Debt as a share of GDP is forecast to rise from 33.1% (federal debt) to 58.1% overall when including states, with total government debt reaching about $2 trillion by the end of the decade.

States and territories are projected to see a 387% jump in gross debt from 2018-19 levels, totaling $770.9 billion, while federal gross debt is expected to climb to about $1.2 trillion (a 92% increase).

By 2029-30, state and territory debt is expected to account for almost 40% of the $2 trillion total, marking a shift from pre-COVID patterns when the federal government bore about 80% of debt.

Treasurer Jim Chalmers defended the Western Australia GST arrangement amid the interim report, arguing it delivers a fair share for WA.

Moody’s kept Australia’s AAA rating, noting a credible path to consolidation despite high debt levels and ongoing consolidation concerns.

The article argues that without spending cuts or asset privatization, politicians will rely more on borrowing, shifting the burden to taxpayers to cover rising interest costs.

Opposition shadow treasurer Tim Wilson warned the debt milestone could heighten inflationary pressures and interest rates, framing it as negative for the country.

The budget office flags sustainability risks including higher interest rates, inflation, infrastructure overruns, potential housing market corrections, rising demand for health and disability services, and volatile federal and GST funding.

The Australian Office of Financial Management issued $4 billion in May 2038 Treasury bonds, signaling continued debt financing amid rising borrowing costs.

Bracket creep and higher tax revenues from upper income brackets are boosting revenue, influencing debt dynamics amid inflation.

Finance Minister Jim Chalmers emphasized responsible economic stewardship as debt surpassed $1 trillion while acknowledging the broader budget context.

Debt servicing and higher bond yields, driven by higher interest rates, are increasing borrowing costs for both federal and state governments.