SYDNEY: Australia’s new conservative government plans to raise its debt ceiling by two-thirds to A$500bil (US$483bil), according to Treasurer Joe Hockey, heading off concerns the country could reach its limit before Christmas.
“The debt limit needs to be set so as to provide sufficient headroom to ensure there is stability and certainty for the financial markets about the government’s capacity to finance its operations for the foreseeable future,” Hockey said.
“We need not look any further than the recent events in the United States to realise how imperative for stability and certainty is for confidence.”
Brinkmanship over raising the US debt ceiling earlier this month partially shut down the federal government and roiled financial markets before a 11th hour deal was hammered out.
In a budget update before September’s election, Australia’s Treasury forecast the face value of outstanding Australian government securities would reach its A$300bil limit by December 2013 before falling back to around A$290bil by June 30, 2014.
The hike in the Australian debt ceiling had little impact in Australian financial markets, which were expecting the increase.
Demand for Australia’s AAA-rated government bonds is strong and with net government debt forecast to peak at 13% of gross domestic product (GDP), investors are mostly sanguine about an increase in borrowings.
Parliament is expected to hold its first sittings under conservative Prime Minister Tony Abbott in late October, giving the new government up to six weeks to pass the new debt limit.
Hockey also announced plans for a Commission of Audit on the scope, efficiency and functions of the government. – Reuters