Our $1 trillion debt doesn’t scare markets - but it still has a cost

May 25, 2026 — 3:00am

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In the next few months, the federal government’s gross debt is expected to hit $1 trillion. This big number is bound to get lots of political attention – the Coalition has even set up a dedicated online “debt clock” to mark the occasion.

It’s striking, however, that the investors who are lending our government the money aren’t really fussed about this milestone.

Government debt has gone up everywhere in the world and, compared with many countries, ours isn’t that high. Even as the bond markets have become more jittery lately, the concern has been more about the global threat of rising inflation, as opposed to anything specific to Australia.

So, should the rest of us be as nonchalant about the government’s debt heading to $1 trillion as the markets? Or should we be a bit more concerned about government debt, given taxpayers are ultimately on the hook for it, after all?

That $1 trillion dollar figure is financed by the government issuing IOUs – bonds – to the world. To the bond markets, $1 trillion is just another number. It needs to be compared with something to make it meaningful, just as a bank compares a mortgage to the income of the borrower.

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One way to do this is to compare government debt against our economy’s size – gross domestic product (GDP). On this basis, our gross debt is 34 per cent of GDP, making our........

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