Is Jim Chalmers’ claim that the Coalition is responsible for almost all of the $1 trillion debt left to Labor accurate? – ABC News

Is Jim Chalmers' claim that the Coalition is responsible for almost all of the $1 trillion debt left to Labor accurate? - ABC News

Labor has been calling for help to ease cost-of-living pressures ahead of the May 2023 budget. Meanwhile, Treasurer Jim Chalmers has been blaming the Coalition for the government’s fiscal woes and the “trillion dollars” of debt it says was racked up by the former government. However, RMIT ABC Fact Check has investigated these claims and found them to be spin. When the Coalition left office in March 2022, Labor was left with $888 billion of gross debt, or $517 billion of net debt. While most of that debt was accrued during the Coalition’s term, a sizeable chunk was inherited from the previous Labor government. Labor’s share amounted to either 25 per cent of gross debt ($218 billion), or 31 per cent of net debt ($161 billion). Experts consulted by Fact Check reiterated that debt was not necessarily a bad thing and that debt levels needed to be viewed in context. Importantly, they said, that means considering what the debt was used for, which in the Coalition’s case included keeping the economy afloat during the critical early stages of the COVID-19 pandemic.

Measuring Debt

Government debt can be measured in either gross or net terms. Gross debt reflects government borrowing on financial markets, while net debt represents gross debt minus the value of selected financial assets, making it a better measure of the government’s capacity to cover its liabilities.

What Labor Inherited

When Labor came to power in May 2022, gross debt stood at $888 billion while net debt stood at $517 billion. Forecasts contained in the pre-election budget showed gross debt was on track to surpass $1 trillion within the year. However, net debt was expected to take several more years to reach that milestone, being forecast to hit $865 billion by mid-2026. At the time of Mr Chalmers’s latest claim, figures published by the Australian Office of Financial Management showed gross debt to have reached $906.6 billion by March 2023. According to government financial statements for the same month, net debt had grown to $565.6 billion.

Labor’s Contribution

While the Coalition left behind $888 billion in gross debt, it inherited $272 billion of that from Labor, of which $54 billion had been inherited from the Howard government. In other words, Labor could be credited with having contributed some $218 billion (25 per cent) of gross debt (as at the May 2022 election). Of the $517 billion in net debt handed over by the Coalition, the former Labor government was responsible for $161 billion (31 per cent).

Expert Opinions

Experts have said that the debt figures were largely meaningless without being viewed in context and cautioned that debt was not necessarily a bad thing. Most of Labor’s debt was “accumulated through wise counter-cyclical spending during the global financial crisis” while much of the Coalition’s was due to its coronavirus stimulus and support package. Pascalis Raimondos, the head of Queensland University of Technology’s economics and finance school, similarly told Fact Check that Mr Chalmers’ claim was “not the whole truth”. However, he said it captured “the right sentiment for why the current government needs to increase taxes”.

Conclusion

In conclusion, Labor’s claims about the Coalition leaving behind a trillion dollars of debt and being responsible for all but “a tiny fraction” of that spending are spin. While most of that debt was accrued during the Coalition’s term, a sizeable chunk was inherited from the previous Labor government. Debt levels need to be viewed in context, considering what the debt was used for, which in the Coalition’s case included keeping the economy afloat during the critical early stages of the COVID-19 pandemic.

Source: abc.net.au

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