There is a new UBS study which among other things covers the fiscal stance of the world as a whole. Please do not misinterpret me as suggesting this implies anything particular for the policy of any individual nation, still the aggregate numbers are interesting to ponder. Here is part of an FTAlphaville summary:
- Government consumption’s share of global GDP has risen from 11 per cent to 14 per cent over the past 15 years. In 2013, it hit its highest level since 1980.
- At the same time, government debt-to-GDP ratios have hit record highs in many countries.
- Working-age populations are growing more slowly, or in some countries, such as Japan, beginning to decline.
- Accordingly, the window of opportunity for mature economies to bring government debt levels down to sustainable levels is narrowing, owing to demographic shifts.
- Given the situation in the government sector, private consumption needs to make a bigger contribution to the next phase of the recovery. Its share of GDP continues to hit multi-decade lows. Fixed investment is also making a smaller contribution to global growth than it did in the pre-crisis years.
Since the start of 2008, government consumption at the global level has risen by 20 per cent in real terms, whereas private consumption and fixed investment have risen just 8 per cent and 5 per cent respectively. Despite talk of austerity, government spending continues to run ahead of spending in the private sector.
While I have not looked into this particular estimate, China is likely playing a big role in this effect.