Damon Mcknight
Australia has had relatively low levels of government debt compared to other OECD countries. In 2025, the Australian parliament passed a law to cut student loans by 20%, providing debt relief for 3 million Australians. This move was aimed at mitigating the rising cost of living and addressing intergenerational inequality. The Australian government's debt is not attributed to a specific country but rather a combination of factors, including revenue sources and borrowing.
| Characteristics | Values |
|---|---|
| Country Australia is in debt to | N/A |
| Student loan debt amount | A$16 billion ($10.31 billion) |
| Number of people in debt | 3 million |
| Average loan amount | A$27,600 |
| Amount written off per person | A$5,520 |
| Minimum repayment threshold (new) | A$67,000 |
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What You'll Learn
Australia's external debt as a percentage of GDP
In the 2016-17 budget, Australia's net government debt as a percentage of GDP was estimated at 18.9% ($326 billion), which is relatively low compared to most developed nations. The net government debt-to-GDP ratio was expected to peak at 19.2% in 2017-18 before decreasing. This projection considered the continuous rise in aggregate terms and the anticipated economic expansion.
The Australian Office of Financial Management, a department within the Treasury Portfolio, is responsible for managing the government's debt and borrowing activities. The Loan Council imposes limits and regulations on government borrowings, except for defence-related or 'temporary' borrowings.
The surplus or deficit in the federal budget directly impacts the government's ability to manage its debt. A surplus enables the government to reduce its debt, while a deficit requires additional borrowing to cover the shortfall. For instance, the 2017 federal budget projected a deficit of $29.3 billion, or 1.6% of GDP, and the 2018 budget forecasted a reduced deficit of $18.2 billion, marking Australia's eleventh consecutive budget deficit.
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Student loan debt owed by citizens
Australia's parliament passed a law in July 2025 to reduce student loans by 20%, which will cut A$16 billion in debt for 3 million citizens. This law fulfills a key election promise made by the Labor Party to alleviate the rising cost of living. The measure will particularly benefit younger Australians, with around 70% of people repaying a Higher Education Loan Program (HELP) debt being 35 or younger.
The law will also raise the minimum repayment threshold from an income of A$54,435 to A$67,000, reducing the amount low-income earners will have to pay. This means that a university graduate with an average loan of A$27,600 would have A$5,520 wiped off their debt. The changes will be backdated to 1 June 2025 before the loans are indexed by 3.2% for inflation.
The Australian government's initiative to reduce student loan debt by 20% aims to address the increasing financial strain on citizens. It will provide financial relief by recognising the rising cost of living and the burden of higher education expenses. With a majority of HELP debt holders aged 35 or younger, the move will assist young Australians in critical life stages, such as purchasing their first home or starting a family.
The 20% reduction in student loan debt will be applied automatically by the Australian Taxation Office (ATO) before the next indexation date of 1 June 2025. This reduction applies to various loan types, including HELP loans, such as HECS-HELP, FEE-HELP, and SA-HELP, as well as specific student support loans like the Centrelink Student Loan. It is important to note that individuals are not required to take any action to benefit from this reduction.
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Government borrowing compared to other OECD nations
Government borrowing has been a significant feature of the global economy in recent years, and this is particularly evident among the member states of the Organisation for Economic Co-operation and Development (OECD). In 2024, OECD governments raised $15.7 trillion in new borrowing, which, when including repayments, added $3 trillion to the total debt of these countries. This took the total debt of OECD nations to $55 trillion, with the average debt-to-GDP ratio expected to reach 85% in 2025, a significant increase from 2019 and almost double the level of 2007.
The cost of servicing this debt has become a burden for many countries, with debt service costs as a percentage of national income rising to 3.3% in 2024, up from 2.4% in 2021. This has outstripped spending on defence, police, and housing, and the OECD has warned that high debt risks and borrowing costs may hinder future borrowing capacity. This is particularly concerning given the need for significant investment in areas such as the green transition, defence, and addressing the challenges of ageing populations.
