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The Detail is a daily news podcast produced for RNZ by Press room and is posted on Stuff with permission. Click on this link to subscribe to the podcast.
Try to imagine a billion of something.
Anything. Sand grains, raindrops, snowflakes, dollar coins.
It’s tough, right? Once you get into those kinds of numbers, they can get a bit abstract.
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Well, try $ 200 billion. That’s what the May Treasury budget predicted the Crown’s central debt would reach by 2024.
And in a time of great uncertainty, one thing is for sure: if you have a job and plan to stay at Aotearoa in the medium term, you will be responsible for returning it.
With such mind-blowing numbers, you’ll be forgiven for feeling a bit uneasy.
But how much does public debt really affect the lives of average New Zealanders?
ROBERT KITCHEN / Things
Finance Minister Grant Robertson gave a presentation to journalists and financial institutions at the official PREFU (Pre-Election Economic Fiscal Update) at the Treasury last month.
In today’s episode of The detail, Emile Donovan talks to NZ Herald business editor Liam Dann about why governments borrow so much money; who are your creditors; if New Zealand is in good financial health ahead of years of record-breaking loans; and why some believe that a new monetary theory might have the answer.
In the run-up to the 2017 elections, Finance Minister Grant Robertson promised to reduce New Zealand’s net debt-to-GDP ratio to 20%.
And Robertson moved on: Before the Covid-19 crisis, that number was actually down a fraction, to 19 percent in 2019.
But over the next four years it is expected to almost triple to 53.6 percent of GDP.
Liam Dann says that while this may sound scary, it is very different: No one is sending heavyweights to the Treasury with crowbars.
“You could argue that if it’s x billion or y billion it doesn’t have a big impact, as long as we stay within the kind of parameters that maintain confidence in the New Zealand economy.”
Other countries, such as Japan, have a debt-to-GDP ratio of over 200%. But, unlike us, the Japanese are big savers, and that is also taken into account when evaluating a country’s creditworthiness.
And, understandably, there is concern about what could happen if New Zealand goes haywire and then is hit by another shock, be it an earthquake or a financial crisis.
But Dann says there is no point in losing sleep over the state of the country’s finances: The numbers may be much higher, but the people who control the levers are not fiscal cowboys taking credit all over the Wild West with no intention of paying. return.
“Personally, I think you should try to keep feelings of emotional worry at bay when it comes to money.
“In your personal finances, you can assess your own appetite for risk and structure your life so you don’t worry about money.
“You have very little control over [crown debt] And the numbers are very large, but … go and look at America’s debt. You could argue that they are applying a modern monetary theory.
“They will never be able to pay that debt, but there is a claim.
“The debt is huge in every country in the world, so I wouldn’t be too concerned from New Zealand’s perspective.
“Either civilization will collapse, or we will solve it.”
