Saturday, September 19, 2026
Australian gov debt hits A$1trillion, US gov debt hits US $40trillion, but how do we rate in the DEBT OLYMPICS?
Sensational headlines this week - Australian government debt hitting A$1 trillion and the US hitting $40 trillion! But how serious are they really? Here is an update on my ‘Debt Olympics’ chart of all levels of debt (government, corporate, household) since 2000. Australia has one of the LOWEST overall debt burdens in the world. Our Government and Corporate debt levels are relatively low, but our Household debt is the highest. The problem is not Debt per se, but how it is spent: paying for current spending, handouts & political pet projects, or building long-term productive capacity to generate future revenues, growth and prosperity?
Pre-budget quick quiz - Which side has a better record on Fiscal Responsibility: Labor -v- Libs?
Since Federation: ‘Right’ governments have run surpluses more often than ‘Left’ governments. But ‘Timing is everything! - the Left happened to be in power during the big build-ups of deficits and debts in the two World Wars, when the spending was bi-partisan. In the post-WW2 era: Left wins. The Left have also run larger deficits on average than the Right, but post-WW2 the average deficits have been the same for both sides. My verdict - Equal points to Left and Right since Federation. But equally POOR scores for both sides post-GFC. Both sides should have used windfall revenue gains to put our national fiscal house in order to be better prepared for global cha
Who wants to buy US debt? – ie lend to the profligate US government? Most of the world except me!
No sign of ‘de-dollarisation’ here – most of the world loves US dollar debt, and have been buying up more! Especially UK, Japan, Europe, and even Canada and Mexico. China has been the big seller, and has halved its holdings over the past decade. But most of the rest of the world (apart from Russia), have been increasing their holdings of US debt – ie racing in to lend more to the profligate US government. The Brits have been by far the biggest fans, buying up even more than China has sold. Despite soaring US deficits and debt, there is no sign of worry from lenders (debt owners) about debt stress or default. The flood of buying across the world has kept yields US relatively low to date. What worries is me is another bond scare – like in 2022 when soaring yields caused the biggest losses on US bonds in a century. More of
1987 Crash Part 2: what happened, why was it much worse in Australia, and what is similar today?
For the US stock market, the October 1987 crash featured its largest ever one-day fall, but it turned out to be a relatively minor hiccup. The US market started rebounding the next day and recovered its pre-crash high in less than two years. But in Australia the crash was much deeper (-50%) and took more than eight years to recover. Although most of the problems and trigger events were in the US, I provide ten reasons why the Australian crash was much worse than the US. The current US tech boom has several similar underlying conditions as in 1987 - over-pricing, speculative fever, inflation, mounting government deficits & debts, trade & current account deficits, falling US dollar, trade/currency wars. However the trigger for the correction is different in every crash, and may be years away. Meanwhile it pays to be vigilant.&
US Government has previously defaulted on Treasuries. They are not entirely risk-free!
As the US government teeters toward yet another debt crisis, it is useful to remember that US government defaulting on Treasures is not new. The US failed to pay maturing treasury bills three times in 1979 when Congress didn't legislate to raise the debt ceiling in time. The creditors sued for unpaid interest but were denied by the Courts. These were 'temporary' defaults and were rectified quickly (the principal, not the interest), but they shocked people who had believed the US government would always pay its debts. The default crisis was a final nail in the coffin for Jimmy Carter and Keynesianism, paving the way for the 1980s boom under Reagan with the revival of free market capitalism. Are we at another turning point now? Today, the US deficit and debt load are more than THREE TIMES WORSE (relative to GDP) than in 1979.&
My latest webinar for IFPA- Elections, inflation, rate cuts, shares, Trump: is there a grand plan?
Here's my latest webinar for the IFPA's Investment Insight series from 9 May 2025. It's a rollicking romp through some critical issues facing long-term investors in these exciting times. Topics include - elections - productivity - inflation - rate cuts - share market action & valuation levels - and the dreaded 'T' word! Is there a grand plan behind Trump's frenzy of policies?
Labor -v- Libs: which side has a better record on Deficits & Debts? Here are the facts
'Left' governments have run deficits more often than 'Right' governments, and the Left have also run larger deficits on average than the Right. But timing is everything! - the Left happened to be in power during the big deficits and debts in the two World Wars, when spending was bi-partisan. My verdict? - Equal points to Left and Right - but poor scores for both post-GFC. Both sides could have used windfall revenue gains to put our house in order to better prepare for global challenges, rather than increase spending and debt.
Who wants to buy US debt? (lend to Uncle Sam?) Most of the world but me! Who’s buying, selling, why?
Just about everyone is rushing in to lend more money to the profligate US government – except China, Russia, Iran (and me). China has dumped $413b of US debt (one third of its peak holdings) since Trump started his trade war in 2018, and accelerated since Russia’s invasion of Ukraine. But the UK soaked up all of that and more, increasing its holdings by $515b.
Trump -v- Biden: Economic Report Card on their first terms – how did they rate?
Putting aside personalities, politics, and hair products, what are the facts? What were the actual economic outcomes in each of their first terms? How do they rate on seven key outcomes for investors?
The Debt Olympics - How do we rate?
Australia and Australians loaded up on debt in the GFC and again in Covid, but how do we stack up against other countries? How do we rate on: Government debt? Corporate debt? Household debt? Is debt good or bad? When does it become a problem? The answers are probably very different to what you may have thought.
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