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Posts Tagged ‘Debt default’

Our fiscal future

February 10, 2010 1 comment

The government has released an updated Intergenerational Report (IGR) which gives us a glimpse into our fiscal future. Too often economic decisions are made with a view to the short-term political cycle and not the long-term sustainability of the policy. The IGR is a useful tool to help us assess whether current policy is sustainable into the future. The short answer is “no”.

As the population ages and as people demand ever-more complex health services, government spending will continue to increase. This will result in sustained budget deficits, leading to growing government debt. While a small amount of government debt is manageable, the debt cannot increase forever. When the debt gets too big then the interest on the debt becomes unaffordable, and the government faces a financial crisis… with any number of potential bad outcomes.

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