National Government will have increased gross debt by over $100b but for whose benefit?

The debt bogeyman has been unleashed in NZ, which we will examine - but even on face value, National Party debt is 25% more than Labour's full debt contribution over 6 years - with no global pandemic

Open to all subscribers -

First, there is nothing inherently wrong with government debt. It’s what we do with it that matters.

In 2023, government debt across OECD countries averaged 110.5% of GDP. New Zealand remained one of the lowest.

Net debt i.e in a simple sense, debt - assets (e.g your debt minus what you have in the bank), the traditional measure used as an international standard, even lower -

Source: Treasury 2023

It’s very important to note here that there’s nothing inherently wrong with government debt - it’s the quality, nature and direction of it that really matters.

However, our national dialogue has been hijacked to suggest that any and all government debt is “bad”.

Nicola Willis even changed core debt measures to make it appear much, much worse than it really is.

Susan St John CNZM QSO:

“In the 2023 budget, financial assets including assets in the NZ Super fund, were netted off [as is standard in global calculations].

From about $15 billion in 2019 or 5% of GDP net debt was projected to become nearly $100 billion by 2024 or 25% of GDP.

By the 2024 budget however, a different measure of the net debt called net core Crown debt was adopted. This measure excludes the assets of the NZ Super Fund and the debt grows from 20% to 45% of GDP over the same time period.”

Using her new measure, Nicola Willis then claimed:

“The previous Government’s spending decisions during and after Covid have left New Zealand with a sea of debt and red-ink in the government finances.…To give you some further historical context, New Zealand’s net core Crown debt, which once hovered between five and 25 per cent of GDP, rose to around 42 per cent last year.”

It’s very typical of the National Party to play this game, and in my view, very dishonest.

Let’s review another economist’s comments on government debt.

Ganesh R Ahirao explains in this article and/or in his excellent Q&A interview -

“The government’s job is to enable the myriad of factors that are critical to the functioning and advancement of a society, including those of future generations…

While… government debt is passed on to our children, so is …the equivalent asset.”

That is, debt can be used to enrich, enliven and acquire a productive, healthy and burgeoning country - one in which we can enjoy, and representative of generational wealth.

And the importance of doing so is amplified within inflationary environments whereby the cost to acquire today out-performs doing so tomorrow.

A good example of this is the i-Rex ferries that National lost $671 million on. Where we acquired fixed price ferries at 40% of the market price during Covid, to acquire an equivalent future proofed boat will cost 100% if not more today. I acknowledge NZ First and National can play games here and acquire less able boats and infrastructure that will require re-investment sooner and hide upfront costs through higher maintenance/operational/replacement costs.

Other good infrastructure examples:

• Bridges are now ~40% more expensive to build compared to a few years ago - same with water supply and sewerage systems.

• 3 Waters was estimated at around $85b when National Party proposed it in 2017. Now it’s estimated at $186bn - and that debt continues to rise and the infrastructure continues to deteriorate!

So when we hear the National Party and/or its affiliate ideology commentators crowing about debt, it’s critical we look under the covers and listen to people like Ahirao and St John who can point out the nuances and differences to us.

And remember that Nicola Willis’s debt presentation is fundamentally dishonest.

Yes, government debt in itself is not a negative in and of itself and it should not be run like a household as it’s fundamentally different in objective, nature, scope and capacity

Second, on pure numbers alone, National Party led government will increase gross debt by $110b in its first five years

Yes - National will increase gross debt by $110b in 5 years.

That’s 125% of Labour’s debt over 2 full terms of government i.e. 6 years.

With their pay equity “savings” they sneakily stole from claimants, many whom were near completion, National increases gross debt by ~$100b.

These are not my stats - they are confirmed by right wing commentator Matthew Hooton.

And subsequently by Nicola Willis herself.

Both of these numbers surpass Labour’s apparently “scandalous” gross debt increase of $88bn over 6 years - of which ~$70bn was a Covid package to save lives, support education, and prop up the economy during a black swan global pandemic.

Right now, as we speak, National is spending more than Labour ever did, even as it cuts funding in multiple directions (including police), and is actively privatising our healthcare and putting our science, environment, vulnerable community, Māori communities, and educational institutions etc. at risk.

Yes while the last government invested and sought to build, invest, and protect, this one is flittering it away for select donor interests.

Yesterday it was announced central government debt rose by another 11% year on year under National.

Again - there is nothing inherently wrong with debt. It is how you use it that matters.

