02 Jun Lies, damn lies and statistics
With Budget Week just behind us, it’s a great time to reflect on how ‘economical with the truth’ politicians of all stripes are. To be clear, we are apolitical; we dislike them all equally, so this isn’t to throw shade on any political party. That said, the constant banging on about which side of the isle is better with the finances is quite frankly, dull.
Here’s the rub. NZ’s public debt went down from the early 2010’s under both sides of the political spectrum (exactly when depends whether you’re thinking it was in total debt $$ or debt as a % of GDP), and started going up again in 2020 – and has gone up under both the current and previous governments.
Check out these graphs here and here to see the trend. And if you’re interested, check out this table to see where the money is spent
Our view: NZ’s sovereign debt is actually at a manageable level. There are 2 things that we think are far more important than the current level of debt that aren’t being talked about enough. They are 1) how does the country service this debt, and 2) what is the debt used for.
The answer to the first question lies in productivity, which no one in Wellington seems to be doing anything about. The last government completely ignored it, the current government addressed it by getting rid of the Productivity Commission… So neither side of the political spectrum scores well there.
The second part of the question is more important – are we borrowing for investment, or are we borrowing to keep the lights on? If we are borrowing to invest – to improve the country – then we are all for it. But it appears that since 2020, we are consistently ticking up the debt to pay operational costs, and that doesn’t end well. It’s the equivalent of running up the credit card without ever thinking about paying it off.
Maybe, come the 7th of November, we will have a politician that’s prepared to have an honest conversation about NZ’s debt. But let’s not hold our breath!
