Posted November 11, 2018 07:31:37 The government has put its plans for a debt-free Australia in place, but the process has been beset by complications and delays.
It’s been a rollercoaster ride, and the country has been forced to confront an extraordinary challenge.
Key points:Debt-free nation Australia will officially become a debt free nation on July 1st with a $4.8 trillion budget deficitThe country’s debts are already at record highs and it’s going to be a long, slow process to unwind the messDebtors can now start paying off debts by September1,200 Australians already have a mortgage, including hundreds of thousands of low-income earnersThe federal government announced last month that it was committed to a $1 trillion debt-recovery plan, and it has made clear it will start winding down the nation’s debt in July.
The government said that by that date, the country would be debt- free and the cost of servicing it would fall by more than $1.6 trillion.
It has said that the debt-restructuring plan would be delivered over five years, with the aim of lowering Australia’s debt to less than $20 trillion by 2022.
The first stage of the plan was announced in December and involved the closure of many banks, including those owned by Commonwealth Bank of Australia, Commonwealth Bank, ANZ, and Westpac.
But there were problems when the plan first came to the public.
In April, the Federal Court ruled that the plan could not be completed because it did not follow the laws and had not been approved by the Senate.
“We have been given permission by the court to proceed with the plan, which has been endorsed by the Federal Government,” the finance minister, Mathias Cormann, told reporters in Canberra on April 30.
Mr Cormann said he had signed off on the plan with the support of the Attorney-General’s department, which oversees the government’s budget.
He said the plan had been vetted by the Reserve Bank of New Zealand and that he was confident that the Federal Treasurer, Scott Morrison, would sign off on it.
Australia’s banks will continue to operate as normal while the plan is completed, and payments to people will continue as normal, he said.
But some debtors have been caught in the crossfire.
AUSTRALIA’S FALLEN BRANDSDebt relief, which will see banks repay debt to households over the next five years and to people, will cost an average of $2,800 per debt.
But Mr Cormann told Parliament on Monday that the Government would cover the costs of servicing the debt in two ways.
Firstly, the government would pay off existing debts, including mortgages, that have already been paid off, as part of its debt-relief package.
This would include repayments made to people and other creditors.
Secondly, debt relief would be rolled into the next $5 trillion budget.
“We will continue working with the Federal and State governments on the implementation of the debt relief package, which is in line with the commitments made in the May budget,” he said in a statement.
WHAT THE DATA SAYs the debt is $18 trillion, and will remain there until 2022.
Debt of $20 billion is still on the books, and is estimated to be $5.4 trillion.
Debt payments are expected to continue until 2022 at an average rate of $1,800 a debt owed.
About $7 trillion is currently owed by the Commonwealth, ANZA and WestPac.
There are currently about $1 billion owed by businesses, including banks, in relation to interest payments on their debts.
More than $3 billion is owed by Commonwealth banks to their investors.
About $500 million is owed to investors by Commonwealth and State banks.
About one-third of this debt is owed directly by households, which are likely to be the first to see the full benefit of the deal.
FIND MORE: Debt will rise to $18.4tn by 2022 (AAP)What’s next:The debt relief will be funded by the levy on the highest income earners.
The levy, which comes into effect on July 15, will increase the tax rate on income from $30,000 to $70,000.
More information:The government says it is also committed to providing a range of tax reliefs for small businesses and households to help reduce debt.
The tax cuts will be in addition to the $1tn of cuts already announced.