Chart for this Month: The Public Debt League – Analysis by Keith Rankin.
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Chart for this Month: The Public Debt League – Analysis by Keith Rankin.
The new government claims to have solutions to our many social and economic problems. Yet it persists with the view that reducing public debt takes priority over any of these problems. Seems to me like they wish to spend the 2020s in Opposition.

This month’s chart shows the public debt to GDP ratio for all 171 countries covered by that have public debt data. Public debt includes the debt of governments at all levels; not just central government. And we should note that many countries with substantial levels of public debt are creditor countries overall; it’s just that the government component of those countries’ economies offsets their private sector creditor status.

The highlighted countries here are all ones which New Zealand is familiar with.
The first point to notice is that there are countries with strong economies and countries with weak economies across the whole spectrum. The overall impression, however, is that countries that we look to as economic exemplars are more likely to be towards the left (higher debt) of the public debt spectrum.

New Zealand, at 25% of GDP, comes in at 139 out of 171 in the public debt league. The only OECD (developed) countries that have less public debt are Luxembourg and Estonia. The other counties in the 24% to 26% range are Peru, Bulgaria, Guatemala, Eritrea, Cameroon and Liberia.

Why do we want to join Kazakhstan, Algeria and Palestine, which are at the 20% mark? The governments of Canada and the United Kingdom, with public debt at 90% of GDP, have triple-A credit ratings. Their governments can borrow money at close to 0% interest despite their high public debt.

Japan’s government borrows from its people at 0%. Indeed Japan, with public debt at 250% of GDP, has plenty of ongoing public spending, including the Rugby World Cup and the Olympic Games. Japan’s government, like New Zealand’s, has a double-A credit rating.

Without public debt, the world economy would be in a state of complete collapse. If all governments were like ours, aiming for the bottom of the public debt league (right hand side of the chart), then this would truly be a race to the bottom.