Friday, October 02, 2026
Australian gov debt hits A$1trillion, US gov debt hits US $40trillion, but how do we rate in the DEBT OLYMPICS?
Sensational headlines this week - Australian government debt hitting A$1 trillion and the US hitting $40 trillion! But how serious are they really? Here is an update on my ‘Debt Olympics’ chart of all levels of debt (government, corporate, household) since 2000. Australia has one of the LOWEST overall debt burdens in the world. Our Government and Corporate debt levels are relatively low, but our Household debt is the highest. The problem is not Debt per se, but how it is spent: paying for current spending, handouts & political pet projects, or building long-term productive capacity to generate future revenues, growth and prosperity?
Who wants to buy US debt? – ie lend to the profligate US government? Most of the world except me!
No sign of ‘de-dollarisation’ here – most of the world loves US dollar debt, and have been buying up more! Especially UK, Japan, Europe, and even Canada and Mexico. China has been the big seller, and has halved its holdings over the past decade. But most of the rest of the world (apart from Russia), have been increasing their holdings of US debt – ie racing in to lend more to the profligate US government. The Brits have been by far the biggest fans, buying up even more than China has sold. Despite soaring US deficits and debt, there is no sign of worry from lenders (debt owners) about debt stress or default. The flood of buying across the world has kept yields US relatively low to date. What worries is me is another bond scare – like in 2022 when soaring yields caused the biggest losses on US bonds in a century. More of
Labor -v- Libs: which side has a better record on Deficits & Debts? Here are the facts
'Left' governments have run deficits more often than 'Right' governments, and the Left have also run larger deficits on average than the Right. But timing is everything! - the Left happened to be in power during the big deficits and debts in the two World Wars, when spending was bi-partisan. My verdict? - Equal points to Left and Right - but poor scores for both post-GFC. Both sides could have used windfall revenue gains to put our house in order to better prepare for global challenges, rather than increase spending and debt.
Who wants to buy US debt? (lend to Uncle Sam?) Most of the world but me! Who’s buying, selling, why?
Just about everyone is rushing in to lend more money to the profligate US government – except China, Russia, Iran (and me). China has dumped $413b of US debt (one third of its peak holdings) since Trump started his trade war in 2018, and accelerated since Russia’s invasion of Ukraine. But the UK soaked up all of that and more, increasing its holdings by $515b.
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