Pinching Debt Data

by Stubborn Mule on 22 May 2009 · 12 comments

Regular readers of the Mule will know that I am a bit of a data-mining junkie. Whenever I come across an interesting chart I start Googling for the underlying data. But, even with well-honed Google skills, it’s not always possible to find the data. Sometimes it is simply not publically available. I ran into just this problem recently. The recent Australian Federal budget triggered countless alarmist opinion pieces despairing that Australia would be “mired in debt” and this prompted me to do some research of my own. In the process, I came across a handy primer on the subject entitled “A history of public debt in Australia”. Written by a number of Australian Treasury employees in the Budget Policy Division, it included the chart below which shows the history of net Government debt (combining Commonwealth and State debt) over almost 40 years. The chart also includes forecasts for the next few years.

Debt History - Original (v2)

Australian Government Net Debt to Gross Domestic Product

While the paper is clearly quite recent (it has no publication date), the forecasts pre-date those included in the May budget, so I was interested in updating the chart with the latest Treasury forecasts. The underlying data does not appear to be published online and, since I do not work with the authors in the Budget Policy Division, I had to resort to special measures. I turned to a handy (and free, open source) little piece of software I have used a number of times to pinch data from charts. The software is called Engauge Digitizer and it allows you to import an image of a chart and extract the underlying data.

Engauge Digitizer Screenshot

For charts with points or curve segments, Engauge generally does a great job of automatically finding the data. For a column chart like the one I had found, the process is a little bit more manual, but with a bit of clicking on the tips of each of the columns in the image, I had my data. The chart below shows the data I obtained. One indication of the accuracy of the results is that the authors of the history paper noted that net debt had averaged 5.7% of gross domestic product (GDP) since 1970. Satisfyingly, the average of my extracted data over this period was also 5.7%.

Debt History - Imported (v2)Australian Government Net Debt to GDP (imported data)

Having obtained the data, I was then able to replace the forecasts with the more recent Treasury figures included in Budget Paper No. 1.

Debt History - New Forecasts (v2)

Australian Government Net Debt to GDP (updated forecasts)

For the alarmists who are worried about this growing debt, it is useful to put these forecasts in a global perspective. The chart below puts these Treasury forecasts alongside IMF forecasts for a number of other developed countries.

World Debt Forecasts

Global Debt to GDP Forecasts

Compared to the rest of the developed world, the global financial crisis is still not looking quite so scary for Australia. When it comes to the United Kingdom, rating agency Standard and Poor’s is even more pessimistic than the IMF and is concerned that their net debt could reach 100% of GDP and have accordingly changed the credit rating outlook for the UK to negative.

UPDATE: For anyone interested in getting hold of the data without resorting to scraping it from the images, I have uploaded it to Swivel. This dataset includes the most recent Treasury forecasts.

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{ 9 comments… read them below or add one }

1 Natalie May 27, 2009 at 4:35 am

Wow. Enguage looks like a pretty awesome tool. I wish I had known about it back in my days as an intern, when I was scouring the web for data to pump into Swivel. Will definitely keep this in mind for future research. Thanks! :)

2 earl June 6, 2009 at 8:26 am

Ok so we have 8 lifeboats afloat (using the graph above) and the one that all the Australians are in doesnt have as many people as the others and the Japanese boat is currently the most over crowded. Worse still the Japanese boat is starting to sink while all the others (including ours) have leaks of varying degrees. When the Japanese boat sinks all the other boats will be affected as the Japanese passengers will want to be taken onboard by them. I dont think there is much comfort in lounging back in your lifeboat thinking that your in a better position than the other lifeboats around you. We are still very much reliant on ALL the other lifeboats staying afloat………

3 Danny Yee June 20, 2009 at 11:29 am

> the global financial crisis is still not looking quite so scary for Australia

To see how scary the financial crisis is, don’t we need to consider private debt as well as government debt?

4 stubbornmule June 20, 2009 at 1:55 pm

@earl: certainly economic weakness in our major trading partners if bad news for Australia (although the G7 is not particular representative of these: Italy and Canada are not particularly important for Australian trade, while China and Korea are). Nevertheless, these Government debt forecasts are, in themselves, not necessarily clear indicators that our trade will collapse. After all, gross Japanese Government debt has exceeded 100% of GDP for over ten years and net debt has been over 80% for the last five years.

@Danny: I agree that looking at Government debt is not a particularly useful way to assess the severity of the financial crisis, except to the extent that the forecast increases reflect a combination of low prospective tax revenues and significant stimulus packages, both consequences of the crisis. The point of this post was more to counter the sometimes hysterical commentary about supposedly burgeoning Government debt in Australia by putting it in a global perspective. Another question, which I didn’t touch on here, is whether or not high levels of Government debt should be scary at all anyway. Some commentators would argue no.

5 earl June 20, 2009 at 5:54 pm

I went on a course this week and the instructor was a self funded retiree who has had to come back to work as his income has reduced. Even in the AFR this morning CIF annual dividend will be 20c down from 34c, other institutions cutting dividend. So the wave of less coming in is still building and will is still to roll in over investors. I note the RBA figures of bank fee increase is due to more usage rather than higher fees. How much you wanna bet the more usage is really (desperate) people taking out new credit cards to jack up existing credit card debt. We are about to enter a new phase of banks being awash with money looking to “give it” away.
Cheers

6 stubbornmule June 21, 2009 at 8:45 am

@earl: I’d agree that we’re not out of the woods yet. There’s plenty on the economic front here and around the world to be concerned about. Since you and Danny has both mentioned consumer debt in one form or another, perhaps it’s time for a post looking at that data.

7 stubbornmule July 16, 2009 at 10:10 pm

Here’s an update. Danny, you’ll be pleased to know I consider private debt this time as well!

8 Samuel Dance September 18, 2009 at 1:04 am

I have always been interested in the fiscal matters. Yes our national debt is very small in comparison to other countries, yet other countries had a large amount to begin with, whereas Australia had a 20 billion dollar surplus. In comparison to the past Australia is doing rather well, however I would like to point out that the sale of Commonwealth Bank, Telstra, Airports, Qantas and so on contributed to reducing the debt, they also however reduced Australia’s potential GDP and we have nothing left to sell of to aid in paying our growing deficit.
Lastly, as a lover of graphs myself, I would ask you to have a look at and post the Private sector debt, you will find that it is in stark contrast to that of the public Australian sector debt. In addition to this the private debt is not Business related but caused through personal “home loans” so it does not generate any further GDP or job based growth. Thanks for posting these, I look forward to the others if possible.

Cheers

9 stubbornmule September 18, 2009 at 8:12 am

Samuel: That is a good point about asset sales being a significant factor in the starting point for Australian public debt coming into the financial crisis. While I would also agree that the merits of some of these asset sales can be debated (after all, the Government still feels it has to mess around with Telstra), I don’t think that it will have an impact on the Government’s ability to repay debt in the future. This is because Australia has non-redeemable “fiat” money so the Government never has to be revenue constrained, a point I touch on it a later post, Park the Debt Truck.

The same post also has a chart showing private sector debt. As you rightly point out, it drawfs the size of public debt. In fact, that is no coincidence as the net income flow of Government + Domestic Private Sector + Foreign Sector have to net to zero. So, while Australia was running budget surpluses and a current account deficit, it is a simply matter of accounting that domestic private sector debt had to increase. This is another reason why a bit of Government deficit spending right now is a good thing: not only does it help stimulate the economy, it helps to allow the domestic private sector to reduce debt.

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