While the United States has at least temporarily increased its ceiling on the amount of debt the government can accumulate, one of the first things the Abbott government will do when Parliament resumes next month, after introducing legislation to repeal the carbon tax, will be to increase the Australian government’s debt ceiling.
The current ceiling in Australia is $300 billion, which is less than 20% of gross domestic product. By way of comparison, the US debt ceiling is around 105% of GDP. People with knowledge on this issue realise that Australia’s gross government debt is tiny, and in fact is so small that Australia has had to get special dispensation from several of the post-global crisis new international banking regulations. These include the Basel III requirements for bank assets and capitalisation because there simply aren’t enough Australian government bonds on issue for the banks and others to hold.