Investors are demanding higher returns for government debt globally, at levels not see since the GFC. Strategists warn this could result in less aggressive rate cuts in Australia.
It may seem like a distant issue for most Australians, but strategists are worried that the growing pile of US government debt is a ticking time bomb that could fuel inflation around the world and hinder the Reserve Bank of Australia from meaningfully cutting interest rates.
Congress is currently debating US President Donald Trump’s so-called “big beautiful bill” that includes significant tax cuts and lifting the government debt ceiling by up to $US5 trillion ($7.6 trillion). That risks adding trillions of dollars to the US government’s annual shortfall over the next decade and pushing the deficit to more than 7 per cent of gross domestic product.
Source: https://www.afr.com/markets/debt-markets/how-america-s-debt-ticking-bomb-could-curb-the-rba-20250606-p5m5fm