NZ’s debt in perspective

Written By: - Date published: 3:00 pm, April 15th, 2009 - 7 comments
Categories: budget 2009, economy, national/act government - Tags: , , ,

Remember when John Key used to say “New Zealand has a growth problem, not a debt problem”? He doesn’t say that anymore, which is a pity because we do have a growth problem, not a debt problem, but the Government is acting like we’ve got a debt problem that needs to be tackled first.

Yes, our gross debt is $45 billion, $15 billion more than predicted before the election and $10 billion more than projected just in December. Our gross debt has gone up $13.5 billion in the past year. Our net debt position, however, is better than expected. It went from $1.8 billion to $3.4 billion and, at 1.8% of GDP, is below forecast. Treasury explains:

[the] gross debt figure includes a component of Reserve Bank bills that (like settlement cash) have corresponding and offsetting assets and that were issued for liquidity management purposes, rather than reflecting the government’s underlying borrowing needs. Excluding these bills, gross debt would have been $40.7 billion (22.6% of GDP).

Although gross debt has increased, financial assets have also increased as a result, minimising the impact on net debt.

It’s like when you get a mortgage. Your gross debt goes up but because you’ve used that debt to buy an asset your net position doesn’t change.

Yes, Moody’s said our credit rating could be downgraded if we let debt grow out of control over the long-term but they re-confirmed our AAA rating. There is no immediate threat to our credit rating from sensible borrowing in the short-term. Anyway, a credit rating downgrade isn’t something to be avoided at all costs, particularly if the cost is a longer and deeper recession. We’ve had lower credit ratings in the past and it hasn’t been the end of the world.

National has been using the fear of debt as a smokescreen for its rightwing agenda. English has justified spending cuts and not providing a jobs package because of debt levels. Nick Smith has claimed we will get a credit downgrade if we don’t slash ACC. The Black Budget that is coming will use debt as an excuse to cut spending on public services like health and education (miraculously, those same supposed debt problems won’t necessitate reversing the recent tax cuts or cutting road spending).

We don’t want debt to get out of control but it isn’t out of control. It’s certainly not as much of a problem as a prolonged recession, service cuts, and 60,000 more unemployed Kiwis.

When National says you have to accept cuts because of debt, remember what that nice man Mr Key said: ‘we don’t have a debt problem, we have a growth problem’.

7 comments on “NZ’s debt in perspective”

  1. IrishBill 1

    Just like last time English will try to cut his way out of the recession. And just like last time the recession will deepen and Kiwis will suffer. It’s sickening deja vu.

  2. big bruv 2

    Neville Key is right of course, we do have a growth problem and that problem developed under the Labour government.

    Our recovery is not helped by the fact that we were the first in the Western World to go into recession thanks to the failed policies of Cullen.

    Sadly Neville Key will not do what is required, he should be cutting (slashing actually) costs and benefits but he has already shown he is nothing more than Labour lite when it comes to cost cutting.

    • Maynard J 2.1

      Neville Key

      Sure, because this is as big as stopping Hitler. When will you narrow minded bigoted provincial folk realise that nothing in our politics is remotely applicable to the Nazis?

      If NZ was in such a bad position, then why is our unemployment rate and debt so low when compared to the other countries you’re presumably comparing NZ to?

      Any why do you argue that we indeed have a growth problem, then follow through with suggestions that solutions to a debt problem are required? Are you incapable of understanding these ideas? If you are, why comment here? There are clubs you can go to if you feel like some humiliation, you could get fixed up in nappies in no time. Maybe not public enough for you?

      • Pascal's bookie 2.1.1

        When will you narrow minded bigoted provincial folk realise…

        But Maynard you big elitist,

        ‘Neville could’ve stopped H1tler at Munich, therefore diplomacy bad’ is one of the only three lessons of history they think they know.

        The others being;

        ‘The Soviet Union collapsed because Reagan told them to tear down the wall, therefore deficits don’t matter and tax cuts’ and

        ‘The entire western peace movement was run out of Moscow, also feminism’

  3. Stephen 3

    The Black Budget that is coming will use debt as an excuse to cut spending on public services like health and education

    Or maybe the Families Commission. But not. Sigh.

  4. Greg 4

    Interesting post. Your right, debt ain’t always a bad thing. The problem the government has at the moment though is that the overseas credit markets are shrinking. It’s a lot harder to go into debt and it costs a hell of a lot more than it used to. Due to the good old recession that we all love so much.

    It is very misleading to compare our amount of debt now with the past. They’re not both apples. In fact, New Zealand would find it very hard to raise the funds to be able to go into significantly more debt (at a reasonable cost). The government really does not have that much room to move.

    • Draco T Bastard 4.1

      We don’t actually need to go into debt. Borrowing money from overseas (or any other capitalist) really makes no difference to the local economy. Use labour where it is most beneficial, make sure it is well looked after* and, wallah, the economy works.

      * any economy is well capable of this if it wants to do so. It just doesn’t have any capitalists in it.

Links to post

Recent Comments

Recent Posts

  • Compliance strengthened for property speculation
    Inland Revenue is to gain greater oversight of land transfer information to ensure those buying and selling properties are complying with tax rules on property speculation. Cabinet has agreed to implement recommendation 99 of the Tax Working Group’s (TWG) final ...
    7 days ago
  • Plan to expand protection for Maui and Hector’s dolphins
    The Government is taking action to expand and strengthen the protection for Māui and Hector’s dolphins with an updated plan to deal with threats to these native marine mammals. Minister of Conservation Eugenie Sage and Minister of Fisheries Stuart Nash ...
    7 days ago
  • Cameras on vessels to ensure sustainable fisheries
    Commercial fishing vessels at greatest risk of encountering the rare Māui dolphin will be required to operate with on-board cameras from 1 November, as the next step to strengthen our fisheries management system. Prime Minister Jacinda Ardern and Fisheries Minister ...
    3 weeks ago
  • Greatest number of new Police in a single year
    A new record for the number of Police officers deployed to the regions in a single year has been created with the graduation today of Recruit Wing 326. Police Minister Stuart Nash says the graduation of 78 new constables means ...
    3 weeks ago
  • Ensuring multinationals pay their fair share of tax
    New Zealand is pushing on with efforts to ensure multinational companies pay their fair share of tax, with the release of proposed options for a digital services tax (DST). In February Cabinet agreed to consult the public on the problem ...
    3 weeks ago