Treasury looks long term

Treasury has done a working paper on our long term fiscal issues. They construct two main fiscal scenarios – a historic trends scenario that uses historic and current settings to interact with changing demography and a sustainable debt scenario that applies a fiscal constraint on non-benefit spending so that Crown net debt stays within the medium-term fiscal target.

I should say from the start, I am a fan of keeping net debt down!

Under the historic trends scenario, net debt reaches 225% of GDP by 2050. The sustainable debt scenario has it at 20% of GDP by 2050.

I won’t go into all the facts and figures but a key message I took from it, is that if we have a high level of fiscal restraint for the next 10 – 12 years, then it becomes easier to keep net debt down over the long term. This means stuff like health spending only increasing by 3% a year.

Superannuation is a big part of the mix also. I’m going to do some dedicated posts on this issue over the next few weeks.

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