Interest Rate Payments on Federal Government Debt to Grow Significantly by 2011-12

Strategic Insights -

Australian government interest rate payments on federal government debt are forecast to rise to A$2.6 billion (US$1.67 billion) by 2011-12, with the government expecting deficits for at least the next three years. The government is seeking to increase the borrowing limit to A$200 billion, up from A$75 billion currently, to fund accumulated deficits resulting from the global recession. Senator Stephen Conroy and Treasurer Wayne Swan defend the move, stating that it is necessary to cover accumulated deficits and that borrowing on financial markets is a normal practice.

Key Takeaways:

  • Interest rate payments on federal government debt will grow to A$2.6 billion (US$1.67 billion) by 2011-12, accounting for 0.2% of GDP.
  • The government is seeking to increase the borrowing limit to A$200 billion from A$75 billion currently.
  • The government expects deficits for at least the next three years, following the collapse in revenues due to the global recession.
  • Accumulated deficits amounting to A$200 billion are projected to be funded through increased borrowing.
  • The government is defending the move, stating that it is essential to put in place ample funds to cover accumulated deficits.
  • Treasurer Wayne Swan emphasized that borrowing on financial markets is a normal practice and not unusual.
  • Senator Stephen Conroy represents the Treasury in the Senate and raised the issue in response to a question.
  • The government's economic projections have been updated, shifting from forecasting surpluses to deficits.

Statistics:

  • Interest rate payments on federal government debt will grow to A$2.6 billion (US$1.67 billion) by 2011-12.
  • The government is increasing the borrowing limit from A$75 billion to A$200 billion.
  • Accumlated deficits of A$200 billion are projected to be funded through increased borrowing.
  • The deficits are expected to last for at least the next three years.
  • GDP ratio of interest rate payments is expected to be 0.2%.

Sources:

  • "Asia Pulse", Canberra, February 5.
  • "AAP", February 05 1629.