Australia debt breaches A$1 trillion amid global borrowing spree

[SYDNEY] Australia’s outstanding national debt temporarily exceeded A$1 trillion (US$711 billion), with that milestone underscoring the struggle in developed nations to rein in borrowing levels that ballooned during the pandemic.

At the end of last week gross national debt stood at almost A$984 billion, and adding in the A$17 billion in bonds and notes sold earlier this week would push the total beyond the symbolic A$1 trillion mark, although it will drop back below on Friday after some other debt matures. The next official figure will be released at the end of this week.

The pile is expected to grow higher. Prime Minister Anthony Albanese’s latest budget forecast gross debt would hit almost A$1.25 trillion by the end of the decade. The Parliamentary Budget Office estimated this week that gross debt, including state and local governments, was almost US$1.6 trillion in the financial year through the end of June.

Concern over Australia’s rising debt comes as global borrowing costs surge amid investor angst about everything from inflation to the debt-laden artificial-intelligence boom. The yield on benchmark 10-year bonds rose to the highest since May earlier this week while debt maturing in 30 years rose to its highest-ever level in Bloomberg data going back to 2016.

However, Australia’s level of debt is nowhere near comparable nations, with the US hitting US$40 trillion in total public debt this week. Australia also has one of the lowest debt levels compared to the size of the economy of any developed nation, and investors are showing little sign of concern about the increase in debt, with almost five times as many bids for the bond sold this week as was available.

Australia’s debt levels aren’t concerning as “it’s still low relative to peers as a per cent of GDP and net debt is quite low as well,” said Philip McNicholas, Asia sovereign strategist at Robeco in Singapore. With those metrics “it certainly makes it a strong credit. The high level of nominal yields as well as the relative steepness of the curve make it an attractive market.”

Both Moody’s Ratings and S&P Global Ratings said this month they were maintaining the nation’s long-term debt rating at AAA with a stable outlook. BLOOMBERG