carbon tax costello nails it, page-55

"the true cost of going into debt is the interest paid less the boost to economic activity which would not have occurred if the debt had not been taken on."

Spot on! Debt that efficiently boosts economic activity is good, its non-ncome-producing debt that causes problems.

Comparing debt to GDP sounds like a good measure of solvency, but it does not quite work that way in practice.

Australia's ratio of net debt to GDP is about the same as that of Peru, South America. Having just returned from three weeks there, I can tell you that not many Australians would want to live under the same living standard as the ordinary Peruvians. But I did not see one Peruvian who was not doing something. Repairing the streets manually employs a lot of people. You want to dig a trench? Here one backhoe and operator does the job. In Peru, a hundred workers with shovels do the same job.

From the chart it is clear that the debt to GDP rose under Keating to 1996, then declined steadily under the Costello years, but has been climbing rapidly under the Rudd/Gillard team. The upward trend seems to be accelerating, so that measure of our prosperity will probably soon be dropped by the labor supporters.

If a low debt to GDp ratio is our aim, a list of countries with the ratio lower than Australia's might be illuminating;

They include;
Namibia
Nigeria
Paraguay
Botswana
Chile
Russia
Saudi Arabia, and
Algeria.

I've been in four of those countries in the last year, and beleive me, the aveage Australian does not want to live there.