Advanced Economies Report Higher Debt Levels

Government borrowing by central governments in advanced economies rose from an estimated $US12 trillion in 2022 to US$17 trillion in 2025. Total outstanding debt reached a record US$61 trillion during the same period. The average debt-to-GDP ratio across the OECD group of advanced economies stands at 83 per cent, rising to 85 per cent.

The US has a debt-to-GDP ratio in excess of 100 per cent. The UK’s stands at 100 per cent, France at 115, Italy at around 140 and Japan at a whopping 237 per cent of GDP.

The OECD estimates that nine hyperscalers will drive an estimated $US4.1 trillion in capital expenditure between now and 2030, much of it financed through debt markets. Central banks have reduced their involvement as purchasers of bonds. Bond markets have handled the increased borrowing without too much strain so far, though interest costs have risen for most governments.

Recent bond market movements indicate the current situation remains fragile.

Bond markets reacted with a spike in yields. In recent days, the Japanese 30-year bond yield pushed through 4 per cent for the first time. Current polls indicate that Nigel Farage’s Reform could win the next UK general election, with a platform of large unfunded tax cuts.

The UK’s gilt market has seen movements after the recent council elections. France has been unable to form a stable governing coalition, with parliament fragmented into different blocs.