New Zealand’s national debt equates to $24,000 for every man, woman and child

New Zealand’s national debt equates to $24,000 for every man, woman and child

But that figure excludes PRIVATE debt

Recent news, such as this, that I will discuss elsewhere, has caused me to think once again about NZ’s debt levels.

Pay freeze hits public servants but not contractors

No caption

Public servants’ pay is being frozen for three years, but not the rates the sector pays to thousands of contractors and consultants

Articles about New Zealand’s debt are like hen’s teeth (about half a dozen articles over about ten) years about this came out at the end of January this year.

The message (just as it was under John Key – “nothing to worry about”!).

Government debt nears $100 billion but Finance Minister Grant Robertson confident in New Zealand’s ‘strong fiscal position’

Government debt is almost at $100 billion but Finance Minister Grant Robertson is confident that New Zealand is in a stronger fiscal position compared with other developed nations.

Treasury’s latest update shows net core Crown debt was $99 billion at the end of November 2020, reflecting the huge cost of COVID-19. But tax revenue was $37.6 billion, $0.7 billion above forecast, showing Kiwis are spending up. 

***

THE DEBT PROBLEM IS IN THE EYE OF THE BEHOLDER.

The seriousness of New Zealand’s debt problem tends to depend on the beholder.

Back in 2012-13 those on the Left were jumping up and down about debt under John Key.

“Government debt has grown to around $80 billion since National gained power in 2008, making our debt mountain over 33% of GDP*. They’ve completely failed to pay down any government debt at all.”

http://thejackalman.blogspot.com/2012/04/national-paying-down-debt-yeah-right.html

If these statistics are accurate then New Zealand’s national debt has increased by about 35% since John Key’s day.

Back in 2017, the National-leaning New Zealand Herald was coming out of the woodwork to angst about our burgeoning debt levels while for those on the Left it was suddenly a non-issue.

Our national debt has topped half a trillion dollars and is still rising, despite signs that the pace of borrowing is starting to ease.

The Herald has tallied the country’s total gross debt – combining household, business, agricultural, central and local government debt.

The grand total of $528.7 billion is up 7.3 per cent from a year ago.

The latest Reserve Bank figures (for the year to April 30) show household debt has topped $250b, driven by rising property prices and an increase in consumer borrowing.

That’s an increase of more than 60 per cent in 10 years

These figures are TOTAL debt, including the all-important private debt.

Fast forward to March, 2020 when the whole country united around Jacinda Adern and her lockdowns which came with wage subsidies and every form of spending that you could imagine to hide the real state of the economy nobody seem to notice the huge printing. of money.

Go back a year and this was the headline. The government turned to quantitative easing at the start of covid-19, during the lockdown and started to spend money as if there was no tomorrow.

  •  RBNZ to buy up to NZ$30b of govt bonds on secondary market
  •  ‘This package is huge,’ ANZ rate strategist David Croy says

New Zealand’s central bank has taken the historic leap to quantitative easing to try to limit a looming recession as the negative economic impacts of the coronavirus outbreak intensify.

The Reserve Bank will buy up to NZ$30 billion ($17 billion) of government bonds in the secondary market over the next 12 months, it said in a statement Monday. It will seek to buy NZ$750 million bonds a week across a range of maturities, via an auction process, it said. The program will begin this week with NZ$500 million of purchases.

WHAT DOES THIS ALL MEAN?

After collecting all the articles that pertain to this I lay down for a rest.

Most of this time I was not really thinking at all but after a while out of my subconscious I got an insight about what this all means and ended up doing some rough “back-of-envelope” calculations.

My mind cannot grasp billions (let alone trillions) so I had to translate this so I could grasp it. According to the source I took for New Zealand’s debt it is currently at $NZ120 billion.

This is 120 thousand million dollars.

Now the population of New Zealand is just short of 5 million.

So when I did this calculation it translates to about $NZ 24 thousand for every man woman and child.

Can you imagine if every member of your household held an individual debt of $24,000?

I went on to do some comparisons. For this I translated the figures into $US.

 

Compared to this, by the same criteria our neighbour, Australia has a debt of $US 430.8. Compared to our population of nearly 5 million Australia has a population of 25 million

Australia’s GDP according to official figrues has a GDP of $1369 billion compared to New Zealand’s 206 billion.

Where it got interesting for me was that our debt was 18 % of Australia’s debt but a full 40% of Russia’s debt levels. According to official statistics Russia (with a population of 145 million) has a GDP of $US1669 billion (less than that of Australia!)

It did occur to me that with a population of 145 million, a purported GDP less than that Australia and with a miltary spending of a fraction of that of the United States is supposed to be the #1 threat to the world.

It does not really compute for me.

New  Zealand, unlike the United States does not have an Empire to defend (Austraiia does not have one whereas Russia so-to-speak does – or rather its very national existence to defend)

The inescapable conclusion for me is that the New Zealand economy beneath the surface (or even above the surface if you care to look is in DEEP SHIT.

