NAB chief denounces deficient debt debate
National Australia Bank chief executive Cameron Clyne said we had a "unique window" as a AAA-rated country to issue more government debt to fund desperately needed infrastructure.
"Australia has a debt problem: we don't have enough," Mr Clyne said on Thursday.
"If we continue to have the debate that suggests that all debt is bad, and not a debate on the productive use of debt, we will simply not be able to fund the infrastructure this economy needs to thrive into the future."
Mr Clyne's comments came a day after the Business Council of Australia released a 10-year action plan for a stronger economy, calling on major political parties to focus on long-term rather than short-term policies.
It listed 10 things it would like the government to do, including developing a national infrastructure plan to ensure the right infrastructure was delivered at the right time.
"Dedicated annual funding and a clear policy on the use of debt for infrastructure will ensure that Australia's stock of infrastructure grows in line with our economic development and population growth," the report said.
The BCA's action plan should not be dismissed quickly, Mr Clyne said. "It should be analysed. Maybe not everything in it is worthy of implementation, but we can't let it fall to short-term populism," he said.
The NAB boss also called for Australia's political leaders to focus on long-term policies, rather than play day-to-day political games through the media.
"One of the reasons why the Australian currency has possibly been somewhat higher than what the technical or fundamental level would be is there is significant demand for what limited Australian government debt there is," he said.
"Most investors around the world are up to their eyeballs in northern-hemisphere government paper. We have a unique window, as a AAA nation, with strong demand for AAA debt, to issue that debt and divert it to productive infrastructure."
Bank of America Merrill Lynch chief economist Saul Eslake said he had sympathy with that view.
"One of the more sensible ways of seeking to reduce the risk of recession when the mining investment boom starts to wind down in a couple of years' time would be for the government to do precisely that," he said.
"We could borrow up to 3 to 4 percentage points of GDP without imperilling our AAA rating, as long as it was for rigorously evaluated and well-targeted infrastructure spending."
Frequently Asked Questions about this Article…
Cameron Clyne described the public debate about debt in Australia as "very immature." He argued the conversation is too focused on the idea that "all debt is bad" and urged a shift toward discussing the productive use of debt, particularly issuing government debt to fund infrastructure that would help the economy grow.
NAB says Australia has a "unique window" as a AAA-rated nation with strong international demand for sovereign debt. The bank’s view is that issuing more government debt now could be diverted into productive infrastructure projects, supporting long-term economic development rather than being dismissed on short-term populist grounds.
The Business Council of Australia (BCA) released a 10-year action plan calling on major parties to focus on long-term policies. Among its recommendations was a national infrastructure plan, dedicated annual funding and a clear policy on the use of debt to ensure infrastructure delivery keeps pace with economic development and population growth.
The article notes that part of the reason the Australian dollar has been relatively high is significant global demand for the country’s limited supply of government debt. Issuing more AAA-rated sovereign debt could meet that demand and potentially influence currency levels and demand dynamics in Australia’s bond markets.
Saul Eslake said he sympathised with the idea of borrowing to fund infrastructure and suggested the government could borrow up to about 3 to 4 percentage points of GDP without imperilling Australia’s AAA rating, provided the borrowing funded rigorously evaluated and well-targeted infrastructure spending.
In the article, “productive use of debt” refers to borrowing that finances infrastructure and other long-term projects that support economic growth. For investors, the emphasis is on debt being spent on projects that are rigorously evaluated and targeted, rather than on short‑term or politically driven spending.
Clyne argued that short-term political games and media-driven decision-making can prevent sensible long-term planning. He urged leaders to prioritise durable policies—such as a national infrastructure plan and clear debt-use rules—so the economy can secure the infrastructure needed to thrive.
The article suggests investors should take the BCA’s and NAB’s recommendations seriously and analyse them rather than dismissing them as populism. Those proposals could signal future government action on infrastructure funding and borrowing, which may affect bond supply, currency dynamics and sectors tied to infrastructure investment.
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