Canberra - Australian Treasurer Joe Hockey warned on Thursday of a US-style shutdown if the Labor opposition refuses to agree to lift the nation's debt ceiling to Aus$500 billion.

The current ceiling of Aus$300 billion will be breached on December 12 and while a bill to raise it passed the House of Representatives on Wednesday evening, there is a stand-off in the Senate.

Labor and the Greens hold the balance of power in the upper house and only want an increase to Aus$400 billion, but the Tony Abbott-led government said that was not enough.

"If Labor prevents an increase in the debt limit, there is no choice but to start having massive cuts to government expenditure because the government is running on borrowed money -- that's what we inherited," Hockey told ABC radio, adding: "They're playing an irresponsible game here."

Last month the United States government was shut down 16 days and taken to the brink of default as Democrats and Republicans locked horns over a budget bill and raising of the country's borrowing limit.

Hockey told parliament on Wednesday the government may have to stop welfare and health-related payments if the ceiling was breached.

"The Labor Party is now playing a game of Russian roulette," he said.

"But what they don't understand in relation to debt limits is that the barrel is fully loaded. If they choose to pull the trigger, there's only one outcome for them. But the problem is, there will be ancillary pain for the Australian people."

Opposition treasury spokesman Chris Bowen accused Hockey of behaving "like a B-grade actor", saying Aus$400 million was sufficient and "we are not going to give them a blank cheque for half a trillion dollars".

"This is a Liberal Party which campaigned to bring down the debt," he told reporters, adding that they needed to justify why the cap should should rise by so much.

"They should release their economic statement and until they do it, we would only approve an increase of $100 billion, which is more than enough -- certainly to get them through this year," he said.

Greens leader Christine Milne also demanded the government explain why so much more money was needed.

"What we're saying is, what is your agenda? What do you want to spend the money on?" she said.

Hockey said Labor, which was ousted from government in September elections, already knew the ceiling needed to be raised as it had said while in office that peak debt would hit Aus$370 billion and a buffer of up to $60 billion was required on top of that.

"The Labor Party couldn't add up when they were in government. How would you expect them to add it up when they're in opposition?" he asked.

"I'm going to send them a calculator for Christmas. I'm going to keep it simple with nice big digits."