New Zealand’s debt burden has nearly doubled in 10 years.
However, there are signs the country’s borrowing habits are becoming more sustainable.
In 2016, when the NZ Herald first ran the Nation of Debt series, available private and public debt figures totalled $492.5 billion.
A decade on, we are approaching $1 trillion in debt, with $937.5 billion.
New Zealand businesses have boosted borrowings by more than $6b in the last year to $143b, a potential sign of rising confidence in the economy.
NZ Herald business editor-at-large Liam Dann told The Front Page it sounds bad, but it’s not growing rapidly.
“It’s the gross national debt; that’s everything. Government debt, mortgage debt, and of course it sounds bad in the same way a mortgage might sound bad.
“It sounds bad having half a million dollars of mortgage debt, unless you’ve got a million-dollar house. So let’s bear that in mind. New Zealand does have assets worth well over $2 trillion.
“It could be worse, and that’s one of the reasons why the global ratings agencies, the credit ratings agencies, are relatively relaxed about New Zealand’s debt level, even though we have had huge growth in mortgage debt and some pretty big growth in Government debt.
“It’s about the quality of debt. People do lose sleep over Government debt. But I wouldn’t be so fixated on the number itself as much as what we’re doing with the money.
“If we’re just borrowing to inflate our own house prices, that hasn’t been great.
“It’s good to see that being a bit more subdued in the past few years as the housing market has come off, because for a while there, the Reserve Bank was worried about the financial stability effect of the fact that we were just borrowing more and more.
“Could New Zealand borrow more? Possibly in theory, but then you have to trust the Government to spend that money well.
“If you’re borrowing money, there’s good debt and bad debt. If you’re borrowing money and investing it somewhere productive that generates more of a return on the investment than the interest you’re paying, that works.
“Businesses try to do that. There’s an expectation that good businesses will carry a certain amount of debt because they will have ideas, they’ll be expanding, they’ll be looking for places to grow,” he said.
Listen to the full episode to hear more about:
- Good debt vs bad debt.
- How much is too much?
- Crown debt.
- Borrowing smarter.
The Front Page is a daily news podcast from the NZ Herald , available to listen to every weekday from 5pm. The podcast is presented by Chelsea Daniels, an Auckland-based journalist with a background in world news and crime/justice reporting who joined NZME in 2016.
You can follow the podcast at iHeartRadio , Apple Podcasts , Spotify or wherever you get your podcasts.
