end of June 2015, total general government net debt was $238.7bn. It was lower than the May forecasts of $250.2bn and represents 14.8% of GDP. Net debt is equal to gross debt less assets, so there is room for debate as to what is included in the “assets” part of the equation and how the assets and liabilities are valued. For instance, as interest rates go down, the market value of the liabilities, that is the Commonwealth Government securities such as ACGBs, will rise although it‘s worth noting at maturity the market value will approach the face value. However, as long as the rate changes are not substantial, the changes in the amounts will be due to actual borrowings and repayments rather than market value changes. According to Westpac, in the eleven years to 2007/08, budget surpluses totalled $103bn but in the seven years from 2008/09 the cumulative deficits amounted to $277bn.