Federal Budget 2025: Australia’s Debt to Hit Record $940 Billion
- admin928749
- Mar 25
- 3 min read
Australia’s federal debt is about to hit a record high, with the government set to unveil a budget that reflects a worsening structural deficit.
Treasurer Jim Chalmers is still selling it as a win, though, pointing out that debt will hit $940 billion in 2024/25—a big number, but still $177 billion lower than what was projected before the last election. He says this means taxpayers will avoid $60 billion in interest payments over the next decade.
“We’re paying down Liberal debt and saving taxpayers tens of billions,” Chalmers said, calling it the biggest budget turnaround in Australian history.
Australia’s Debt: Still Low Compared to Other Countries
While a near-trillion-dollar debt sounds huge, it’s worth noting that Australia’s debt is still relatively low compared to other countries. Right now, it's just over a third of the economy. By comparison:
UK debt is nearly the same size as its economy
US debt has blown past 120% of its GDP
But that doesn’t mean we’re in the clear. With defence, health, aged care, the NDIS, and interest payments all increasing, economists warn that Australia’s debt will continue to grow, peaking at 37% of GDP.
The Budget's Hidden Reality
Labor is pointing to $95 billion in savings across its last four budgets, claiming it has helped turn things around. But some economists—like Chris Richardson—are saying, not so fast.
He argues that most of the budget’s improvements are thanks to external factors, like higher-than-expected tax revenue from commodity prices. In fact, he says government decisions have actually slowed down what could have been an even bigger improvement.
Meanwhile, Deloitte Access Economics is warning that Australia’s tax system is outdated and might not be able to keep up with rising spending. Partner Stephen Smith says, “We may need to raise more tax in the future just to keep up.”
The "Off-Budget" Spending Trick
Another thing to watch: off-budget spending. This is when the government classifies certain spending as an “investment” instead of a budget expense—basically, moving money off the books.
For example, two major spending commitments won’t show up in the underlying deficit:
$2.4 billion to bail out the collapsed Whyalla steelworks
$16 billion in student HECS debt forgiveness
According to Deloitte, these kinds of “off-budget” measures will total around $99 billion over the next four years.
What’s in the Budget?
While this budget isn’t packed with huge spending splurges, there are still plenty of key commitments, mostly focused on cost-of-living relief, health, and infrastructure.
Health
$8.5 billion over four years to expand bulk billing rates to 90%.
$689 million to cut PBS medicine costs from $31.60 to $25.
$644 million to open 50 new Medicare urgent care clinics.
Cost of Living
$1.8 billion to extend energy bill rebates (saving households $75 per quarter).
$95 million in lost revenue from a freeze on draught beer excise (cheaper beers at the pub).
Housing
$800 million to expand the Help to Buy scheme (raising income and price caps for homebuyers).
Infrastructure & Transport
$7.2 billion for Bruce Highway upgrades (QLD).
$2 billion for a new rail hub at Sunshine (Melbourne’s west).
$1 billion to secure a rail corridor from Western Sydney Airport to Macarthur/Leppington.
$125 million to upgrade Donnybrook Rd & Mitchell St intersection (Melbourne’s outer north).
Education
$2.8 billion in funding for Queensland schools.
$16 billion in HECS debt forgiveness, but it’s off-budget so won’t officially impact the deficit.
Defence
$1 billion in existing defence funding brought forward to boost military capability.
Disaster Recovery
$1.2 billion to help southeast Queensland & northern NSW recover from ex-Tropical Cyclone Alfred.
This budget is all about careful balancing—Labor is spending big while trying to keep debt under control. But with rising costs in health, defence, and welfare, the big question remains:
Can Australia’s tax system keep up, or will we need to pay more in the future?
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