Australia's Debt Spiral

In a week dominated by headlines celebrating Australia's fastest GDP growth in two years—up 0.4 per cent in the September quarter to an annual 2.1 per cent—it's easy to miss the sobering undercurrent.

Economists are sounding alarms over the "spend and grow" approach driving this rebound, warning it could reignite interest rate hikes and exacerbate the nation's ballooning debt.

While private investment and household spending provide a welcome lift, the real story is fiscal recklessness: federal gross debt is on track to hit $1.585 trillion in 2025-26, or 55.1 per cent of GDP, climbing relentlessly toward 57.5 per cent by 2028-29.

This isn't prudent management; it's a runaway train hurtling toward a cliff.

Consider the numbers. Federal net debt is projected to surge 24 per cent to a record $768 billion by the end of the decade, with combined federal, state, and territory interest payments devouring $48.1 billion this year alone—equivalent to $1,700 per taxpayer.

That's more than the National Disability Insurance Scheme costs, crowding out essential services like defence, education, and healthcare.

Governments at all levels are borrowing to fund expansive programs, from green energy subsidies to welfare expansions, without corresponding revenue growth.

The result? A vicious cycle in which debt begets more debt as interest compounds and eats into budgets.

Labor's post-pandemic largesse has only accelerated this, with gross debt already at historic highs relative to GDP.

The inflation consequences are stark and immediate.

As debt mounts, central banks face pressure to keep rates low to service it, but surging growth—like the recent data centre boom and consumer uptick—fuels demand-pull inflation.

If the Reserve Bank responds with hikes, mortgage holders and businesses will buckle under higher borrowing costs, stifling investment and growth. Worse, should fiscal pressures force money printing to cover deficits—a tactic not unfamiliar in desperate times—inflation could spiral into hyperinflation, eroding savings and wages.

Everyday Australians would pay the price: grocery bills soaring, superannuation values slashed, and a devalued dollar importing higher costs for fuel and other imports.

History offers grim precedents for nations that ignored such warnings.

In Weimar Germany, post-World War I reparations and unchecked printing led to hyperinflation in 1923, where a loaf of bread cost billions of marks and savings evaporated overnight, paving the way for social upheaval.

The Latin American debt crisis of the 1980s saw countries like Argentina and Mexico default on foreign loans, triggering decades of austerity, currency collapses, and recessions that halved GDPs.

More recently, Greece's 2010 sovereign debt meltdown—peaking at 180 per cent of GDP—forced brutal bailouts, pension cuts, and unemployment above 25 per cent, shattering public trust.

These weren't anomalies; they were predictable outcomes of fiscal denial.

Australia isn't there yet, but the trajectory is clear. Without spending restraint—trimming wasteful outlays and prioritising productivity-boosting reforms—we risk joining this ignominious list.

Politicians must confront the debt beast now, lest future generations inherit not prosperity, but penury.

The choice is ours: fiscal discipline today, or economic reckoning tomorrow.

"The budget should be balanced, the treasury should be refilled, the public debt should be reduced and the arrogance of public officials should be controlled."
Ross Perot