However, despite this crucial advantage, we cannot fully insulate ourselves from the spillovers from others. Fiscal slippage by some major countries may increase interest rates for all.
Moreover, experience suggests that when debt exceeds 90 per cent of GDP (as it will for most of our trading partners), growth slows, with predictable consequences for our exports.11 In the extreme, if fiscal consolidation abroad is delayed too long, investors may even call into question the existence of a risk-free asset.