Chart of the week: The end of austerity?

Almost a third of advanced economy public debt has a negative yield, and government net interest payments as a percentage of GDP have fallen to a multi-decade low. Most major economies have plenty of fiscal space before investors traditionally worry about debt sustainability — in other words, before debt servicing costs rise beyond the sum of GDP growth and the primary deficit, which excludes interest payments. Yet most governments haven’t taken advantage of this fiscal leeway, which is a shame because it could make up for what’s lacking from monetary stimulus. In fact, several studies suggest that ‘fiscal multipliers’ (how many dollars of GDP growth arise from every dollar of fiscal expansion) may be much larger than usual when policy rates are at 0%. But there are potential issues. Read more about the power of fiscal policy in ‘Looking for fiscal green shoots’, an article in our latest InvestmentInsights.