Australia's debt levels will soar as high as the level reached after World War II if future governments fail to curtail spending on an ageing population.
A report by ratings agency Standard and Poor's says without curbs on government spending on the growing number of older people, Australian government debt would reach 139 per cent of GDP by 2050.
In today's dollars, that would equate to more than $2 trillion.
General debt is now about $240 billion. The highest recorded Federal government debt level was after WWII at more than 150 per cent of GDP.
Even a failure to deal with agerelated costs over the rest of the decade will lift government debt levels, reaching 21 per cent of GDP by 2020.
Standard and Poor's says that rather than enjoy one of a handful of triple-A credit ratings, Australia's rating would slump to a triple-B by 2050 if age-related costs are not brought under control.
Australia would not be alone, with the agency fearful no country in the developed world has worked out how to accommodate within their budgets the demographic financial time bomb.
Report author Marko Mrsnik said much hinged on the ability of governments globally to overcome debts incurred fighting the global financial crisis and to tighten their fiscal belts.
"This may be the start of a decades-long period of tension between two different priorities: public spending on pensions and health care for ageing populations versus the need to contain sovereign budget deficits and debt," he said.
In the case of Australia, if it stopped any further aged-related spending total debt falls from existing levels while it would retain its triple-A credit rating.
Lower global interest rates would also mean Australia's debt levels would remain muted even with higher spending on aged-related services.
Australia already has one of the lowest aged-related spending levels among developed nations.
The agency's findings come ahead of the release of the Federal Government's latest intergenerational report.The report, which outlines the costs to the Budget caused by demographic change, is more than a month behind its scheduled release. Rising costs $240b Australia's current general debt level, which analysts say could rise sharply by 2050
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