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Steaming toward $1 trillion in gross debt in 2025/26

Australia remains on track to rack up a record $1 trillion in debt within two years, but the Albanese government is still claiming a win because it didn't get there sooner.

Treasurer Jim Chalmers has frequently castigated the former coalition government for leaving Labor with "one trillion dollars of debt".

Under the previous government, gross debt as measured by the Treasury borrowings was on track to crack that milestone this financial year.

Jim Chalmers with Treasury Secretary Steven Kennedy
Gross debt is still on course to crack the trillion dollar mark in 2025/26. (Lukas Coch/AAP PHOTOS)

"This year gross debt will be $904 billion instead of the more than one trillion we inherited - meaning debt is $152 billion lower," Treasurer Jim Chalmers told parliament on Tuesday.

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"A stronger budget means we save around $80 billion in interest costs over the decade.

"These are the dividends of our responsible economic management."

Gross debt is still on course to crack the trillion-dollar mark in 2025/26 when it will reach 35.1 per cent of gross domestic product.

The following year debt will rise to $1.1 trillion, peaking at 35.2 per cent of economic output, as Labor runs a series of budget deficits.

At the same time, Australia's annual interest bill will rise to $34 billion by 2027/28, from about $22 billion in the next financial year.

Net debt - which takes into account the positive financial impact of certain government assets - will peak at $698.5 billion in 2026/27, which is better than expected.