The Australian Office of Financial Management has recommended an increase of the government debt ceiling to between $300 billion and $320 billion from the current $235 billion.

The hike would be a hedge in case the need to pay maturing bonds due to weak tax collections would cause total debt to temporarily go beyond the debt limit. Although Australia's debt is low compared to other western nations, Canberra pursued the third largest stimulus programme in the world to address the impact of the 2008 global financial crisis on the Australian economy.

Hiking the debt limit would seek to prevent a situation similar to what happened to the U.S. in 2011 when Washington approached the legislated debt ceiling and Congress threatened not to increase it, which ultimately led to the downgrade of the U.S. credit rating.

However, the plan to increase Australia's debt limit is likely to be criticised by the Opposition. Shadow treasurer John Hockey said the plan would cause the debt ceiling to be four times higher the 2008 level.

"Australians are right to be concerned about handing Wayne Swan yet another increase in our nation's credit card limit," 9 News quoted Mr Hockey.

Australia's debt as a percentage of its gross domestic product (GDP) is expected the reach 9.6 per cent in 2011-12, but is projected to go down to 7.3 per cent in 2015-16.

In contrast, Japan's debt is expected to go beyond 150 per cent of GDP in the coming years. Eurozone governments' debt average 75 per cent of their GDP while it is about 80 per cent for the U.S.

Due to its relatively low levels of debt, Australia is one of only eight countries in the world that has kept its AAA credit rating. The relative safety of the Australian economy has led offshore investors in 2011 to snap up Australian government bonds. In 2011, the Gillard government said it aims to keep the bond market between $160 billion and $190 billion, which is higher than the $150-billion mark considered necessary to keep the market liquid.

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