The Conversation is fact-checking claims made on Q&A, broadcast Mondays on the ABC at 9:35pm. Thank you to everyone who sent us quotes for checking via Twitter using hashtags #FactCheck and #QandA, on Facebook or by email.
Our foreign debt is approaching $1 trillion, which is extraordinary. Last year it was $74 billion. – Independent senator for South Australia Nick Xenophon, speaking on Q&A, May 30, 2016.
Independent Nick Xenophon issued a warning about Australian debt levels on Q&A (watch from 2:44 in the clip above), saying that foreign debt is approaching $1 trillion, up from $74 billion the previous year.
Is that right?
Checking the data
The Conversation asked a spokesperson for Nick Xenophon for a source to support his assertion. The spokeswoman told The Conversation that
He mixed up net foreign debt with the current account deficit, which are closely related but actually different things.
According to an ABC report on ABS figures, the December result left Australia’s net foreign debt at $1.006 trillion – an increase of 2.8% on the previous quarter’s $971 billion.
The source for that particular sentence was an ABC report of the ABS figures.
The current account deficit for the calendar year of 2015 was in the vicinity of $74 billion. The source for this was Trading Economics, which draws on ABS stats.
Let’s set the record straight on foreign debt data.
What’s the real picture on foreign debt?
Net foreign debt data is collected by the Australian Bureau of Statistics (ABS) and published in Table 2 of its Balance of Payments and International Investment Position data set.
Here’s what the latest ABS data shows on Australia’s net foreign debt position at end of period (by year and quarter) from December 2007 to the March 2016 (the latest data available):
The data shows that:
- Australia’s net foreign debt in March 2016 was over $1 trillion.
- Australia’s net foreign debt in 2015 hovered between $900 billion and $1 trillion.
- This data set goes back to September 1988, when net foreign debt was at around $102 billion.
Nick Xenophon was wrong to say net foreign debt was $74 billion last year. It was over $900 billion.
As his spokeswoman said, Xenophon mixed up net foreign debt with the current account deficit.
He was broadly correct about current net foreign debt levels (although the level is not approaching $1 trillion, the level is already more than $1 trillion). – Graeme Wells
The facts presented above are correct, and show that Senator Xenophon was clearly wrong in multiple ways on Q&A.
Mixing up the current account deficit and net foreign debt is not a simple mistake – it shows a real lack of feel for basic economics.
It is also important to note that the $1 trillion figure is total debt, not just government debt. Private debt – such as that issued by corporations – is not something to be overly concerned about. It is net government debt that is important to focus on – and to measure it relative to Gross Domestic Product.
Australia’s net government debt as a share of GDP is around 17% or 18%, far lower than many other OECD countries, as the chart below shows. – Richard Holden