National debt reaches ‘grim’ $1 trillion milestone as government grapples with ongoing Budget pressure

Australia’s gross Federal debt is set to cross the $1 trillion mark for the first time as the Government grapples with ongoing pressure from the May Budget.

The Australian Office of Financial Management (AOFM), which manages the Commonwealth’s borrowing, recorded $983.7 billion of debt as of August 14.

Further borrowing of $13bn through a syndication and another $4bn on Thursday will push the total figure to about $1,000,800,000,000.

That number is expected to dip below $1 trillion briefly on Friday when about $6bn of notes mature. But the milestone is unlikely to be temporary, with government debt expected to stay above the threshold more consistently from September.

Treasurer Jim Chalmers’ May Budget forecast gross debt would reach $1.051 trillion this financial year, which is equivalent to about 34 per cent of GDP.

Government spending is forecast to reach 26.8 per cent of GDP this financial year, according to Treasury, although the figure remains below the extraordinary levels recorded during the pandemic.

The debt is then projected to climb to 35.8 per cent of GDP by 2028-29.

Thursday’s $1 trillion milestone has triggered a fresh political fight over the government’s spending and debt management.

Dr Chalmers defended the government’s record, pointing to Australia’s AAA credit rating and arguing Labor has improved the financial position it inherited.

“Moody’s, the second global ratings agency in the course of the last couple of weeks, reaffirmed Australia’s AAA credit rating and they did that because of the responsible way we have gone about managing a Budget, getting gross debt down $200bn lower than we inherited and the trajectory that those opposite left us when we came to office,” Dr Chalmers said.

The Coalition instead blamed Labor’s spending.

“A trillion dollars of Labor debt is a grim milestone for Australia,” Leader of the Opposition Angus Taylor said.

“It is what happens when you have a Labor government that cannot control its spending or the Budget.

“Labor is spending at levels we have not seen outside a recession in around 40 years, yet Australians are being told to pay more tax and accept higher prices.”

The Parliamentary Budget Office has warned that interest payments will consume an increasing share of government revenue, reducing the amount available for other priorities.

“The interest costs of paying off debt are forecast to take up a larger share of government revenue, ­rising from 4.1 per cent in 2024-25 to 6.2 per cent in 2029‑30,” the office said.

The debt increase comes as interest rates remain elevated. Australia has recorded three 0.25 per percentage-point rate increases this year, while financial markets have put the chance of another increase before the end of the year at about 60 per cent.

Public concern about government debt is also high, with Newspoll polling indicating 70 per cent of voters are at least somewhat worried about debt levels, including 31 per cent who are “very worried”.