Economists have described the political shenanigans surrounding the national debt ceiling as a "storm in a teacup" that's only become an issue in Australia because of the recent debacle in the US.
Labor and the Australian Greens used their numbers in the Senate on Thursday to limit an increase in the debt ceiling to $400 billion, rather than the $500 billion sought by the government.
"You will find $500 billion is the appropriate level to deal with the legacy of Labor's debt," Treasurer Joe Hockey told the lower house, rejecting the amendment.
The bill could return to the Senate on Thursday evening, but it is more likely a further vote will remain in limbo until the Senate sits again in the week of December 2, just 10 days before the current limit of $300 billion is breached.
The opposition parties want to restrict the increase because the government has not provided adequate reasons for such a large debt ceiling.
But Mr Hockey won't release the mid-year budget review - that would lay out updated economic, fiscal and debt forecasts - until after the release of the September quarter national accounts in early December.
However, he argues that Labor's own economic statement released before the election showed Commonwealth debt peaking at $370 billion in 2015/16.
Additionally, advice from the Australian Office of Financial Management shows it was prudent to have a buffer of $40-$60 billion above the forecast peak.
"We're not going to put the stability of the markets, and the stability of the CPS (Commonwealth Public Service) at risk as a result of Labor ... in opposition," he said.
TD Securities head of Asia Pacific research Annette Beacher said compared to other countries, Australia's debt is "tiny" and Australia's triple A rating is unlikely to be affected.
"Compared with global fiscal issues, this is a storm in a teacup, and more political posturing than anything else," Ms Beacher said in a note to clients.
Earlier, Mr Hockey warned of a US-style shutdown of federal government services if his legislation was blocked in the Senate.
"There is no choice but to start having massive cuts to government expenditure," he told ABC radio.
But shadow treasurer Chris Bowen said it was strange that it was only the treasurer who was talking about a government shutdown.
"In the United States you saw a political party (the Tea party) try to shut down the government. Here the only person talking about that is the government," he told reporters in Canberra.
He said Mr Hockey went to the election promising to reduce debt and implementing deep budget cuts, and was now using the debate over the debt ceiling as an alibi for not reducing the debt.
Prime Minister Tony Abbott weighed in on the issue during question time, saying having been incapable of managing the budget in government, Labor now thinks they can do it from opposition.
"What frauds they are. Members opposite should stop interfering with the fiscal repair job that this country desperately needs," Mr Abbott said.
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