Here are some of the handful of articles (apart from my own) that relate to New Zealand’s debt

National to increase NZ’s debt by $61 billion over 5 years

National to increase New Zealand’s debt by $61 billion over five years
 
Budget numbers reveal our national level of indebtedness will skyrocket by $61 billion over five years, which is an economic ticking time-bomb, says the Green Party.
 
“New Zealand’s national debt will skyrocket by $61 billion over the five years from 2012 to 2017 according to figures in National’s own budget,” said Green Party Co-leader Dr Russel Norman.
 
“John Key said on the Thursday the next election will be about the economy. National’s failure to manage debt is a major risk to our economy and will hurt his electoral chances.
 
“The real story from Thursday’s budget is how indebted we will become under John Key and National. In 2012, New Zealand’s Net International Investment position was minus 70.7% of GDP of $208 billion, which means we owed $147 billion in net debt to the rest of the world.
 
“By 2017 National’s Budget projections show New Zealand’s Net International Investment Position will skyrocket to minus 80.9% of GDP of $257 billion, equating to $208 billion in net debt to the rest of the world.
 
“In just five years National will blow our level of debt to the rest of the world by over 40%. John Key is building our economy on debt, and history tells us that such a reckless economic strategy is likely to lead to collapse. 
 
“The wafer thin surplus in the government accounts is marginal when you look at the real debt vulnerabilities in the New Zealand economy.
 
“The Green Party in Government would work to rebalance our economy and reduce debt. We would be responsible economic managers, unlike National and their debt monster.”

 

National paying down debt… yeah right!

30 April, 2012,

Today, the NBR reported:

Prime Minister John Key has restated the government’s confidence it can run a Budget surplus in the year to June 2015, just days after Finance Minister Bill English questioned its achievability.

“Budget 2012 will show we are on track to return to surplus – as we promised – in 2014-15,” Mr Key said in a speech to the National Party’s Otago regional conference yesterday.

That’s an advance on Mr English’s commitment three days ago, in a pre-Budget speech to the Wellington Chamber of Commerce, that ministers “remain focused on staying on track to surplus”

Clearly National doesn’t know its arse from its elbow.

With his party riding high in the polls despite months of decisions judged miscalculations by both pundits and Opposition MPs, Mr Key said many New Zealanders were supporting the government’s careful fiscal approach.

“One of the lessons from last year’s election was that New Zealanders expect their government to do what they’ve been doing – tightening its belt, paying down debt and spending carefully,” he said.

National paying down debt… yeah right!

Now that they’ve shown themselves up for the economically bungling fools that they are, John Key is resorting to blatant lies.

Government debt has grown to around $80 billion since National gained power in 2008, making our debt mountain over 33% of GDP*. They’ve completely failed to pay down any government debt at all.

Corporate debt on the other hand has fallen slightly, decreasing by only 3%. Thats in comparison to an increase of 200% in government debt under National.

It’s therefore safe to say that John Key wouldn’t know the truth if it kicked him in the head.

Nation of Debt: Half a trillion dollars and still rising

NZ Herald,

30 December, 2017

 

Our national debt has topped half a trillion dollars and is still rising, despite signs that the pace of borrowing is starting to ease.

The Herald has tallied the country’s total gross debt – combining household, business, agricultural, central and local government debt.

READ MORE: • Debt sheriff watches what we owe

The grand total of $528.7 billion is up 7.3 per cent from a year ago.

The latest Reserve Bank figures (for the year to April 30) show household debt has topped $250b, driven by rising property prices and an increase in consumer borrowing.

That’s an increase of more than 60 per cent in 10 years.

But, while household debt remains at levels that worry the Reserve Bank and leaves us vulnerable to the risk of a housing market crash or international financial crisis, there have been signs of improvement in the past year.

Crown debt has stabilised as the Government looks to reduce its debt to 20 per cent of GDP by 2020.

The cooling of the housing market, particularly in Auckland, saw the rate of credit growth ease in the first four months of the year.

In terms of housing credit growth, things “have definitely improved”, Deputy Reserve Bank deputy governor Grant Spencer told the Herald.

The overall ratio of net debt to GDP – a key measure for economists and ratings agencies – has fallen as economic growth and improved savings offset total volume of debt.

Dairy prices have also improved, taking the cashflow pressure off debt-laden farmers.

“This loss of momentum in the housing market has seen the rate at which we’re accumulating debt slow down over the past year,” said Westpac senior economist Satish Ranchhod.

However, the risks remain high.

For New Zealand households, the ratio of debt to income has now reached a record – 168 per cent, well above the pre-financial crisis peak of 159 per cent.

 

As well as continuing vulnerability to international shocks, New Zealand now faces a risk to economic growth as the borrowing trend slows, Ranchhod says.

