Treasurer Joe Hockey has let slip that the government debt could rise to more than half a trillion dollars - a figure that exceeds previous expectations by some $50 billion.

It comes days after the Coalition resolved its standoff over the debt ceiling, with the Greens voting with the Abbott government to abolish the self-imposed limit on government borrowing.

Treasurer Joe Hockey has warned of Australia's deteriorating budget situation. Credit:Alex Ellinghausen

Mr Hockey is expected to reveal the new peak debt figure of more than $500 billion in next week's Mid Year Economic and Fiscal Outlook, which the Abbott government has framed as an ugly set of financial figures that will be blamed entirely on Labor.