Australia is not broke. The financial pressure we feel has nothing to do with migration or illegal immigrants.

Whenever the Commonwealth Budget is handed down, the headline is the debt. A trillion dollars. Deficits as far as the eye can see. It sounds like a country in trouble.

It is not. The International Monetary Fund published its October 2026 World Economic Outlook this week, and on the measure it uses to compare every country on the same footing, total government debt across Commonwealth, states and councils, Australia owes about 52.6% of a year’s national income. The average of the G7 industrial democracies is 124%. The United States is at 127%, the United Kingdom 102%, Canada 116%, France 118%, Italy 138%, Japan 199%.

Of the Group of Seven, only Germany, which writes a debt limit into its constitution, comes anywhere near us, and we are still comfortably below it.

All three major ratings agencies rate Australia AAA with a stable outlook. We are one of only a handful of countries in the world that can say that. Lenders fight to hold our bonds. If the question is whether the country can pay its bills, the answer from the people whose job it is to judge that is an unqualified yes.

Hold onto that fact, because it matters for everything that follows. The government is not broke. The nation is not broke. Whatever is causing the pain in Australian kitchens right now, it is not the national debt, and it is not the cost of looking after people.

Because the pressure is not sitting on the government’s balance sheet. It is sitting on the household one.

Australian households carry debt of around 112% of GDP, the second-highest level in the world behind Switzerland. The public balance sheet looks clean partly because the private one is carrying the load. Most of that debt is mortgages, and most of those mortgages are variable or about to be.

That is why every move in interest rates lands straight on the kitchen table. The Reserve Bank lifted the cash rate to 4.60% on 29 September, its fourth rise this year and the highest level in fifteen years. Headline inflation is running at 4.0%, and even the “trimmed mean” measure the Bank watches most closely is stuck at 3.6%, well above the 2 to 3% target. The Bank has said plainly it will go higher again if it has to.

The spark: fuel

Transport costs are up 5.6% over the year, almost all of it petrol and diesel. The Reserve Bank’s own statement points to disrupted global oil supply and the widening conflict in the Middle East, and notes that higher fuel prices are already being passed through into the price of other goods and services. Fuel is in everything. It is in the freight on the groceries, the tradie’s ute, the school run, the cost of getting to the job that pays the mortgage. When fuel moves, the whole cost of living moves with it.

The accelerant: the Budget

Here is the part that is harder to say, because the motive behind it is decent. For years now, governments of both colours have responded to cost-of-living pain the way a Keynesian textbook says they should: spend to soften the blow. Energy rebates. One-off payments. Tax cuts brought forward. Relief “targeted at the most vulnerable”.

Each of those measures is humane on its own. Taken together, they put money into an economy that the Reserve Bank is simultaneously trying to take money out of. The Treasury presses the accelerator while the Bank stands on the brake, and the car goes nowhere except hotter. The Bank has been explicit that demand needs to stay subdued to bring inflation down, and when the Budget keeps demand up, the only lever the Bank has left is to raise rates further and hold them longer.

In fairness, this is an argument, not a settled fact. Economists are divided on how much the relief measures have actually added to inflation. The Reserve Bank’s own statements put the main blame on fuel, global energy prices and an economy running close to capacity, and have generally described the Budget as a modest contributor rather than the driver. The energy rebates, while they ran, also mechanically lowered the measured inflation rate, because the bill the statistician counts was the bill after the rebate. The case made here is about direction: fiscal policy has been pushing the same way as the problem, not against it. It is not a claim that the Budget caused the problem on its own.

And the clawback is not evenly spread. A rate rise barely touches a household with a paid-off home and money in the bank; it actually helps them. It falls hardest on exactly the families the relief was designed for: the ones with a young mortgage, two or three kids, and no slack. The arithmetic is not subtle. Four quarter-point rises this year add about $400 a month, close to $5,000 a year, to the repayments on a $600,000 variable mortgage over 30 years. A one-off rebate of a few hundred dollars disappears inside the first month of that. Your own numbers will differ with the size of the loan, but the direction does not change.

Why the anger

Psychologists have a simple model for this. Before people worry about anything else, they need to feel safe: a roof, food on the table, the ability to look after their children. Every rate rise, every petrol price, every grocery bill is an attack on that bottom layer. People whose safety is under threat do not reason calmly about fiscal policy. They look for someone to blame, and they are easily pointed at whoever is nearest and least able to answer back.

That is the mood the country is in, and it is the subject of the next section.

As an accountant in practice for approaching four decades, I have observed first hand what happens to one group of Australians every time interest rates move. They are the people who keep the country running, and for them every rate rise lands twice.

I have not only watched it across the desk, I have lived it. I have had staff I employ walk into a bank and come out with more finance than the bank would give me. They qualified as “vanilla” employees: a payslip, a steady wage, a job. The job was in my business. The wage came out of my business. The bank put a value on the payslip and no value at all on the enterprise that produced it. That is not a complaint about my staff, who deserved every dollar they were lent. It is a description of how Australian banks see the world: a wage is an asset and a business is a risk, even when the one depends entirely on the other.

There were 2.74 million small businesses actively trading in Australia at 30 June 2026, 97% of all businesses in the country, and the number grew by more than 84,000 over the year. They employ over five million people, 42% of the private-sector workforce, train 63% of the nation’s apprentices, and contribute around $483 billion a year to the economy, roughly a third of it. The café, the earthmoving contractor, the physio, the IGA, the transport operator with three trucks: this is where most Australians actually work, and where most of the jobs in regional towns come from.

