CHARTS: Australia's government debt is expected to rise to $573 billion over the next decade

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Australia’s outstanding government debt – something forecast to decline in the 2014-15 federal budget – is now expected to grow in the coming decade.

Westpac, in a research note released soon after budget release, has some excellent charts that show how outlook for gross government debt levels has evolved since the release of the 2014-15 budget.

The first shows how forecasts for total outstanding government debt have been gradually revised higher from the 2014-15 budget. The forecasts from 2014-15 are represented in black while those for 2015-16 are in red.

According to Westpac’s analysis, total government debt is expected to rise to $A518 billion by the end of the 2018-19 fiscal year, an increase of around 26% from levels forecast for the 2015-16 fiscal year.

The second shows the 10-year estimate for total outstanding Australian government debt issuance – or the amount the federal government owes in total – for the decade ahead.

Expectations for outstanding government debt, something that was expected to decline from 2019-20 in last year’s budget, are now forecast to increase gradually in the decade ahead. The total outstanding amount is now expected to increase to $A573 billion by 2025-26, something Westpac believes reflects “a modestly weaker underlying cash balance, and its associated higher public debt interest expense, accumulating over the medium term”.

As for net debt, that which includes the value of government assets, it is expected to peak at 18% of GDP in 2016-17, one year earlier than what was forecast in December’s 2014-15 MYEFO and slightly higher than the 17.6% cyclical high seen then. The third and final chart below tells the story. Forecasts contained in the 2014-15 budget are shown in grey, those for 2015-16 in red.

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