At a moment when prosperity might invite discipline, Australia instead finds itself drifting deeper into structural deficit — a condition that former Treasury Secretary Martin Parkinson warns will transfer an ever-growing tax burden onto generations who have no voice in today's choices. The concern is not merely arithmetic; it is a question of intergenerational fairness and political will, as both major parties have allowed the urgency of fiscal responsibility to quietly dissolve in the years since the pandemic reshaped national priorities. From a contested GST arrangement costing the Commonwe
Albanese Government Warned Over Rising Debt as Treasury Official Sounds Alarm
We are consuming today, and our children are going to pay for it
Mark
When Parkinson says we should be running surpluses at this point in the cycle, what does he mean by that?
Mimi
He means the economy is growing, unemployment is low, and businesses are investing. Those are the years when governments naturally collect more tax revenue and spend less on welfare. It's the time to pay down debt, not accumulate it. We're doing the opposite.
Mark
So the GST deal with Western Australia—is that the main problem, or is it symptomatic of something larger?
Mimi
It's both. The deal itself is costing four times what was promised, which is a concrete failure of fiscal management. But it's also a symptom of a broader unwillingness to make hard choices. The government extended it through 2030 rather than confront the cost.
Mark
Parkinson mentioned that programs don't always terminate. What does he mean?
Mimi
Governments create temporary spending measures—tax breaks, subsidies, support payments—and promise they'll end. But when the time comes, there's always political pressure to extend them. So the budget assumes savings that never materialize.
Mark
If the structural deficit is the real problem, not the headline one, why does anyone care about getting back to surplus in ten years?
Mimi
Because a structural deficit means you're spending more than you earn even when the economy is healthy. A headline deficit can be temporary—a recession, a crisis. But structural means it's baked in. You can't grow your way out of it.
Mark
The Victorian teachers got 28 percent over four years. Is that reckless spending, or fair compensation?
Mimi
It's both fair and expensive. Teachers were underpaid relative to other states. But the point Parkinson is making is that governments keep making these commitments without asking whether the nation can afford them collectively. Each deal seems reasonable in isolation.
Mark
What would actually fix this?
Mimi
Parkinson doesn't say, but the implication is clear: either raise revenue or cut spending, or both. And do it now, while the economy is strong enough to absorb the pain. Wait another decade and the choices become much worse.
The Pulse
- Martin Parkinson, one of Australia's most respected economic voices, has broken through the political noise to declare the nation is living beyond its means — and that children will pay the price.
- The Productivity Commission's finding that the WA GST deal has cost $60 billion — four times the original estimate — has ignited a furious interstate dispute over fairness, with South Australia calling the arrangement outright immoral.
- The Albanese government faces a compounding fiscal squeeze: it has extended the GST deal through 2030 at accelerating cost, while a $5 billion Victorian teachers' pay settlement adds pressure at the state level.
- Consumer confidence is sending mixed signals — JB Hi-Fi posted record annual revenue but watched its stock fall more than 9 percent after July sales turned negative, revealing households under strain from rates, fuel, and inflation.
- Westpac's CEO has entered the immigration debate, urging policymakers not to let community anxiety about population pressures crowd out the skilled migration Australia needs to sustain economic growth.
- The path back to surplus, already a decade away on the government's own projections, depends on terminating expiring programs — a discipline that, in practice, Australian governments have rarely managed to maintain.
At a moment when prosperity might invite discipline, Australia instead finds itself drifting deeper into structural deficit — a condition that former Treasury Secretary Martin Parkinson warns will transfer an ever-growing tax burden onto generations who have no voice in today's choices. The concern is not merely arithmetic; it is a question of intergenerational fairness and political will, as both major parties have allowed the urgency of fiscal responsibility to quietly dissolve in the years since the pandemic reshaped national priorities. From a contested GST arrangement costing the Commonwealth billions more than projected, to public sector wage deals and cautious consumer spending, the pressures are converging at a moment when the structural foundations of the budget remain unresolved.
Martin Parkinson, who served as Australia's most senior Treasury official and later as head of the Department of Prime Minister and Cabinet, has delivered an unsettling verdict on the nation's finances: Australia is spending money it does not have, and the reckoning will fall on the next generation. Speaking to the Australian Financial Review, Parkinson argued that both Labor and the Coalition have allowed fiscal discipline to erode since the COVID era, at precisely the point in the economic cycle — steady growth, manageable unemployment — when the country should be running meaningful surpluses. Instead, it carries both a structural and headline deficit, with the government's own budget papers projecting a full decade before a return to surplus, and only then if expiring programs are actually wound back. "We are consuming today, and our children are going to pay for it with their tax burden," he said.
The warning lands amid a fierce dispute over the GST. The Productivity Commission has found that the 2018 deal guaranteeing Western Australia's share of GST revenue has cost the Commonwealth around $60 billion over a decade — roughly four times the original estimate — at a rate now exceeding $6 billion a year. South Australia's treasurer called the arrangement immoral; New South Wales argued it gives Western Australians an unfair advantage in services and tax rates. Western Australia and former treasurer Scott Morrison defended it as a necessary incentive for resource investment that benefits the whole country. Prime Minister Albanese has played down the prospect of major changes while awaiting a final Productivity Commission report in December, even as the government has extended the deal through 2029-30 at a cost of roughly $20 billion over three years.