The United States is the largest contributor to OECD borrowing, representing more than two-thirds of total gross borrowing in 2024. The top five issuers, including the US, Japan, France, Italy, and the UK, accounted for over 85% of gross borrowing that year. While the US has a substantial impact on OECD borrowing trends, it is important to note that the organisation's analysis also includes emerging markets and non-member nations, providing a broader perspective on global debt dynamics.
The impact of the COVID-19 pandemic has also played a role in government borrowing, with a large proportion of pandemic-related borrowing expected to be refinanced at higher interest rates. This is a concern not only for OECD countries but also for emerging markets, especially low-income, high-risk nations where a significant portion of their debt is due for refinancing in the coming years. As debt becomes more expensive, the OECD emphasizes the importance of ensuring that borrowing supports long-term growth and productivity.
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Gas corporations owing royalties on exports
Australia's gas exports reached 256 million tonnes of CO2-e in 2022-23. However, the country has been losing out on billions in royalty revenue from these exports. According to the Australia Institute, royalties were not charged on 56% of gas exports from Australia in the past four years, resulting in a loss of $13.3 billion in royalty revenue. This is because multinational gas corporations do not pay royalties on gas exported from six of Australia's ten liquefied natural gas (LNG) export facilities. Four of these projects are based in Western Australia, and two are in the Northern Territory.
The Australian government has the power to impose royalties on offshore gas fields, but it has failed to do so. This has resulted in a situation where Australians have missed out on better healthcare, education, and public housing because the government has chosen not to collect royalties from the gas industry. The Federal Government's Future Gas Strategy, for example, makes no mention of 'royalties', 'tax', or 'return'.
The amount of royalty revenue collected from gas exports in Australia is well below that of its international competitors, such as Qatar and Norway. Qatar, for example, produces only slightly more LNG than Australia but receives six times the revenue. By choosing to increase the Petroleum Resource Rent Tax (PRRT) and collect revenues from the gas industry, the Australian government could have billions of dollars more to spend on public services.
The Western Australian Government’s changes to its domestic gas policy have also given companies more opportunities to export gas, further reducing domestic gas supply and threatening the stability of the state’s gas market.
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HECS revenue compared to Petroleum Resource Rent Tax
Australia's Higher Education Contribution Scheme (HECS) refers to a government loan program introduced in 1989 to help higher education students cover the cost of their studies. In 2025, Australia's parliament passed a law to cut student loans by 20%, wiping off more than A$16 billion ($10.31 billion) in debt for 3 million people.
The Petroleum Resource Rent Tax (PRRT), on the other hand, is a federal tax levied on profits from the sale of petroleum products like stabilised crude oil, liquefied petroleum gas, ethane, and shale oil. The PRRT was designed to ensure that Australians benefit from the extraction of their gas and oil resources. However, revenue from the PRRT has barely grown along with the profits and size of the gas industry. This is because gas companies can deduct many of their costs, allowing them to claim that they never earn enough profit to be required to pay the PRRT.
In 2022-23, PRRT collections totalled nearly $2.3 billion, while HECS and related student loan repayments brought in $4.9 billion. In 2023-24, tax from the PRRT was less than a quarter of the amount raised by HECS/HELP debt repayments. In the seven years leading up to 2022-23, the government collected a total of $14,962 million more in HECS/HELP than in PRRT, equivalent to 168% more in tax.
While gas companies argue that they pay other forms of tax, students also pay income tax, GST, and other excises, as well as the costs of attending tertiary education, which can involve moving interstate. Unlike gas companies, students cannot use these costs to reduce their future HECS repayment obligations.
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Frequently asked questions
Australia has had very low levels of government debt compared to other nations in the Organisation for Economic Cooperation and Development (OECD).
Student loans are an example of debt in Australia. In July 2025, Australia's parliament passed a law to cut student loans by 20%, wiping out more than $10 billion in debt for 3 million people.
The Coalition has repeatedly claimed that the Australian government is borrowing excessively and that high levels of debt are a burden on the country's prosperity.
