Politics with Michelle Grattan: Jim Chalmers warns rising debt bills are set to hit the budget

Australia’s next budget update, being delivered just before Christmas, is set to be hit by what’s “likely to be billions of dollars extra” in higher interest bills on government borrowing, federal Treasurer Jim Chalmers has warned.

The federal government now has more than A$1 trillion in debt .

Looking ahead to the December Mid-Year Economic and Fiscal Outlook (MYEFO), which will update the May budget’s forecasts, Chalmers said “it won’t be anything like a mini budget” with major new measures.

Speaking to The Conversation’s Politics podcast, the treasurer instead predicted the most “problematic” impact on the mid-year update would be the rising global costs of servicing debt.

The big influence on the mid-year budget update, unfortunately, is going to be an increase in borrowing costs.

Because if you read the international economic commentary, the biggest thing that’s going on right now is the way that bond yields – which are essentially a reflection of borrowing costs – are going up around the world and quite substantially.

And here in Australia as well.

And so the big, problematic influence on the mid-year update is, at this stage, likely to be billions of dollars extra to service our borrowing costs.

However, Chalmers argued Australia is: better placed than other countries in this regard when it comes to borrowing costs, because our debt is a sliver of what other countries are carrying.

And we’ve got it down further since we’ve been in office from the trajectory that we inherited.

But the mid-year update, I think one of the things that people can expect to see, is the damaging impact of higher bond yields on everyone’s budget, including ours.

Read more: Australia’s government now has $1 trillion in debt.

Four charts on how we got here and its cost On mixed long-term forecasts At the start of this week, the federal Treasury released Australia’s seventh Intergenerational Report .

First launched in 2002, the report projects what the nation’s demographics, economy and budget might look like over the next four decades.