Australia's new conservative government, led by Prime Minister Tony Abbott, will introduce a legislation to raise the country's debt ceiling as the current limit is expected to be reached by around December this year, Treasurer Joe Hockey said on Tuesday.

The coalition will legislate to increase the Commonwealth Government debt limit to A$500 billion from the current A$300 billion, Hockey said in a statement.

The August economic statement and the Pre-election Economic and Fiscal Outlook (PEFO) outlined that Commonwealth Government Securities or CGS on issue were expected to reach the existing debt limit of A$300 billion around December 2013.

These documents also outlined that CGS on issue would continue to increase over the forward estimates and reach A$370 billion by 2015-16.

Since this time, the outlook for the previous Government's last Budget has deteriorated further, Hockey said, adding that on current trends, the peak debt is now expected to exceed A$400 billion.

Hockey observed that according to the Australian Office of Financial Management, it is prudent to maintain a buffer of A$40 billion-A$60 billion of headroom above the peak debt projected in any year to allow for unanticipated events with a fiscal impact.

"The debt limit needs to be set so as to provide sufficient headroom to ensure there is stability and certainty for the financial markets about the Government's capacity to finance its operations for the foreseeable future," he said.

RTTNews