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Deficit or debt?

They’re not the same thing. What’s the difference?

These two words are mixed up constantly, including by politicians. The deficit is about one year. The debt is about all the years added together.

Set a deficit or a surplus and watch what it does to the debt, and to the interest bill, over ten years.

Deficit every year$30bnInterest rate on the debt3.50%

Debt today: $1,051bn
Debt in 10 years: $1,351bn; higher
Interest bill in year 10: $47.3bn; vs $36.8bn today

1051

1081

1111

1141

1171

1201

1231

1261

1291

1321

1351

Now+1+2+3+4+5+6+7+8+9+10

The deficit is the tap: how much more the government spends than it raises in one year. The debt is the bath: everything borrowed so far and not yet repaid. Turning the tap down (a smaller deficit) still fills the bath. Only a surplus lowers the level.

These tools are simplified on purpose so the idea is clear. Tax figures use the current resident rates, the low income tax offset and the Medicare levy; they leave out other offsets, HELP repayments and the Medicare levy surcharge. They are not financial advice.