“With interest rates set to continue gradually rising over the coming years, we expect house price inflation will remain modest through 2017 and 2018. That’s likely to continue dampening credit growth, and will weigh on spending and economic activity more generally.”

The slowdown in debt accumulation and house price inflation makes it less likely that we’ll see a tightening of Reserve Bank policy in the near term, Ranchhod says.

But the RBNZ is still looking at introducing new tools such as debt-to-income ratios for mortgage borrowers.

New Zealand Starts Quantitative Easing to Support Economy

Residential and commercial buildings standing on the city skyline are seen from Mount Victoria Lookout at dawn in Wellington, New Zealand, on Saturday, June 22, 2019. The out-of-favor kiwi dollar has tumbled about 3% this quarter as the Reserve Bank of New Zealand turned dovish and cut interest rates, the first central bank in the developed world to do so. Economic growth held at a five-year low in the three-months through March, leaving the door open for further easing. Photographer: Birgit Krippner/Bloomberg

Bloomberg,

23 March, 2020

New Zealand’s central bank will start buying bonds this week to further stimulate the economy as the negative economic implications of the coronavirus outbreak intensify.

The Reserve Bank will buy NZ$30 billion ($17 billion) bonds in the secondary market over the next 12 months, it said in a statement Monday. It will seek to buy NZ$750 million bonds a week across a range of maturities, via an auction process, it said.

New Zealand’s economy is stalling as the virus outbreak halts tourist arrivals and domestic restrictions start to impact travel, trade and commerce. The RBNZ’s Monetary Policy Committee last week cut the official cash rate to 0.25% and signaled that quantitative easing was a possibility.

“The severity of the impacts on the New Zealand economy has increased,” the RBNZ said. “Weaker global activity is affecting the economy through a range of channels, not just reduced trade. Domestic measures to contain the outbreak of the virus are also reducing economic activity. Employment and inflation are expected to fall relative to their targets in the near term.”

The RBNZ also said that financial conditions in New Zealand “have tightened unnecessarily” over the past week, reducing the impact of the low OCR on achieving the MPC’s mandate.

“Heightened risk aversion has caused a rise in interest rates on long-term New Zealand government bonds and the cost of bank funding,” it said. The bond purchase program “aims to provide further support to the economy, build confidence, and keep interest rates on government bonds low,” it said

And…

ASTRONOMICAL DEBT AND HELICOPTER MONEY IN NEW ZEALAND

We have a case of mass denial now that New Zealand is sliding into depression which it is trying to paper up with creating debt to the tune of $50,000,000,000.

The Left, that couldn’t keep quiet about John Key’s debt (which also came out of a national crisis) now will do anything to explain this away.

They say this reflects National hypocrisy (which in part, it does, but they ARE in opposition).

They say you can’t compare because Greece’s debt came out of irresponsible spending ( a lie – they were manipulated into this) and because New Zealand isn’t.

We have a (manufactured) crisis in covid 19 so any explanation will do – and any amount of helicopter money – anything to paper of the cracks and pretend that the situation is other than what it is.

I even got told that the comparison is irrelevant because “Greece has a different tax structure”.  Excuse me!

John Key did it and now Jacinda Adern is doing it on an epic scale.

Why is it that usually the best coverage about the NZ economy comes from overseas?

Helicopter Money Could Be Coming To New Zealand

Zero Hedge,

27 May, 2020

The latest on the list of Central Banks to do away with any thoughts of moral hazard in favor of simply printing and distributing money comes from New Zealand. 

Finance minister Grant Robertson said late last week that the country is considering “distributing free cash directly to individuals as a way of policy stimulus” to deal with the effects of the coronavirus pandemic, according to Reuters

He was asked about the government’s ideas for “helicopter money” and exactly how the central bank would get the money to the country’s citizens. While he says the concept is still being discussed, “it’s not something that has got to that level of discussion at all,” he told the media.

“I am pretty keen on making sure that fiscal policy remains the role of the government,” he said.

We’ll give it a couple more days and ask again…

The idea of helicopter money continues to gain in popularity with Central Banks across the globe as governments look to a way to try and stimulate their way out of a pandemic-induced recession that has made even some numbers from the Great Depression look meaningless. 

Despite its appeal, no major countries have embarked on direct helicopter money (money has been issued from the state after Central Bank asset purcahses, but not directly from Central Banks), as it calls further into question Central Bank independence (we’ll pause for laughter) and – even for the MMT crowd – raises the question of inflation.

New Zealand’s economy is export-reliant and expected to contract a stunning 21.8% in the current quarter due to the pandemic.

For now, New Zealand’s Central Bank has cut interest rates to a record low of 0.25% as a result and has doubled its bond buying program to NZ$60 billion. It has also telegraphed a potential coming shift to negative rates.

POSTSCRIPTThe question I would like to ask (and will never get an answer for) is,  who are the main holders of New Zealand’s debt and who it is that might be keeping us away becoming like our Pacific island neighbours?.Could it perchance be China?

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