The austere measures contained in the proposed Commonwealth budget have been justified by fears that Australia’s public debt is expanding rapidly and dangerously, and must be arrested through a dramatic change in fiscal policy. These fears are misplaced.

Australia does not face any present or imminent debt crisis. Australia’s deficit and accumulated debt are both low, relative to international experience and Australia’s own history. According to the Organization for Economic Cooperation and Development, the current net debt (for all levels of government) in Australia is equivalent to 13.8 percent of GDP – less than one-fifth the average debt burden carried by other industrial economies (and an even smaller fraction of the debt in countries like the U.S., the U.K., and Japan). Since the GFC, debt has grown less rapidly here than in other countries. Interest rates paid on Australian debt are at record-low levels (and likely to stay that way for years), further reducing the burden of net interest payments. In short, Australia’s ability to manage public debt is very strong.