Australia's national debt has exceeded 1 trillion Australian dollars for the first time
Australia's gross national debt has exceeded 1 trillion Australian dollars for the first time in history. Meanwhile, U.S. national debt has reached 40 trillion U.S. dollars, according to ABC News Australia.
Australia’s public debt-to-GDP ratio stands at 32%. This is lower than in a number of other developed countries: in Germany, the ratio is 70% of GDP; in the United Kingdom, 95%; in the U.S., 125%; and in Japan, 250%.
Independent economist Sol Islake noted that Australia significantly increased its borrowing during the COVID-19 pandemic, when short-term loans were cheap. According to him, as these loans are refinanced, the country may face higher global interest rates and larger debt payments. Islake also pointed out that Australia traditionally pays a premium on its borrowing, despite its AAA credit rating.
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The economist believes that, given Australia’s near-full employment, the country should not maintain a budget deficit. The article also notes that following the global financial crisis, the country experienced a decade of deficits and subsequently increased spending to support the economy during the pandemic.
At the same time, Australian household debt stands at 190% of their income and is primarily related to real estate. In Canada, this figure stands at 180%, in New Zealand at 166%, in the United Kingdom at 118%, and in the United States at about 92%. This debt structure makes Australian households more sensitive to changes in interest rates.
ABC News Australia reports that in recent weeks, the yield on 30-year U.S. Treasury bonds has risen to its highest level in nearly 20 years, as investors demand higher returns on U.S. debt. According to estimates by the U.S. Congressional Budget Office, the U.S. public debt-to-GDP ratio could rise to 137% over the next eight years. The U.S.’s annual interest payments on its debt have approached $1 trillion and exceed the country’s defense budget.
