While Australia weathered the Global Financial Crisis (GFC) relatively well compared to most other nations, we have been left with higher net national debt and budget deficits consistently running in the order of -2.0 percent to -4.0 percent of nominal GDP.
Countless suggestions have been put forward regarding how to rectify this. Some argue it should be fixed by reducing government spending, others suggest an increase in personal and corporate taxes, while many believe that both spending cuts and tax increases should be employed.
KPMG carried out modelling involving five simulations where Australia's debt-to-GDP ratio was targeted to achieve a reduction of 5 percent over the current trajectory between 2016-2020. The simulation models were:
We also engage our KPMG-MACRO model to simulate various policy options targeted at reducing the nation’s debt-to-GDP to consider the impact on the Australian economy into the medium term.