As he vies to become Australia’s next prime minister, Opposition Leader Anthony Albanese has hit out at the Coalition’s economic record.
Speaking on Brisbane radio station 4BC, Mr Albanese claimed the Coalition government “hadn’t been governing in Australia’s interests”.
“People know that debt has never been higher, deficits have never been higher,” he said.
So, what do the history books tell us? RMIT ABC Fact Check investigates.
Mr Albanese is wrong.
Historical data shows that debt and deficit, when measured against GDP, were higher in the years following the world wars when compared with current levels.
It is this measure economists use to make comparisons over time for debt and deficit, rather than nominal figures, which do not take into account the size of the economy.
Heard it all before
Mr Albanese and his Labor colleagues have repeated variations of this claim many times during the election campaign.
Speaking at a doorstop press conference in Gladstone, Queensland on April 12, Shadow Treasurer Jim Chalmers labelled the economic record of Prime Minister Scott Morrison and Treasurer Josh Frydenberg “indefensible”.
“No government has taken more debt or bigger deficits to an election than this government is,” he said.
On The Guardian’s Australian Politics podcast, Mr Chalmers suggested that if Labor were to win the election, they “would be inheriting, factually, the worst set of books ever taken to an election by any government in the history of the Commonwealth”.
Katy Gallagher, the Shadow Minister for Finance, similarly claimed Labor would “inherit the worst set of budget books that any incoming government would have ever inherited”.
Previous claims that one party had handed the “worst set” of financial books on record to a new government did not, however, come from Labor.
Back in 2015, Fact Check investigated an almost identical claim from then-minister for foreign affairs and deputy Liberal leader Julie Bishop, who said her government had “inherited the very worst set of financial accounts in Australia’s political history”.
Ms Bishop was found to be wrong.
“Large borrowings to finance Australia’s participation in World War I and World War II and the impact of the Great Depression led to much higher deficits and levels of debt than any government has experienced since,” Fact Check’s verdict on the claim stated.
Assessing the claim
Fact Check has used the same methodology to assess Mr Albanese’s claim as that used when Ms Bishop’s 2015 claim was investigated.
At that time, economists told Fact Check the best way to compare historical financial records was to take into account the size of the economy: in other words, analyse debt and deficit as a proportion of GDP.
David Richardson, a senior research fellow at the Australia Institute, told Fact Check at the time that “looking at the figures without looking at gross domestic product tells you nothing”.
“If you go back 40 years, everything you want to measure is going to be roughly 30 times bigger now than it was then,” he said.
The economists added that it was best to use net debt (rather than gross debt) figures where possible, as it allowed for “debt-related assets” of the government to be offset against borrowings.
Figures for net debt, gross debt and budget deficits as a proportion of GDP are readily available in the budget papers for financial years dating back to 1970-71.
Publicly available data dating back to federation in 1901 is harder to come by.
Treasury provided Fact Check with data pertaining to gross debt, with historical figures sourced from a 2009 Treasury paper on the history of public debt in Australia.
While economists view net debt figures more favourably than gross debt, as explained above, Fact Check has assessed the claim using the data provided by Treasury, as it is the best available.
As for budget deficit data — in an email, a Treasury spokeswoman said the department did not have a “complete verified data series” dating back to federation.
Fact Check has been unable to source any official data on deficits covering the period since federation, nor were economic experts able to provide such data.
As such, when it comes to deficit levels this fact check relies primarily on a 2013 research paper written by economist Ashley Owen and commissioned by financial advisory firm Centric Wealth, as well as expert opinion.
The debt figures
The gross debt data supplied by the Treasury shows that government debt, when measured as a proportion of GDP, reached far greater levels in the years following World War II than in 2020-21 (the last full financial year).
According to the 2009 Treasury paper authored by three economists (which is the source of the historical gross debt figures), the first debt recorded on Australia’s balance sheets occurred in 1911.
“During the First World War, gross Australian government debt increased from around 2.2 per cent of GDP to around 50 per cent of GDP,” the economists said.
“Gross Australian government debt increased from around 40 per cent of GDP in 1939 to around 120 per cent of GDP in 1945.”
That figure is a lot larger than the 39.5 per cent of GDP reached in 2020-21 (a figure that the budget papers estimate will stay the same in 2021-22).
Due to a series break, an entirely consistent comparison can not be made but, looking at the 116 years since federation, gross debt has been higher than 39.5 per cent on 34 occasions.
The deficit figures
The historical tables in the latest budget papers show that Australia’s deficit reached a 50-year high of 6.5 per cent of GDP in 2020-21, eclipsing the previous 50-year record of 4.3 per cent set in 2019-20. Other high deficits were 4.2 per cent recorded in 2009-10 during the global financial crisis and 4.1 per cent in 1992-93.
Data predating what is contained in the budget papers illustrate that, similar to debt levels, Australian budget deficits were higher during and following the two world wars.
In 2015, Fact Check noted that graphs contained in the research paper commissioned by Centric Wealth showed that the budget deficit reached more than 10 per cent of GDP during World War I and more than 20 per cent of GDP during World War II — more than double the level reached in 2020-21.
In an email, Simon Ville, an economic historian and professor at the University of Wollongong, told Fact Check that the budget deficit “of course rose pretty quickly in 2020-21, but not as high as in wartime”.
Jeff Borland, a professor of economics at the University of Melbourne, added that when assessing debt and deficit data, it was important to take into account the economic circumstances a government had to contend with.
“Just as it didn’t make sense to criticise the Rudd and Gillard governments for having increased spending during the GFC, so it doesn’t make sense to criticise the current government just because they increased spending with the onset of COVID-19,” Professor Borland said in an email.
Principal researcher: Ellen McCutchan
- Anthony Albanese, Interview with Neil Breen, 4BC, April 19, 2022
- ABC Fact Check, Fact check: Did the Government inherit the ‘worst set of accounts’ in history?, March 18, 2015
- Ashley Owen, Australian government debt, deficits and the stock market, Centric Wealth, May 23, 2013
- Katrina Di Marco, Mitchell Pirie and Wilson Au-Yeung, A history of public debt in Australia, Australian Treasury, 2009