Economy

Rising global bond yields pressure Australia's budget

Australian Treasurer Jim Chalmers warned that rising global government bond yields will pressure the country's federal budget.

Higher debt-servicing costs could constrain government spending in the mid-year budget update. A widening deficit could in turn add supply pressure on longer-dated Australian government bonds amid the Reserve Bank of Australia's hiking cycle.

For beginners Bond yield is the interest rate a government pays on its debt: the higher it is, the more expensive it becomes to service that debt, leaving less room for other budget spending.