Bill English has said that his fiscal policy priority is to reduce gross public debt to 20 percent of GDP. Is public debt really our number one economic problem?
I took a quick look at the IMF’s biannual ‘World Economic Outlook Database’ (April 2016 edition). I found that New Zealand’s gross public debt is 30.4 percent of GDP, and net public debt is 7.5 percent of GDP. Too high, many might say. How do these statistics compare with other countries’ public sectors?
For gross public debt, data is given for 186 countries. New Zealand comes in at 149th in the public debt league. (For net public debt, New Zealand ranks 73 out of 94 countries for which this data exists.)
Significant countries with less gross public debt than New Zealand are few: Norway (ranked 151), Indonesia (152), Bulgaria (154), Peru (161), United Arab Emirates (166), Democratic Republic of the Congo (168), Russia (171), Iran (173), Chile (174), Nigeria (176), Saudi Arabia (183).
Countries New Zealanders relate to that have higher gross public debt than NZ include: Japan (ranked 1; 248 percent of GDP), Italy (4th highest), happy Bhutan (9), unhappy USA (10), Spain (15), France (17), Ireland (18), Canada (22), UK (23), Brazil (39), Germany (44), India (67), Finland (65), Malaysia (75), Argentina (78), Mexico (82), South Africa (90), Fiji (99), Denmark (101), Switzerland (102), Sweden (104), China (106), Papua New Guinea (115), Panama (121), Philippines (126), Australia (127), South Korea (130), Qatar (132), Bangladesh (140), Turkey (144). Are these all economic ‘basket cases’, as the Roger-gnomes claimed the New Zealand economy was in 1984? Many of these countries have significantly higher living standards than New Zealand does.
Do we really need to beat Norway, Indonesia, Bulgaria and Peru in the low debt stakes? If we achieve the 20 percent goal, we’ll be 165th in the world for gross public debt instead of 149th. Whoop-de-doo!
Beating Norway would be a hollow victory. It has a net public debt of minus 278 percent of GDP. Don’t think we could match that.
Greece has the highest net public debt, at plus 177 percent of its GDP. Japan sits in third place on 128 percent. The UK and the USA both have net public debt at 81 percent of GDP. Canada has 27% and Australia 18%. Our 7.5% is puny. Do we really need to reduce that figure further?
Let’s address the economic problems that we do have. There are plenty, such as housing. We could start by paying Statistics New Zealand a couple of million dollars to find out how many ‘rental’ properties are not actually being rented. (The withdrawal by ‘investors’ of houses from the rental stock is the proverbial ‘elephant in the room’ on this matter.) While we do not have a public debt problem, we do have very serious housing challenges that could be resolved by substantially taxing the owners of metropolitan baches and unrented rentals, thereby returning a substantial stock of existing houses to a state of habitation.