Quantitative Easing, Government Debt Management and Debt Interest

For nine years after the global financial crisis, central government debt interest payments fell steadily relative to GDP, from 2.5 per cent in 2011-12 to 1.1 per cent in 2020-21, despite continuing budget deficits. This was partly the result of low short-term interest rates, and generally falling longer-term rates, but it was also a consequence of quantitative easing (QE). The purpose of this box is to explain the connection between quantitative easing, which is generally regarded as an instrument of monetary policy, and government debt management and interest payments.