Simon Cowan, at last weekend’s Liberty & Society conference, addressed the pressing issue of Australia’s ballooning federal expenditure and the huge economic and social impact this will have if spending isn’t curbed soon.

The elephant in the room that Cowan, a research fellow at the Centre for Independent Studies, is referring to is Australia’s dwindling economic growth, an ageing population and the rapidly rising healthcare and pension costs associated with the demographic shift.

Australia’s government spending problem isn’t new. Since the election of the Whitlam-Labor government in 1972, public spending has grown at an average pace of more than 4% per year, while Gross Domestic Product (GDP) has been expanding by only 3%. If not tackled soon, Australia’s government expenditure could exceed 50% of GDP by 2050.

That’s why Cowan is pushing the Target30 programme, which is aimed at limiting the pace of government spending. The programme seeks to endorse realistic and pragmatic policy solutions to reduce public expenditure to less than 30% of GDP over the next 10 years. An impressive goal indeed.

However, the ‘Lucky Country’ isn’t alone in its ballooning government expenditure. New Zealand faces many of the same demographic and economic pressures, and the Treasury’s latest projections on how this will affect us makes for scary reading.

New Zealand’s public expenditure to GDP ratio is expected to be 30.8% by 2020. From there it blows out to 40.6% over the next 30 years, before topping out at 46.8% in 2060 (the limit of the forecast).

Superannuation and healthcare costs are the primary causes, increasing from 4.3% to 7.2% and 6.8% to 9.9% respectively.

And we will be borrowing heavily to pay for this, with net government debt topping 118% by 2050. Regardless of whether the government’s focus is to return the budget to surplus in the short term, the real challenge lies down the track.

That said, while the headline numbers are frightening, the challenge is not insurmountable. Treasury’s previous 2009 estimates put net debt-to-GDP at a horrifying 223%, almost double that of the latest projection. What politicians need to do is grasp the nettle and grasp it fast.

We need to stop talking around the issue and actually start looking at expenditure-reducing solutions, question just how crucial particular public services are, and eliminate uncontrolled wasteful spending. The consequences of not doing so are far too grim.

Liberty & Society, hosted by The Centre for Independent Studies, is a classical liberal forum designed to get young university graduates and students talking about the challenges facing Australia.