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How sustainable is sub-national public debt in Australia??

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  • Anthomy J. Malkin
  • Julian Pearce

Abstract

Since the Global Financial Crisis the public indebtedness of Australiaùs States and Territories has risen significantly due to sizeable fiscal deficits. This paper examines the stability of sub-national governmentsù indebtedness before gauging the fiscal effort needed to scale back public debt to GSP ratios to ten-year average levels. To do this, we first derive key debt sustainability formulae which are then applied to relevant sub-national data. The analysis reveals that under macroeconomic conditions and fiscal settings in 2012ó13, debt levels were unstable for all State and Territory general governments. Moreover, virtually all sub-national governments in Australia need to turn existing primary budget deficits into substantial surpluses to restore public debt to levels experienced on average over the previous decade. This is not in prospect without even more substantial fiscal consolidation than currently envisaged in State and Territory budgets.

Suggested Citation

  • Anthomy J. Malkin & Julian Pearce, 2014. "How sustainable is sub-national public debt in Australia??," Economic Analysis and Policy, Elsevier, vol. 44(4), pages 364-375.
    • Handle: RePEc:eee:ecanpo:v:44:y:2014:i:4:p:364-375
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    Cited by:

    1. Carmen Marín & Diego Martínez, 2024. "The public debt of the Spanish regions. Estimates of their fiscal consolidation efforts and scenarios of future evolution," Studies on the Spanish Economy eee2024-15, FEDEA.
    2. Carmignani, Fabrizio, 2015. "Can public expenditure stabilize output? Multipliers and policy interdependence in Queensland and Australia," Economic Analysis and Policy, Elsevier, vol. 47(C), pages 69-81.

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