It is excellent that finally the treasurer has realised that there is good and bad debt, but he shouldn’t stop there. Rather than just have us guessing how much good or bad debt there is, the budget papers should tell us.

After years of railing against government debt, Scott Morrison has discovered that actually debt is not only good, but also necessary.

In a speech to the Australasian finance and banking conference, Mr Morrison – after noting that a vast majority of Australia’s debt is private – argued that “it is patently obvious there are good uses of debt and there are bad uses of debt. Bad debt is debt use for recurrent spending purposes”.

Wow, who knew?! It’s amazing what happens when suddenly you are the one responsible for debt that continues to grow.

But, here’s a quiz. Look at the following graph and work out which is the good debt and which is the bad debt:

Now if one were cynical you could argue that Scott Morrison has discovered that debt turns good once the LNP is in charge and especially when he is treasurer and all the bad debt is any that can be blamed on the ALP.

But it was good to hear Morrison suggest bad debt was that which was required for recurrent spending, because with luck it will put to end the idiotic debate, which resurfaced this week, about the GFC stimulus package – which essentially had nothing to do with recurrent spending.

It would also be nice to believe that the thinking expressed in his speech will be a bit of a turning point for economic debate.

Among the dumbest economic narratives of my lifetime has been the suggestion that a budget surplus is inherently good for the economy and that a deficit is thus bad. The corollary to this is that governed debt is thus always bad and must be reduced.

We could hope that Scott Morrison has had this change of heart on debt because he has discovered the worth of fiscal stimulus and running a deficit, and the weakness of relying purely on low interest rates to get the economy moving.

But it is more likely his overwhelming worry that the ratings agencies are about to downgrade Australia’s credit rating from its current AAA rating, and that he will be blamed for it.

His speech pointedly mentioned those agencies, and he attempted to defend the government’s fiscal soundness. He noted for those “particularly in ratings agencies” that both “the current account and the budget, Australia’s position is stronger today than it was a year ago”.

He noted that Australia’s current account deficit “had narrowed to 2.7% of GDP, down from 4.5% in December of 2012”.

Now that is true as far as it goes, although picking December 2012 is a bit odd, and would appear to have more to do with it being a high point rather than any particular reference point of note:

The problem for Morrison, despite his new found understanding that debt can have positive effect on economic growth, is that the budget is very poor at differentiating the “good” debt from the bad. It all just gets lumped together – and so we only talk of the total level of debt (currently at $463.2bn – an 80% increase on the $257.4bn held in June 2013).

It’s actually rather difficult to split up the budget into recurrent spending – things like pensions, ongoing defence, health and education spending – and capital expenditure – spending on infrastructure like roads, rail and the NBN.

One problem is such capital spending is not always “on budget”.

Spending on the NBN, for example, is mostly “off-budget” because it involves spending on an asset for which there is an expected return. In such cases the spending is not regarded as government expenditure because unlike money spent on pensions or buying a new submarine, the government expects to get some (or all, or more) of the spending returned via someone buying the asset or repayment of the loan.

But there are impacts on the budget, and yesterday the parliamentary budget office released a report outlining the expected impacts out to 2026-27.

The PBO noted the government has committed $29.5bn in equity funding to NBN Co, and also a further loan of $19.5bn to complete the rollout.

That $49bn is not included in the budget deficit, but that does not mean there is not an impact on the budget.

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The PBO noted that because the NBN Co has accumulated losses (which are expected in the early years of the roll out) there has been a $7.2bn deterioration in the government’s equity holdings. That amount is reflected in a decline in the government aggregate net worth, which is found “in its balance sheet and the department of communications and the arts annual financial statements” but crucially “it is not separately identified in the budget papers”.

The NBN does however have an impact on the budget deficit mostly from the debt interest payments that the government has to pay (because it had to borrow that $49bn).

The PBO estimates that the annual cost to the budget of the government’s investment in the NBN is $580m in 2016-17, and that it is expected to rise to $2.1bn by 2026-27.

The PBO notes, these costs “while significantly impacting the budget bottom line, are not separately identified in the budget papers.” It is only through such reports do voters or ratings agencies get a better picture of what the budget is made up of.

But given his new found acknowledgment of good and bad debt, one thing the treasurer could do in Monday’s mid-year fiscal and economic outlook, or in next year’s budget, is to actually provide us with the split of all such debt and expenditure.

That way we would have not only a clearer picture of the government’s debt level but also better debate about the need to cut back on recurrent spending – whether it be welfare, health, education or defence spending.

For now all sides operate within an environment where debt is essentially a black hole able to be labelled as good or bad depending on political whims.

Our economic debate would be much better served if – as with annual government expenditure – we were able to break down what the government debt is for and what the annual debt repayments are paying off.