After the immediate virus crisis, he says that if interest rates remain low, the government consistently balances the budget and economic growth is about a trend 2.75 per cent, gross debt-to-GDP could be reduced by 1 percentage points a year.
Frydenberg and Finance Minister Mathias Cormann have emphasised that the key to sustainable debt management is economic growth, not “austerity” spending cuts or tax increases.
That’s especially true at the moment when the AAA-rated government can borrow for 10 years at about a 1 per cent interest rate.
If the economic growth rate exceeds the borrowing rate, debt-to-GDP falls, even if the dollar value of debt doesn’t decline.
A burst of controlled inflation would also help reduce the debt burden,…
Read the full article at: https://www.afr.com/policy/economy/how-the-government-can-shrink-the-850b-debt-bill-20200724-p55f2o
