Australia’s gross government debt/GDP ratio will hit the highest level since WWII by 2022/23. While the budget deficit will narrow again over the coming years as tax revenues rebound and stimulus measures expire, it will remain consistent with rising debt levels. However, the financial markets probably won’t be spooked and the RBA should help by keeping government bond yields low. As such, the government will get away with only modest austerity that won’t undermine the recovery.
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