Government and Fiscal Policy

New Zealand among lowest government debts in OECD

Tuesday September 26, 2017 Hugh Dixon

New Zealand is one of the countries in the OECD with the lowest levels of government debts, when expressed as percentage of GDP.  In 2015, among OECD countries, New Zealand government debt was just 35.6 percent of GDP (in dollar terms New Zealand government debt was in 2015 NZ$86.1 billion).  This position enables the New Zealand Government, if needed, the ability to borrow billions of dollars to fund new infrastructure and investments within New Zealand, or prop up the economy in the face of a recession.


Of the OECD countries only Estonia, Chile, Turkey and Luxembourg had lower levels of government debt when expressed as a percentage of their countries GDP.  Overall in 2015 the median level of government debt as a percentage of GDP was the Netherlands with 77.5 percent, while our neighbours Australia sat at 67.7 percent, the UK at 112.6 percent and the United States at 125.9 percent.    


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After the Greek crisis in 2008, high levels of Government debt (where debt is over 100 percent of GDP) have been seen as bad by markets and the general public.  With many governments including New Zealand aiming to decrease government debt to maintain credit ratings (and lower borrowing costs) and assure the public that the Greek crisis would not occur in their own backyard.


High levels of Government debt do not have to cause economic and fiscal issues for a country, as can be seen by the levels of government debt carried by Japan, the United States, Canada, and the United Kingdom.  High levels of Government debt only become an issue for a country when the debt is funded mainly from overseas investors, when the debt is issued in non-local currency, the country is unable to alter its exchange rates, where the debt is used to fund the basic operations of Government, and when the global economic conditions see declines in the available credit and a loss of confidence amongst investors willing to loan money.