When the Howard government left office, net government debt had ''improved'' by 21.9 per cent of GDP (from 18.1 to -3.8 per cent of GDP).
So how did the Howard government do it? It was very simple, with a three-pronged approach to debt elimination:
■
A record high tax take - the Howard government was the highest taxing government in Australia's history.
■
Record low spending on infrastructure - the level of public construction work done as a percentage of GDP reached a record low under Howard.
■ A large-scale asset sale and privatisation program.
It was a simple formula that worked a treat from a political objective, yet it had little merit as a tool of economic policy management.
Had the
Howard government not had the
highest tax take in history and simply maintained its tax take at the level of the Hawke/Keating government and nothing else changed, net debt would have risen, not fallen. The difference in the tax to GDP ratio under Howard versus Hawke/Keating was a coughulative 19.2 per cent of GDP over the life of the Howard government.
In other words, a record tax take from households and business accounted for the elimination of net debt.