Some months ago I wrote about “good debt” and “bad debt”, a couple of terms which had crept into the finance vocabulary in recent times. In a very short definition good meant tax deductible and bad meant non tax deductible.
There is only one good debt and that’s “affordable debt” but I would prefer to use the terms “sustainable” or “productive” coupled with “affordable”. Affordable means being able to pay interest on time.
This is the time of the year when Federal and State treasurers hit the headlines with their budgets. Some financial writers and TV commentators rightly point out that Australia, and its states and territories, are currently wallowing in a sea of debt which nationally is more than our GDP. This is a bit like saying that you are in a bad place personally if you’ve borrowed a sum of money that exceeds your annual income.
Despite what the headlines say, debt – that is manageable debt – is here to stay, productive and sustainable.