A global sell-off in government bonds is driving up borrowing costs worldwide, and Australia is not immune, according to columnist Peter van Onselen. Although few Australians directly buy government bonds, the market sets the baseline cost of borrowing for banks, businesses and ultimately households, meaning the sell-off risks pushing up mortgage rates, denting superannuation returns, and forcing the government to choose between raising taxes or cutting spending to cope with higher debt costs.

Australia's 10-year government bond yield has climbed to around 5.2 per cent, its highest level in more than 15 years and sharply up from a pandemic-era low of just 0.55 per cent. The trend is global, with yields in the US, Japan, Britain and Europe also hitting multi-year highs, driven by persistent inflation, large government deficits and central banks keeping interest rates elevated. The OECD expects governments and companies to borrow a record US$29 trillion via bond markets this year, twice as much as a decade ago, with 78 per cent of OECD government borrowing simply refinancing existing debt at these higher rates.