perceptions_now
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Australian Politics
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Perth WA
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Un-sustainability of a Government debt (Gross) Any level above 70-90%, of a country’s Debt to GDP ratio, is a level generally accepted by Economists as being too high & therefore being unsustainable. But, that position may have hanged somewhat, in recent years?
Personally, my preference would be to keep the Gross Debt to GDP ratio UNDER 40%, whenever possible, as it could prove to create some quite difficult circumstances. The exceptional to this rule WOULD HAVE BEEN DURING THE PEAK YEARS OF THE BABY BOOM, when Growth would have generally seen any accumulated Debt repaid without massive difficulty! But, the time to properly repay the Baby Boomer Boom years, would properly have been BEFORE THE BABY BOOMER BOOM YEARS ENDED AND THEN NOT TO HAVE GONE BACK INTO DEBT. BUT, THAT JUST DIDN'T HAPPEN, EITHER IN OZ, NOR IN ALMOST ALL OTHER COUNTRIES!
The level of tolerable Government debt depends on a multitude of factors (such as) 1) If the borrowing currency is also a major reserve currency? If it is, then it may be seen to reduce risk levels & increase the possibility of "Printing" more money, to assist in servicing the Debt issue? Some related issues are currently percolating in the USA.
2) Who will own the government Debt, Locals or Foreign sources? The larger the Foreign component, the greater the difficulties that may be experienced.
3) The Likely level of interest rates that will be payable on the Government Debt, over the short, medium & longer term? Higher rates of interest (particularly short to medium term), make higher Debt MORE difficult to service, whereas Lower rates of interest may make Debt LESS difficult to service, but that may depend on how the Economy is tracking, at the time.
4) But, expected Economic Growth, is the most important factor! Higher levels of expected Real Economic Growth, may increase the likelihood of higher Tax Revenues, thus possibly increasing the likelihood of being able to afford Debt Repayment.
During the modern Economic era, particularly over the period between 1955 to 2005, Economic Growth has largely been fuelled by Population Growth & a massive increase in the Supply of Energy (at relatively cheaper Prices) , plus a significant contribution from modern Technology!
Lower levels of expected Population/Economic Growth, would significantly increase the likelihood of relatively lower Tax Revenues, thus making Debt repayment more difficult, irrespective of interest rate levels &/or which Political party happens to be in power.
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