Australia’s government now has $1 trillion in debt. Four charts on how we got here and its cost
Public debt interest payments are the fastest growing area of federal government spending. See what changed, and why, from 1990 to today.
Australia's federal government now carries a staggering $1 trillion in debt, and this figure is expected to surpass $1.2 trillion by 2030, representing 35% of the nation's gross domestic product (GDP). This represents a significant increase from just a single generation ago, when the debt was only seven times lower than it is now.
To understand how this monumental debt came about, it is necessary to delve into the financial policies of successive governments. In 2002, under the Howard administration, net debt was around 5% of GDP. For two consecutive years, the government had surplus revenues and did not need to borrow money. However, the global financial crisis (2008-09) and the COVID-19 pandemic (2020-21) forced governments to spend more than they collected in revenue.
As a result, successive Labor and Coalition governments resorted to selling government bonds to meet the shortfall in funding.
The cost of this debt is predominantly in the form of interest payments. In the 2026 budget, it was revealed that public debt interest payments have been the fastest-growing component of federal spending. When compared to other developed countries, Australia's government debt relative to its economy is comparable to that of New Zealand (56.7% of its GDP) and South Korea (54.4%). However, it is still lower than the average for advanced economies, which stands at 108.2%.
There is an established debt limit in Australia, theoretically capping the federal government's debt at $75 billion without parliamentary approval. However, this limit was scrapped in 2013, and the treasurer is now free to adjust the debt limit as needed. The limit has been raised multiple times since 2008, culminating in its current level of $1.2 trillion.
Despite the enormity of the debt, Australia has maintained a strong credit rating of triple-A from the world's three major credit rating agencies since 2003. This rating signifies that the country is at the lowest risk of defaulting on its debts. The federal government has always repaid its debts since its inception in 1911, and there is no reason to believe this will change in the future.
Written by urgent.news from The Conversation AU's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
