Federal debt ticks over $1 trillion for the first time

Australia's federal gross debt has crossed the $1 trillion mark for the first time, as the budget comes under more strain from rising interest payments.

The Australian Office of Financial Management, which manages the nation's sovereign debt, issued $4.1 billion of debt on Thursday, bringing the total amount owed by the Commonwealth to $1000.8 billion.

While gross debt will come back below $1 trillion on Friday, when $6 billion of notes mature, more debt issued in the weeks following will take the figure back to 13 digits.

The federal budget in May predicted gross debt to hit $1.25 trillion by 2029/30.

Shadow treasurer Tim Wilson said the record debt would only be paid off by higher taxes on future generations of Australians.

He said Labor had received a $400 billion revenue windfall in government, but instead of paying down the debt, extra spending had fuelled inflation.

"We know that it's costing about $2000 per Australian taxpayer to continue to finance this debt, and as a consequence, it could be a $2000 tax cut that was offered if it wasn't there," Mr Wilson said.

Interest payments to service the debt are forecast to cost the budget $29.6 billion this financial year and are set to rise to $42.3 billion by 2029/30.

Treasurer Jim Chalmers said the debt would be even worse if the coalition was still in charge.

"No amount of hyperventilating from the Liberal Party today will change the fact that debt is $200 billion lower this year than what they left us," he said in a statement.

"Under the Liberals and Nationals, gross debt would have crossed the trillion-dollar mark three years ago.

"If the coalition had been in power today, gross debt this year would already be approaching $1.2 trillion."

Compared to international peers, like the US and the UK which have a debt-to-GDP ratio over 100 per cent, Commonwealth gross debt is relatively low at about one third of GDP.

Net debt, which paints a more accurate picture of the government's financial health, is projected to hit $616.9 billion in the 2026/27 financial year, which is about 20 per cent of GDP.