By that measure Australia is doing quite nicely thank you whatever the would-be Treasurer Joe Hockey has been telling us in recent months. Australia clearly has one of the most manageable public debts in the world with the sobering evolution of public debt in advanced economies since the crisis, as well as IMF projections for debt ratios over the next five years shown in the following table:
Government Debt to Gross Domestic Product.
Among the advanced economies, Australia, Denmark, Korea, New Zealand, and Norway generally have the most fiscal space to deal with unexpected shocks—although of course they, too, must be mindful of future fiscal pressures cautions the IMF report. Greece, Italy, Japan, and Portugal appear to have the least fiscal space (i.e., least scope for increasing public debt without a fundamental shift in the behavior of the primary balance), with Iceland, Ireland, Spain, the United Kingdom, and the United States also constrained in their degree of fiscal maneuver, the more so owing to the run-up in public debt projected in coming years as well as demographic pressures and the possible realization of contingent liabilities.