Jim Chalmers is continuing to insist Labor is a responsible economic manager on a day that gross Commonwealth Government debt surpassed $1 trillion for the first time.
Australia’s grim milestone was reached on Thursday as the Australian Office of Financial Management issued $4 billion worth of syndicated Treasury bonds that mature in May 2038.
Despite the prospect of higher government debt interest payments, Dr Chalmers issued a statement claiming Labor are great economic managers.
“Our responsible economic management has delivered one of the three strongest Budgets in the G20 and much lower debt to GDP than any major advanced economy,” he said.
Shadow treasurer Tim Wilson said the $1t debt milestone was a reminder that soaring government debt was adding to overall demand in the economy which adds to inflation — emphasising a point previously made by Reserve Bank of Australia governor Michele Bullock.
“Today is ultimately a sad day for the country,” he told reporters at Parliament House in Canberra.
“We have had our national debt pass the $1 trillion mark, and what we know is that more debt is being used to stoke inflation, increase interest rates, and increase the price at the supermarket.”
Moody’s this week became the latest credit ratings agency to affirm Australia’s AAA credit rating but there was a caveat noting that “although government debt has risen to levels higher than peers, there is a credible path to consolidation”.
That path to consolidation is actually bracket creep as the tax office gets more revenue from more workers entering into higher tax brackets as their pay levels rise to keep pace with inflation.
Australia is able for now to service this rising debt, through their income taxes, as the increasing cost of the National Disability Insurance Scheme continues to outpace inflation.
Commonwealth Government debt was expected to make up 33.1 per cent of gross domestic product as of June 2026 but with debt from the states and territories added on, that climbed to 58.1 per cent, which is higher than the 46.5 per cent level of other AAA-rated nations.
The Parliamentary Budget Office late on Wednesday night issued its own warning having overall debt at all levels of government in Australia rising from 55.4 per cent of GDP in 2026-27 and rising to 58 per cent by 2029-30.
Think about that: debt across Australia is already more than half the economy and will only get worse.
On the way there, in 2028-29, debt as proportion of the economy would be higher than the pandemic-era peak of 57.8 per cent of GDP when Australia’s biggest cities, Sydney and Melbourne, were in COVID lockdown and service workers were paid to stay home.
That would occur as Federal and State debt climbed from $1.7t to $2t by the end of the decade, with the PBO noting cost overruns on transport infrastructure projects was an issue in Victoria, South Australia, Queensland and the ACT.
As the State Governments piled on their debt, the Federal Government’s gross debt was projected to climb from 33.3 per cent of GDP this financial year — with a gross debt burden of $1.031t — to 36.5 per cent of GDP by the end of the decade as Commonwealth debt climbed to $1.279t.
The PBO forecast that national public debt interest payments would climb from $54.2b, making up 1.8 per cent of GDP during this financial year, to $77.2b in 2029-30, making up 2.2 per cent of GDP.
Higher interest rates mean the Australian government has to offer higher bond yields to able to borrow, with the bonds maturing in May 2038 having a yield to maturity of 5.17 per cent — or the amount an investor can expect to receive each year for the next 12 years.
Without concrete plans to cut government spending or privatise assets to reduce the reliance on borrowing, politicians at the Federal and State level are putting even more spending on the credit card and leaving Australian taxpayers to pay the soaring interest bill.
No amount of clever spin from the Treasurer can disguise this fact.
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