Other pressures are accumulating. Victorian teachers have voted 79 percent in favour of a pay deal delivering a 28.3 percent rise over four years plus a $2000 bonus — a settlement expected to cost the state up to $5.5 billion and make Victorian education staff the highest paid in the country. In the retail sector, JB Hi-Fi posted record annual revenue of $11.1 billion but saw its shares fall more than 9 percent after July sales turned negative, with customers increasingly confining purchases to promotional events as interest rates, fuel costs, and inflation weigh on household budgets.
Westpac chief executive Anthony Miller has urged a measured approach to immigration reform, arguing that while community concerns about pressure on housing and services are legitimate, skilled migration remains essential to prosperity and should not be sacrificed to broader anxieties about population growth. Across all these pressures, Parkinson's message remains the sharpest: without genuine political will to confront the structural deficit, the fiscal trajectory is unsustainable — and the cost will be borne by those not yet old enough to vote.
Martin Parkinson, who once held the nation's most senior Treasury post, has delivered a stark assessment of Australia's fiscal trajectory: the country is spending money it does not have, and the bill will come due for generations not yet old enough to vote. Speaking to the Australian Financial Review, Parkinson—who served as Treasury Secretary and later as Secretary of the Department of Prime Minister and Cabinet—argued that both Labor and the Coalition have allowed the urgency of budget discipline to evaporate, particularly in the years since the COVID crisis shifted national priorities.
The concern that once animated fiscal policy has simply disappeared, Parkinson suggested. At this stage of the economic cycle, when growth is steady and unemployment manageable, Australia should be running substantial structural surpluses. Instead, the nation carries both a structural and headline deficit. According to the government's own budget papers, it will take a full decade to return to a headline surplus—and even then, only if the government actually terminates expiring programs, something that rarely happens in practice. "We are consuming today, and our children are going to pay for it with their tax burden," Parkinson said.
This warning arrives as Australia grapples with multiple fiscal flashpoints. The Productivity Commission has estimated that the 2018 GST distribution deal with Western Australia has cost the Commonwealth roughly $60 billion over the past decade—about four times the initial projection. The arrangement now costs federal taxpayers more than $6 billion annually to maintain Western Australia's share of GST revenue. The finding has ignited a bitter dispute among state treasurers. South Australia's Tom Koutsantonis called the deal immoral, arguing it props up a state that does not need assistance at the expense of others that do. New South Wales Treasurer Daniel Mookhey echoed the complaint, saying the current system gives Western Australians an unfair advantage in access to services and tax rates. Western Australia's Rita Saffioti defended the deal as necessary to incentivize resource development that benefits the nation. Former Prime Minister Scott Morrison, who was treasurer when the deal was struck, also defended it, noting that other states were held harmless and that the arrangement was designed to encourage investment in productive capacity.
Meanwhile, the Albanese government faces pressure on multiple fronts. Prime Minister Anthony Albanese has downplayed the prospect of major changes to the GST arrangement, saying Western Australians deserve their fair share while awaiting the Productivity Commission's final report in December. Yet the fiscal math remains unforgiving. The government has extended the GST deal through 2029-2030, committing roughly $20 billion over three years—about two-thirds the cost of the entire original six-year transition, compressed into half the time.
Other spending commitments compound the structural challenge. Victorian teachers have accepted a major pay deal from the Ben Carroll government, ending a prolonged dispute. Union members voted 79 percent in favor of an offer delivering a 28.3 percent pay rise over four years, plus a $2000 bonus when the agreement begins. The deal is expected to cost the state between $5 billion and $5.5 billion and will make Victorian education staff the best paid in the country. While the agreement resolves an immediate industrial dispute, it adds to the fiscal pressures facing governments at all levels.
Retail spending offers a mixed signal. Electronics giant JB Hi-Fi reported record revenue of $11.1 billion for the full year, up 4.8 percent, with underlying net profit rising 2.9 percent to $489.9 million. Yet the company noted that sales in July had recorded negative growth, and investors marked the stock down more than 9 percent on the news, concerned about the trajectory ahead. CEO Nick Wells acknowledged that customers are increasingly chasing value and confining purchases to promotional events, driven by higher interest rates, fuel costs, and stubborn inflation.
Westpac's chief executive Anthony Miller has urged policymakers to take a thoughtful approach to skilled migration as the Albanese government prepares to unveil immigration reforms. While acknowledging community concerns about unfettered arrivals and pressure on services and housing, Miller argued that skilled migration remains essential to Australia's prosperity and that the nation should not conflate legitimate concerns about uncontrolled immigration with the need for talent acquisition. The banking boss's intervention reflects broader anxiety about balancing economic growth with community sentiment.
Parkinson's warning cuts through these competing pressures with a simple, uncomfortable truth: Australia's fiscal position is unsustainable without significant change. The question is whether political will exists to confront it.
Notable Quotes
It's almost like debt is not an issue for anybody anymore because the concern dissipated during the COVID crisis and nobody's ever refocused on it.— Martin Parkinson, former Treasury Secretary
We need skilled migrants and should not conflate legitimate concerns about uncontrolled immigration with the need for talent acquisition.— Anthony Miller, Westpac CEO
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Politics & Governance