‘Confronting’: Chilling warning on Aussie debt as interest rates soar

Jim Chalmers has issued a chilling message on debt and told Australians to brace for some “confronting” budget figures.

Treasurer Jim Chalmers has warned Australians to prepare for “confronting” news when he unveils the state of the nation’s finances next week.

Soaring interest rates on record levels of government debt are expected to burn a $13bn hole in the budget.

Speaking to reporters in Canberra, Mr Chalmers said the government had inherited the “trickiest set of economic circumstance” in living memory.

“When it comes to the trillion dollars of debt that we inherited from our predecessors, that is becoming more and more expensive for us to accommodate,” he said on Monday.

“Every dollar that they borrowed is now more expensive to service. That’s just the reality.”

Mr Chalmers is set to provide an update on the federal budget on July 28 once parliament resumes.

Jim Chalmers made the grim warning on Monday. Picture: Jerad Williams

Essentially, the government is facing the same punch from interest rates as the everyday Australian is on their mortgage payments.

When the budget was handed down in March, interest rates were assumed to average 2.2 per cent over the next four years.

But an uncertain global economic environment has propelled the Reserve Bank of Australia to successively hike interest rates in a bid to curb rising inflation.

The federal government is set to pay more on its own loans as it tries to simultaneously recoup funds and provide cost-of-living relief to Australians.

Mr Chalmers said on Monday he would continue to be upfront about his expectation that the fuel excise discount would end in late September as planned.

“Clearly, we always try and do the right thing by people and will take the economic conditions into account when the time comes,” he said.

“But my expectation, and the expectation I’d encourage people to have, is that we can’t afford to continue that petrol price relief forever.”

He said the Albanese government would try to help people through this “difficult period” but the levels of debt meant it couldn’t “do everything we would like to do”.

“And so we have to prioritise and our priority is childcare and medicines,” he said.

Assistant Treasurer Stephen Jones warned earlier on Monday that the federal government would soon be spending as much on interest as it did on Medicare.

“We’re going to (have a) tough budget statement and tough budget coming down the line in October because we cannot, as an incoming government, just throw money around and not be blind to the consequences,” he said.

Originally published as ‘Confronting’: Chilling warning on Aussie debt as interest rates soar