The coronavirus pandemic and associated policy responses have led to the largest deterioration in the Commonwealth Government’s fiscal position since the Second World War.

This report examines the sustainability of the government’s fiscal position by calculating future paths for debt under various scenarios indicating that the government’s fiscal position is sustainable in the long term.

The scenarios for GDP growth, interest rates and the budget balance suggest that the government will be able to maintain a sustainable level of debt relative to GDP over the coming decades. The scenarios also show that a sustainable fiscal position can be maintained even if the budget remains in a modest deficit position over the long term, although reaching that position will require governments to continue to increase revenue and/or contain spending to return the budget balance to the average levels recorded over time.