UP TO OUR EYEBALLS – The best Treasurer Australia has ever had is depressed:

Former treasurer Peter Costello thinks he’ll be dead and buried by the time the federal government has paid off the nation’s debt.

Mr Costello warned until spending was under control Australia wouldn’t be in a position to pay back money owed.

“It took us 10 surplus budgets to pay off last time. You would be doing well to pay of it off in 10 surplus budgets this time,” Mr Costello told ABC TV’s 7.30.

“I think the probabilities are we will never get back to where we were, you and I will die before that happens.”

Spending needed to be cut by at least $18 billion a year, Australia’s longest-serving treasurer warned, adding it needed to be capped at 24 per cent of gross domestic product.

Right now it’s at about 25 per cent.

He pointed out there had been 10 years of deficits which translated to borrowing about $370 billion.

“That money doesn’t go away. It’s going to be there, we’re going to be paying interest on it, until somebody pays it back,” Mr Costello said.

Costello is more optimistic than I am – I don’t believe the debt will be ever paid off, partly because the pile is already too big to contemplate the exercise, and partly because our political class across all parties does not really consider it to be a big problem anymore. The Australians themselves seem to be far more comfortable living with debt – personal and government – than even ten years ago, much less two or three decades ago, which translates into less political pressure on governments to do something about the problem. You will have noticed that no one in the current government talks about the “budget emergency” anymore. Budget surpluses are still an aspiration, and tonight’s budget will promise one – sliver thin – sooner than at the end of the forward estimates, but how many budget surpluses would you need to pay off the current half a trillion plus debt? It is increasingly proving impossible to pass through the parliament any meaningful cuts to any government program or item of spending, never mind the substantial cuts that would be necessary to bring the government spending back to sustainable levels and make major inroads in debt reduction.

Maybe I’m wrong – politics being cyclical, maybe after the current period of budgetary gluttony our country will reacquire the appetite for lean government, but in all honesty I can’t see that happening without some major and possibly catastrophic circuit breaker to reset the political system not just in our country but across the developed world. The experience of our OECD partners shows clearly that once government debt become systemic it only ever gets worse. We are all social democrats now.