New Zealand’s Growing Debt Mountain

Treasury has recently published a  paper http://www.treasury.govt.nz/downloads/pdfs/mi-lane-slides.pdf  by Philip R. Lane, economist of Trinity College Dublin,  which shows the extent to which New Zealand’s overseas debt has been building up since the 1970s as year after year we have failed to pay our way as a nation.

This series of slides tells the story of ongoing current account deficits leading to rising levels of overseas debt and there appears to be no end to the debt-laden road.  Most worryingly the league of debtors into which we have now been relegated includes economic basket cases like Greece and Spain.  In fact, according to this work, New Zealand now owes more than they do (as a % of GDP).

I’m no economist but it does not seem plausible to say there is nothing wrong with a situation where debts are mounting up, and each month and year our expenses as a country far outweigh our income. Interest rates are already high in New Zealand compared to other countries.  Interest rates are the price lenders charge to borrowers for use of their money.  The price factors in things like risk.

It’s time that the public debate shifted onto some of these big-ticket items that are now looming large and can no longer be pushed under the carpet.  The elephant is in the room and his name is our overseas debt. Let’s start looking at solutions and debating the pros and cons for resolving this critical challenge. We still have time but the clock is ticking.

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