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Debt costs help push government borrowing to 30-year high

Meanwhile interest payable on UK gilts, or bonds, which the government sells to international investors to raise the money it needs, has risen sharply, he said. This is because many gilts are “index linked”, meaning the government’s repayments rise in line with the Retail Prices Index measure of inflation which is currently at double-digit levels.


Source link The Australian government’s total liabilities have risen to a 30-year high, with much of the increase driven by the cost of borrowing.

The latest report from the Australian Office of Financial Management (AOFM) shows that the country’s net debt totalled $680.2 billion at the end of the December quarter. This is the highest since the 1990-91 financial year.

The AOFM says the increase is largely due to the cost associated with borrowing. In the December quarter alone, the government’s borrowing costs were around $9.9 billion. This is up more than 28.7 percentage points compared to the same period last year.

Of this amount, $7.9 billion is accounted for by the AOFM’s securities program, while $2 billion relates to the loan facility associated with the First Home Loan Deposit Scheme.

Overall, the AOFM says that the September quarter saw net debt increase by $30.5 billion, the largest quarterly increase since December 2010. This can be attributed to both the increased costs of borrowing and the government’s ongoing efforts to implement its policies and programs.

The federal government is not alone in having to borrow money in order to meet its obligations. Firms and individuals have also been doing this for decades in order to finance investments and consumption.

That said, with the government’s current net debt standing at $680.2 billion, this is far higher than the private sector.

Going forward, the Australian Office of Financial Management suggests that the government should focus on reducing its reliance on debt to finance its programs and policies. This should be done by increasing its revenue where possible, while also controlling its expenditure.

It also advocates for an integrated debt management strategy that takes into account both the current and medium/long-term debt costs.

At the same time, it is clear that debt costs are likely to remain a factor in the government’s budget planning. Therefore, it is imperative that the government takes a prudent and responsible approach to debt in order to ensure that the country is not burdened by an unsustainable debt burden.

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