S&P's missing $400 billion

Regular readers will recall that this year's coverage began with the unwholesome news that S&P were in the process of downgrading Australia's BICRA score - the credit rating given to the Australian financial system.

This blogger has chopped a rather important chart from the primary BICRA document (see above, full document below) in order to ask a question.

Credit junkies will note that Australia's debt to GDP ratio is graphed in the upper 120 percentage point range. To be precise, it is 127.3%.

The question is this. Why is Australia's debt to GDP so low?

Dr Steven Keen puts the ratio at 160%, which would clearly push Australia into the nasty territory currently occupied by Spain, the UK and the US.

This blogger has double checked Dr Keens' figures and they are correct. It then played around with the credit aggregates available at the RBA (D02), adding and subtracting them in various ways, leaving some credit components out and calculating against GDP. But nothing has worked to produce 127.3%.

Wondering if this was a straight error, the same was tried with New Zealand's debt to GDP figures. Again, no rearrangement of figures served to justify the quoted ratio.

So clearly S&P uses some kind of proprietary formula for calculating debt to GDP that loses more than 20% or roughly $400 billion of Australia's debt.

The above graph hints at that formula in the description "Domestic credit to the private sector". But what exactly does that mean?

Perhaps it means that international banks that extend credit in Australia are excluded. Or, perhaps it means that offshore borrowings are excluded. Or, perhaps it means that some portion of Australian credit ends up offshore.

This blogger is buggered if he knows. So it rang S&P. They haven't answered his inquiry.

Given the rather important nature of this question, perhaps someone out there can help locate the missing $400 billion.

S&P Preliminary BICRA in 23 Countries Jan 6 2011 (1)

S&P FI RfC Methodology for Determining BICRA May 13 2010 (1)