Here is what the economics textbooks leave out. In most advanced economies a profitable small business can borrow against its own trading record, its stock, its contracts, or through a public scheme that shares the lender’s risk. Australia has very little of that. Our banking system, dominated by four lenders, has settled on one answer to the question “how do we know you will pay us back?”, and the answer is the family home.

The Reserve Bank’s figures tell the story. Fewer than one small business loan in twenty is unsecured. Just under half are secured over the owner’s house, and those are the only ones of any real size: a loan backed by residential property is on average four and a half times larger than one that is not. If you want enough money to buy a truck, fit out a shop or carry a season’s stock, you put the house on the line. That is true even when the business is profitable and growing.

And the money has flowed accordingly. Over the past five years Australian housing loans grew by around $650 billion. Lending to small business grew by about $58 billion, roughly one-tenth of that. The system is built to lend against bricks, not against enterprise.

Why this belongs in a story about household debt

Because a good slice of that 112% of GDP in “household” debt is not household debt at all. It is business debt wearing a mortgage. The Reserve Bank admits it cannot measure small business leverage properly for exactly this reason: so much of it is borrowed against the owner’s home that it is counted as a home loan. The national statistics describe a nation of over-extended home buyers. Part of what they are really describing is a nation of small business owners who had no other way to fund their businesses.

Now watch what happens when the cash rate rises. The owner’s home loan reprices within weeks. The business loan reprices faster still, because it is a variable-rate facility secured on the same house. The Reserve Bank’s own analysis says the pass-through to small business is quicker than to big companies. And the small business pays more to begin with: in July 2026 small businesses were paying an average of 7.46% on their loans against 5.74% for large companies, the highest small business rate in seven years.

Then add the fuel bill. The businesses most exposed to the energy shock, according to the Reserve Bank this month, are the smaller ones with thin cash buffers in transport, hospitality and construction, who find it hardest to pass higher costs on when customers are already pulling back. These are the same owners carrying the double mortgage. They are being squeezed from both ends at once, and when they fail, the house goes with the business.

None of this is an argument that banks should lend recklessly. It is an observation that Australia has chosen to run its small business sector on home equity because it never built the risk-sharing institutions that other countries use, and that the family home is now carrying a load it was never designed to carry. When people ask why Australians with a AAA-rated government feel so financially insecure, this is a large part of the answer.

It is also, not coincidentally, where a lot of the anger is coming from.

When people are frightened for their safety, they look for someone to blame, and the easiest target is whoever is nearest and least able to answer back. In Australia right now that target is “illegal immigrants living off the system”. It is worth being precise about who those people are and what they cost, because the numbers do not support the anger.

Who they are

Home Affairs estimates there are around 77,000 unlawful non-citizens in Australia. Almost none of them arrived covertly. They came legally, on tourist, student or temporary work visas, and stayed when the visa ran out. Roughly 25,000 of them have been here for more than ten years. In a country of 27 million people, that is 0.285% of the population: not even one third of one per cent, about one person in every 350, a smaller group than the population of Bendigo.

What they get

Nothing. An unlawful non-citizen cannot receive a Centrelink payment, cannot get public housing and cannot use Medicare. They have no work rights, so what work they find is cash. They pay market rent, buy their own food and pay GST on everything they spend. The one dedicated support program, Status Resolution Support Services, is budgeted at about $26 million a year across the whole country, and it is for people actively going through a status determination, not for overstayers living in the community.

It is also worth knowing that this applies well beyond the undocumented. Most people who arrive legally as permanent residents face a waiting period of up to four years before they can claim JobSeeker, Youth Allowance, Parenting Payment or most other working-age payments. Temporary visa holders, which includes every international student and most skilled workers, cannot claim them at all. “Migrants on welfare” is, for the overwhelming majority of recent arrivals, legally impossible.

What they cost

The real cost is enforcement, and it is a cost governments choose. The federal compliance, detention and border budget runs to roughly $1.26 billion a year. Against a $2.7 trillion economy that is about 0.05% of GDP, or roughly 0.08% once the legacy offshore processing facilities are included. Keeping one person in onshore detention costs around $429,000 a year; supporting the same person on a bridging visa in the community costs about $4,000. Offshore processing is more expensive again: on Refugee Council analysis of the Budget papers, holding one person on Nauru has cost between $5.6 million and $9.6 million a year, because a fixed system of contracts and facilities is now spread over a very small number of people. The expensive part of this system is the part built to look tough.

Where the social security dollar really goes

If you want to know who the welfare system supports, the answer is us. The biggest lines in the social services budget are the age pension, the National Disability Insurance Scheme, aged care, Medicare and family payments. Those go, by law, to citizens and long-term residents. They are the cost of looking after our parents, our children and our neighbours who cannot work. They are also, as the first section of this page shows, a cost the nation can comfortably carry.

The honest caveat

None of this means migration policy is above argument. Net overseas migration has been running at historically high levels since the borders reopened, and it is reasonable to ask what that does to rents and housing supply. That is a debate about the size of the legal intake, and it is a fair one to have. It has nothing to do with welfare, and nothing to do with the 77,000 overstayers. Running the two together is how a legitimate policy question turns into a hunt for a scapegoat.

Raising the bar

Australia is not broke. The pressure on households is real, and it comes from interest rates, fuel, a tax and transfer system working against the Reserve Bank, and a banking system that funds small business on the family home. Every one of those is a choice we have made and can remake. Blaming the one group that costs almost nothing and receives nothing solves none of it. It just lets the people who could fix it off the hook.