Politics

Borrowing to cover welfare payments is ‘bad debt’, Treasurer says

Apr 29, 2017

Treasurer Scott Morrison pictured during an appearance on the ABC.

Treasurer Scott Morrison has revealed some more of his thinking ahead of the May 9 Budget, and it doesn’t sound great for pensioners.

In his last big speech ahead of the budget announcement, the MP said his thoughts were focused on Aussies who struggled with low or no pay rises, cost-of-living pressures and rising power prices.

But Morrison said that he had to make a distinction in the budget between “good debt” and “bad debt”, likening taking out a mortgage to good debt because it was an investment in the future. Bad debt, meanwhile, was similar to putting everyday expenses on a credit card.

The same went for governments, he said, in a speech to economists. Borrowing to fund growth-producing infrastructure in transport and energy was good, but taking on debt to cover welfare payments was bad because that spending wouldn’t generate an income for the government, Morrison said in the speech, according to a News Corp report.

“We all need to understand what is driving the growth in our public debt and we need to budget in a way that creates accountability for increasing public debt and the interest payments that go with it,” the Treasurer said, adding that the budget would make it more clear where government debt was being accrued by assigning it to the various areas of government spending.

The Conversation reported that the net federal government debt was currently estimated at $317 billion.

“Our measure will begin the process of changing this spending culture, ensuring portfolios will be held responsible for the debts they are incurring for future generations as a result of their spending.” Morrison said.

But Fairfax News columnist Jessica Irvine, an economist, pointed out that debating good and bad debt was silly because infrastructure spending, for example, could be used to porkbarrel a marginal electorate, while jobless benefits could help keep a person on track, with a roof over their head, while they looked for and found a new job.

And Business Insider quickly noted that one of the credit ratings agencies said Morrison’s shuffling of the debt numbers wouldn’t change how it rated Australia’s debt.

Meanwhile, artist Cathy Wilcox summed up the potential holes in Morrison’s argument in one picture.