Public sector debt analysis 2019-20

An analysis of public sector debt statistics for the 2019-20 financial year

Released
27/04/2021

Public Sector Debt Analysis

Unless otherwise specified, the L2 (a) measure of public sector debt on a net basis for the general government will be referred to within this article as net public sector debt.

Net public sector debt at a record level in 2019-20

  • All Australia net public sector debt reached $637.9 billion in 2019-20.
  • As a percentage of GDP, All Australia net public sector debt has risen from a low of -6.4% in 2007-08 to a high of 32.1% in 2019-20. 
  • Commonwealth net public sector debt increased 21.9% in 2019-20.  The main components of this were debt securities and provisions for defined benefit superannuation.
  • State net public sector debt increased 142.9% in 2019-20. The main components of this were provisions for defined benefit superannuation and loans.
  • State percentage share of All Australia net public sector debt increased, with all states and territories rising in 2019-20 except for Western Australia.

Net public sector debt increased 34% in 2019-20

Net public sector debt for the All Australia general government sector in 2019-20 was $637.9 billion, an increase of $161.0 billion (33.8%) since 2018-19.  It has increased every year from a net lending position of $75.7 billion in 2007-08, which coincides with the beginning of the Global Financial Crisis (GFC). 

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Net public sector debt as a percentage of GDP can be used as an indicator of the ability of governments to make future payments on its debt. All Australia net public sector debt as a percentage of GDP has increased rapidly in 2019-20 to 32.1%, as a result of all levels of Government responding to the health and economic impacts of COVID-19.

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In 2019-20 All Australia net public sector debt was comprised of:

  • Commonwealth sector net public sector debt contributed 87.0%, a fall from 95.8% in 2018-19;
  • State general net public sector debt contributed 15.6%, an increase from 8.2% in 2018-19;
  • Local general net public sector debt contributed -3.0%, an increase from -4.1% in 2018-19; and
  • Control not further defined (c) net public sector debt contributed 0.3%, an increase from 0.1% in 2018-19.

The Commonwealth sector’s share of net public sector debt is at its lowest since 2013-14 while that of the State sector is at its highest.

Commonwealth sector net public sector debt reaches $553 billion in 2019-20

Commonwealth net public sector debt increased $99.5 billion (21.9%) to $553.4 billion in 2019-20. By comparison, Commonwealth net public sector debt increased $38.7 billion during the GFC, from 2007-08 to 2008-09.

As a percentage of GDP, Commonwealth net public sector debt has risen annually from a low of -4.5% in 2007-08 to a high of 27.9% in 2019-20.

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  • The net public sector debt position for debt securities has been rising since 2007-08 and in 2019-20 increased $106.4 billion (20.3%) to reach $631.6 billion. This is due to significant amounts of debt securities being issued by the Commonwealth government to fund expenditure to support the economy during the COVID-19 pandemic.
  • The net public sector debt position for Provisions for defined benefit superannuation has seen significant increases over the past two years – $101.7 billion (32.4%) in 2018-19 followed by a further $14.9 billion (3.6%) in 2019-20.  The increases are largely due to increases in life expectancy of defined benefit superannuation members, as well as reductions in the bond rate.

State net public sector debt increased 142.9% in 2019-20

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Total State net public sector debt increased $59.6 billion (142.9%) in 2019-20 to reach $101.3 billion, its highest level since 1998-99, the beginning of the time series on an accruals basis. 

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Annual change in State Net public sector debt, $
 NSWVICQLDSAWATASNTACT
$m$m$m$m$m$m$m$m
2014-15-0.92.20.6-3.22.3-0.3-0.30.3
2015-16-5.20.0-5.10.54.4-0.2-0.40.6
2016-17-8.7-6.4-1.61.75.1-0.10.4-0.5
2017-18-1.34.80.2-0.72.9-0.10.7-0.4
2018-190.5-3.30.40.61.30.10.70.7
2019-2023.721.111.63.2-1.30.50.40.4
  • All States increased their level of net public sector debt during 2019-20, except for Western Australia.
  • The largest annual increases were in New South Wales ($23.7 billion), Victoria ($21.1 billion) and Queensland ($11.6 billion).

Western Australia’s net public sector debt decreased $1.3 billion in 2019-20. This was primarily driven by a range of COVID-19 impacts (such as early border closures to avoid lockdowns) and other non-COVID factors such as an increase in royalties from iron ore and transitional GST funding.

The Northern Territory has the highest net public sector debt to Gross State Product (GSP) ratio

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State Net public sector debt to GSP Ratio
 NSWVICQLDSAWATASNTACT
 %%%%%%%%
2015-160.16.01.04.45.7-2.58.2-5.2
2016-17-1.44.10.46.07.6-2.89.6-6.4
2017-18-1.55.00.55.18.4-3.012.2-7.1
2018-19-1.44.00.55.58.0-2.514.5-5.0
2019-202.48.53.88.36.9-0.915.4-3.9

The ratio of State net public sector debt to GSP can be used as an indicator of the ability of State and Territory governments to make future payments on their debt. 

  • Northern Territory had the highest net public sector debt to GSP ratio of 15.4%, followed by Victoria (8.5%) and South Australia (8.3%).
  • Australian Capital Territory had the lowest net public sector debt to GSP ratio of -3.9% followed by Tasmania (-0.9%).
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  • The net public sector debt position for total state provisions for defined benefit superannuation rose by $25.5 billion (17.6%) in 2018-19 to $170.4 billion followed by a more modest increase in 2019-20 of $2.4 billion (1.4%).  As seen in the Commonwealth, the decrease in the discount rate has led to a higher valuation of superannuation liabilities for the State general government sector.
  • The net public sector debt position for total state loans and placements in 2019-20 increased $40.3 billion (35.5%) to $153.7 billion. This is indicative of the increase in state borrowings by their respective treasuries from the Public Financial Corporation (PFC) sector as a method of maintaining funding.

 

Footnotes - show all

(a) The focus of this article will be on the L2 measure of debt which is the measure most comparable to government reporting of net debt under the UPF.  It comprises debt securities, loans, Special Drawing Rights and currency and deposits.

(b) Based on GDP at current prices as published in Australian National Accounts: National Income, Expenditure and Product, December Quarter 2019 (Cat. no. 5206.0), Table 36 Expenditure on Gross Domestic Product (GDP), Chain Volume Measures and Current Prices, Annual; and Gross State Product (GSP), current prices, as published in the annual release of Australian National Accounts: State Accounts, Table 1 Gross State Product, Chain Volume Measures and Current Prices.

(c) Control n.f.d. refers primarily to public universities, as per the AGFS15 Concepts, Sources and Methods.