New Zealand’s public debt has soared to a record $16.9 billion, with the country’s economy in its worst ever recession and a debt-to-GDP ratio exceeding 110%.
The country’s public finances are also in the grips of a massive deficit.
This has prompted a debate on whether it should pay its debts.
The New Zealand Herald has compiled a look at how the government is managing the debt burden, and how it can manage future growth.
What’s behind the New Zealand debt boom?
New Zealand is currently in its second year of a “debt recovery”, the government says, and the country is already on track to reach a deficit for the first time in its history.
The government says it has a “sustainable debt recovery”, but this isn’t based on the real world.
Instead, the country has a debt of $15.5 trillion and is spending about $4.5 billion per day to pay it off.
The government says this debt-reduction plan has helped it cut its debt by $4 billion over the past six months.
“The government has taken on a huge debt load,” says Andrew Dickson, the finance minister.
“It’s the biggest one since the early 1970s.”
New Zealand’s debts have risen steadily in the past decade, and have been increasing since 2008, when it started reducing debt.
But while New Zealand has managed to achieve its debt-recovery target, the government still has an enormous amount of debt.
The debt has grown at an alarming rate over the last decade, to a staggering $10.9 trillion.
The country’s government is currently facing a $10 billion shortfall.
New Zealand has been cutting spending by around $300 million a day since March this year.
The amount of cash being spent by the government was down slightly from a year earlier, but it’s still nearly $1.2 trillion.
The New Zealand government has managed the debt-deflation by cutting spending.
But it’s not just the spending cuts that have had an effect.
“It’s very easy to have a reduction in spending if you’re not cutting back on other things, like education, and that’s what’s happened,” says Mr Dickson.
The Government says it’s managed to cut the cost of debt by more than $100 billion since 2008.
However, many of the cuts have been done through a mixture of spending cuts, tax increases, and borrowing.
Mr Dison says the debt has ballooned, but that he thinks this is due to other factors.
“We’ve had a really hard time in the last 12 months, which has caused us to borrow more than we’re able to repay,” he says.
In total, New Zealand now has $1 trillion in debt.
This is $8.7 billion less than what it owes in interest, but still over $10 trillion in total debt.
This is a huge amount of money, and it’s going to get bigger if the economy continues to slow down.
“A lot of these debt burdens are because of the Government’s own decisions and not the decisions of other countries,” says Matthew Scott, an economist with the New York-based think tank Chatham House.
New territory: what we knowWhat’s in the budgetThe New England government has been on a massive spending binge in recent years, with a $1 billion budget surplus in 2019-20.
But this is largely a result of borrowing.
The Government also borrowed money in the form of the government bonds issued by the private equity firm Fidelity Investments.
This has helped the government raise a total of $4bn in borrowing, according to the government.
“I think that’s a significant amount of borrowing, and I think it’s the first indication that the Government has taken the view that it needs to increase its debt and reduce its spending in order to keep pace with its fiscal challenges,” says Dr Scott.
This includes the Government issuing more than 1.5 million shares in Fidelity to fund debt repayments.
But there is also a larger picture here.
The private equity firms, Fidelity and private equity funds, are part of the same entity.
This means that they have a common ownership stake in the companies that issue the bonds, which means they’re effectively shareholders of the companies.
“There are risks associated with that ownership,” says Scott.
“And that means that when those companies fail, they can be bailed out.
It could also mean that investors are paying a higher price for the shares.”
A new economy?
The Government is also continuing to focus on boosting the economy by increasing public investment in the private sector.
This includes increasing the number of people working in New Zealand businesses and providing more support for the construction industry.
“New Zealanders have a real passion for building,” says the Government.
“That’s the reason why we’re investing in the New World.”
The government’s plan to build a new $3.8 billion New Zealand Superhighway will provide new jobs, and will create hundreds of thousands