The Australian<\/a>.<\/p>\n\u201cIt hasn\u2019t so much broken $1 trillion as it has just touched the wall and done a tumble-turn.<\/p>\n
\u201cIt\u2019s a higher debt level than Australia is used to, but at around a third of GDP that\u2019s a much lower level than international investors are used to.<\/p>\n
\u201cThat being said, there\u2019s a bit of concern about global debt demands \u2013 and that\u2019s been pushing longer-term interest rates higher over the past two months.\u201d<\/p>\n
Rising debt levels have ignited a political war of words in Canberra. Shadow Treasurer Angus Taylor said hitting the trillion-dollar threshold was a direct consequence of government spending.<\/p>\n
\u201cA trillion dollars of Labor debt is a grim milestone for Australia,\u201d Mr Taylor said. \u201cIt 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.\u201d<\/p>\n
Treasury hits back<\/p>\n
Treasurer Jim Chalmers defended the government\u2019s fiscal management in parliament, pointing to international credit rating endorsements.<\/p>\n
\u201cMoody\u2019s, the second global ratings agency in the course of the last couple of weeks, reaffirmed Australia\u2019s 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,\u201d Dr Chalmers said.<\/p>\n
A spokesman for Dr Chalmers said Labor\u2019s record on managing debt was stronger than the Coalition\u2019s.<\/p>\n
\u201cIf the Coalition had been in power today, gross debt this year would already be approaching $1.2 trillion,\u201d the spokesman said.<\/p>\n
Budget pressures are being made worse by soaring structural spending in health, hospitals, childcare, housing and defence at the federal level, alongside cost overruns on state infrastructure projects such as Melbourne\u2019s Suburban Rail Loop. <\/p>\n
To pay for the spending, Treasury forecasts show Dr Chalmers is on track to become Australia\u2019s highest income-taxing treasurer since records began, with personal income tax as a share of GDP reaching 18.6 per cent in 2026-27.<\/p>\n
Ratings agency S&P Global reaffirmed Australia\u2019s AAA credit rating this month, but noted the dependence on tax increases.<\/p>\n
\u201cAustralia\u2019s planned property tax increases and savings measures should help mitigate rising structural spending pressures,\u201d S&P Global said.<\/p>\n
State budgets also face uncertainty from potential changes to the GST distribution formula, following an interim report from the Productivity Commission into Western Australia\u2019s GST deal which found the arrangement could cost federal taxpayers nearly $60 billion. <\/p>\n
Under current arrangements, all states are guaranteed not to be left worse off, but that guarantee ends in 2030. When asked about the findings, Dr Chalmers stood by the current arrangement.<\/p>\n
\u201cWe\u2019re not going to go through it page by page and respond to all of the detail in the interim report, except to say a fair go for WA is very, very important to us,\u201d Dr Chalmers said.<\/p>\n
Despite the mounting interest costs, the PBO analysis concluded that Australia\u2019s national fiscal position remains sustainable in 24 out of 27 long-term scenarios, provided economic growth holds firm and interest rates moderate over time. <\/p>\n
\u2018Doom loop\u2019: US passes far more concerning milestone <\/p>\n
If you thought Australia\u2019s debt issues made grim reading, the US just held our beer as it crossed its own staggering threshold overnight, sparking fears of a \u201cdoom loop\u201d.<\/p>\n
The US gross national debt has surged past $40 trillion ($56 trillion) for the first time, government data showed, outstripping earlier forecasts at a pace fuelled in part by President Donald Trump\u2019s invalidated tariffs. <\/p>\n
The uptick in borrowing comes as longer-term US obligations linked to social security and health care have been growing, while interest payments have climbed as well. <\/p>\n
Total public debt outstanding stood at $40.05 trillion at the close of business on Tuesday, according to data released Wednesday by the Treasury Department. <\/p>\n
This stands in contrast to an earlier forecast by the Congressional Budget Office that overall borrowing would hit $39.4 trillion by the end of fiscal year 2026. <\/p>\n
Rising US debt comes as concerns over inflation, war in the Middle East and government spending have been driving investor worries, and the cost of borrowing has grown. <\/p>\n
Yields on long-term Treasury bonds rose on Tuesday to the highest level since 2007, reflecting growing price pressures due to the war in Iran and anxiety over US deficit spending. <\/p>\n
The increase forces the US government to refinance debt at the highest rates since before the 2008 global financial crisis. <\/p>\n
But the US Treasury Department moved to steady the long-term bond market early on Wednesday, sending yields lower.<\/p>\n
The federal government operates at a deficit and borrows money to help cover its obligations, including its war spending and tax cuts. <\/p>\n
As buyers demand higher yields, that drives up the Treasury\u2019s borrowing needs. With two months left to go in the fiscal year, the government\u2019s interest cost so far for 2026 is $1.17 trillion \u2014 a 15 per cent increase on the same period a year before. That in turn adds to the debt, potentially fuelling further investor calls for higher rates, in a pattern known as a \u201cdoom loop\u201d.<\/p>\n
\u201cIt\u2019s been well known for a while that the United States government was on a pretty unsustainable path with deficits,\u201d said Jessica Riedl, a budget and tax fellow at the Brookings Institution. <\/p>\n
\u201cOver the last few years, the United States has moved into roughly $2 trillion deficits, even during peace and prosperity,\u201d she added. <\/p>\n
While deficits of three per cent to four per cent of GDP used to worry financial markets, she noted that levels are closer to six per cent to seven per cent of GDP now. <\/p>\n
\u201cThat has made markets more nervous,\u201d she said.<\/p>\n
As inflation pushed interest rates higher, interest costs on the debt have risen as well, and costs linked to an ageing population are pushing up deficits. <\/p>\n","protected":false},"excerpt":{"rendered":"Australia is hurtling towards a staggering $2 trillion in combined national and state debt by the end 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