But given National’s frequent attacks on Labour for their debt levels, and most importantly, the fact that their debt is not conducive to the public good nor building up critical services e.g. health, infrastructure, education etc. but rather serving landlords, tobacco companies, and fossil fuel multinationals, it is a heavy mark against this government.

---

---

Business leaders concur: Debt is not the problem, it’s what you do with debt that matters

Financial commentator Bernard Hickey once said that Kainga Ora could be viewed as a “stonking financial success”. As usual, Hickey hits the mark.

A 25% debt ratio returned 100% quality, well built, houses for future generations.

And as former Board member Philippa Howden-Chapman clearly articulated:

"Has anyone ever bought a house or built a house without doing any borrowing?

The money doesn't come off trees.

In fact, [because of Kāinga Ora].. - the state owns - 72,000 houses and they are worth close to $40 billion… We have one of the lowest debt rates against asset capital - much lower than, in fact, that the Reserve Bank recommends."

Yesterday ANZ Chief Economist Sharon Zollner told NZME:

“It's worrying if [government debt] is getting frittered away [under National], instead of going into key things like infrastructure.”

Because again - government debt is a healthy function of responsible governments when it comes to building the nation, restoring infrastructure, enabling conditions for employment, supporting health, education, social cohesion, security, saving lives etc.

And, government debt is significantly cheaper to everyone than private debt.

We all know we’d rather go to Provider A if they offered us a 1% lower interest rate on our debt than Provider B.

So why do we ignore private debt and only focus on government debt?

The truth is it’s a manipulation and one frequently practiced by right wing aligned individuals and commentators.

It’s also why Labour will come up against problems as this populist narrative has overtaken NZ in the last few years, and perpetuated by those featured heavily in media.

In Australia, Rupert Murdoch aligned media hasn’t been able to capture the narrative in the same way, and it’s not for trying, in my view.

The National Party and ACT operate along a US GOP aligned libertarian ideology, as I’ve written about many, many times before.

Willis, Bishop, Stanford, Brown and Luxon etc axed major infrastructure programs¹ as soon as they got into government - including, but not limited to, 3 Waters, Let’s Get Wellington Moving, Auckland Light Rail, school builds, hospital builds, cycleways etc.

They also cut jobs, cut support, cut wages, cut cohesion, cut science, cut environmental protections.

No wonder people are struggling!

---

Finally, National has not only created an ideological wrecking ball. It’s so called “great plans” are incomparable to Labour’s historical investment

After crashing the construction sector rapidly, Luxon defended his government’s actions by saying National would soon commence a large pipeline of largely unfunded infrastructure work.

However, he refused to answer if the 2026 spend was larger or smaller than 2023 infrastructure spend three times.

Gerry Brownlee has to save him under questioning from Hipkins -

And as Chris Bishop keeps telling us, they want us to pay for it anyway - just through more expensive private debt and “user pays”!

---

So when National attacks Labour for borrowing, remember to give them the facts.

And remember what National is really about - privatisation and sell offs while claiming it’s the party of low debt and taxes

That “low debt” they claim is simply a game of transferring that debt onto Kiwis via private debt.

Last year, respected infrastructure leader Sean Sweeney warned Kiwis that so-called PPPs (private public partnerships) are no cheaper than government projects.

In fact, he pointed out that in Australia, those PPPs are all coming back to the government for handouts.

But all that doesn’t matter to this government.

Nicola Willis wants to sell off Kiwibank and privatise en masse if they win a second term.

Luxon already gloated about this “opportunity” last year. And Chris Bishop confirmed it again this year.

This term they want to sell “lots of land” and houses to foreigners and encourage bolthole residence for the uber wealthy.

That’s all the right parties have got really - selling the family goods. Once gone, it’s Kiwis who will pay for perpetuity.

Share the facts to counter the misinformation out there. Help each other stop them.

---

---

Related Articles:

Related Media:

• A less-known way that keeping hold of the gentailers can bring down power prices - Edward Miller for Newsroom

• Marsden Fund says it was given only a day's notice of further funding cuts - Mary Argue, RNZ

• How Jacinda Ardern’s ‘groundbreaking’ climate law has become ‘a shell’ - Kirsty Johnston, RNZ

• Homeowners could be left with costs under building consents changes - RNZ

• Nurses start next round of industrial action - Pretoria Gordon, Anna Sargent, RNZ

• Foreign ministry warns of deteriorating finances in future - Sam Sachdeva, Newsroom

• Go-it-alone councils brace for ministerial intervention in water services ($$ Paywalled) - Newsroom, Jonathan Milne

1. In fact they axed nearly every government service in the country