With the passage of legislation through the Senate on Monday, Australian Federal Parliament has voted to abolish the nation's debt limit of 300 billion AU dollars (272.37 billion U.S. dollars), in time to prevent the ceiling being breached.
The ruling Liberal-National Coalition and the Greens joined forces to pass The amendment to the Commonwealth Inscribed Stock Act 1911. Labor had resisted the move, saying the limited should have been set at 400 billion AU dollars.
The debt cap was due to be breached by December 12. The government proposed a 200 billion hike in the debt ceiling.
Before the government clinched its deal with the Greens it had first tried to raise the debt ceiling to 500 billion AU dollars while Labor and the Greens, initially, wanted to restrict the increase to 400 billion AU dollars.
In a press release, Treasurer Joe Hockey said the legislation " will provide certainty to markets about the government's capacity to finance the budget, and increasing transparency around Commonwealth borrowing."
"This was a ceiling created by the Labor Party, who on four occasions then broke their own self-imposed limit because of their addiction to debt, and then did nothing to find an acceptable solution despite knowing it would be reached," the press release said.
The treasurer said as part of the agreement with the Greens, there will be increased transparency around government debt in the budget papers and greater parliamentary debate.
Under the agreement, the government must provide more information on government debt in the budget and make a parliamentary statement on debt levels each time borrowings rise by 50 billion AU dollars.
The new government debt reporting rules will be included in Hockey's mid-year budget review, which is due to be released in the next week or so.
Expectations are that the outlook will show a much larger deficit for 2013/14 than the 30.1 billion AU dollars forecast by Treasury during the federal election campaign.