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Treasury expected to issue less debt than planned, as NZ weathers the COVID-19 storm better than expected and the Government doesn't spend all it borrows

Treasury expected to issue less debt than planned, as NZ weathers the COVID-19 storm better than expected and the Government doesn't spend all it borrows

Finance Minister Grant Robertson is preparing this year’s Budget with a war chest at his disposal.

The Government had $42 billion of cash effectively sitting in its bank account with the Reserve Bank (RBNZ) as at March, according to the latest available data. 

The Crown Settlement Account is flush with cash because the Government has been borrowing more than it has been spending on the COVID-19 recovery. 

This is partly due to the New Zealand economy doing better than expected, and partly due to it taking time to get the money out the door for the likes of infrastructure projects.

The Crown Settlement Account, provided by the RBNZ for the Government, via Treasury, to use to deposit surplus funds into, is at a record high.

The Government having $42 billion sitting in its account with the RBNZ does not mean its books are in surplus. 

BNZ senior strategist, Nick Smyth, and ANZ senior strategist, David Croy, believe the Government will issue less debt over the next few years than previously expected.

When Treasury published its last bond issuance programme in December, it forecast issuing $30 billion of New Zealand Government Bonds (NZGBs) in the year to June 30, 2022.

Smyth and Croy believe it will cut this figure when it publishes its next forecast with the Budget on May 20.

But rather than Treasury wind its bond issuance right back in 2022, so the Government can eat into its cash first, Smyth and Croy expect it to spread the reduction across a few years. This way Treasury can avoid surprising and upsetting financial markets.

As for the current year, Treasury is on track to issue $45 billion of NZGBs by June 30, as forecast in December.

At last year’s Budget, when the outlook looked very grim, it forecast issuing $60 billion of NZGBs.

At the time, the Government ring-fenced $62 billion for the COVID-19 recovery. 

However, Treasury can’t say how much of the $52 billion of this that has been allocated, has actually been spent. It doesn’t track this.

Rather, it says both it and the Auditor General have “reinforced” to government agencies they have to provide updates on COVID-19 funding in their annual reports.

Monetary and fiscal policy need to work together

Coming back to Treasury reducing its bond issuance forecast, the complicating factor is that this affects the RBNZ’s Large-Scale Asset Purchase (LSAP) programme.

The RBNZ has said it could buy up to $100 billion of NZGBs from the secondary market (IE from retail banks and other investors) by June 2022.

While this commitment helped the bond market function smoothly at a time it was flooded with NZGBs, it also helped reduced interest rates. The RBNZ wants interest rates to remain low to boost inflation and employment.

A sudden halt or wind-back in government bond issuance would hamper the RBNZ’s ability to keep using its LSAP programme to put downward pressure on interest rates.

To date, it has bought $50 billion of NZGBs and nearly $2 billion of Local Government Funding Agency Bonds. 

The rate at which the RBNZ has been buying bonds has largely mirrored the rate at which Treasury has been issuing them, as per this BNZ graph:


Should the RBNZ keep buying $350 million of bonds a week, as it currently is, Smyth’s modelling suggests it would end up buying less than $100 billion of NZGBs by June 2022.

And should Treasury revise its bond issuance programme down to $20 billion (from $30 billion) for the year to June 2022, the RBNZ wouldn't hit the cap of its LSAP programme, which restricts it from buying more than 60% of NZGBs on issue.


Should the RBNZ decide it needs to do more to meet its inflation and employment targets, it could lower the Official Cash Rate (OCR), which is currently at 0.25%.

Economists believe this won’t be necessary.

What’s more, one might question why the RBNZ would seek to do more to stimulate the economy by lowering interest rates, if the Government is sitting on cash it could release into the economy to provide this stimulus. 

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I expect a massive increase in the welfare state as Robertson tries to bridge the ‘inequality gap’ (chasm) that has eventuated due to runaway house prices and soaring rents. The taxpayer gets stuck with all the costs of this housing fiasco.

Creating welfare state is not the right way to reset but will prefer providing opportunity and level playing field to all.

Need a Leader with vision not politicians, who are unable to think beyond elections.

Govt took 1 year to act on house prices and could have introduced a Stamp duty, instead put in a measure that gave landlords another excuse to put rents up. They had to finally do something, anything was better than nothing and announcements about announcements. But it was the wrong way. Sadly the tax payer will pay via benefit increases

Oh the land of lords will protest no matter what, even if it was stamp duty. I think this was a decent call, they should have immediately extended it with a rent control too. I really hope this immigration consultation results in some much needed changes. We need to see what ratio of these accomodation supplements are claimed by recent immigrants from the last 10/15/20 years.


If you jump onto the facebook property investor pages you'll find that a significant number of landlords are the immigrants.

IO how did you come up with such conclusion? that sounds very inappropriate without actual data to back up. Did you conclude that they are immigrant, by their name and picture? Land owning would be primarily in the hands of European Kiwis. While there will be immigrant landlords, they are very unlikely to be a significant number.

What I meant was, how many recent immigrants came to NZ under whatever category they did in hope of a better life but instead stuck in unproductive sectors and are unable to sustain themselves independently and have ended up needed tax payer supplements including for accomodation.

‘The immigrants’?

I guess you mean all those cashed up Americans who've been buying their citizenship.

It was a terrible call! It's a perverse tax that makes no philosophical sense. All OECD countries have a cap gains tax for the obvious reason you want to tax profit, not losses. This is panic legislation, three government departments said don't do this, and also cowardly avoidance of the dumbest promise in modern political history, 'I promise no capital gains tax', smh!

Yes the good old non currency issuing taxpayer.

> This is partly due to the New Zealand economy doing better than expected, and partly due to it taking time to get the money out the door for the likes of infrastructure projects.

Surely also because they've been issuing bonds for QE purposes rather than the need to borrow.

Yep, since when is borrowed and unspent seen as a KPI to wellness.
More because the usual KPI, GDP/capita, housing, incomes & child poverty being poor & moving in wrong way.

Imagine the glowing plaudits if he borrowed $1 Trillion and had it sitting there. "We are doing so well!"

Ha :) made me smile, thanks.

If this were a private sector plan, the stakeholders/approvers of such plans often consider resource constraints. This is so capital that might otherwise be idle due to resource constraints might be deployed elsewhere productively. I wonder if the Cabinet consider (or are briefed on) constraints on the ability of their government to use the allocated capital?

The Treasury sees NZ Gov infrastructure spend at just under 12B this year (their forecast peak spend year) so it appears as though the war-chest will last a while even when QE is reduced.

The government can write any number that it chooses to onto its balance sheet as it has its own central bank and which is where all of the governments money comes from.


so let me get this right -- sound prudent fiscal management involves borrowing $40 billion more than is needed -- paying interest on that and of course leaving it sitting in a current account -- WOW who would have thought it!

The numbers are getting so big that it’s losing all meaning now. As long as our debt is less than that of the US then Robertson and the media will be crowing about ‘prudent fiscal management’.

Makes absolutely no sense. Taxpayer pays for it all. This would never happen if it was GRs personal account. I would like to know though what his plans are. Surely there is something in progress, otherwise this is just insanity.

Wouldn't we all love to have what now amounts to a gigantic slush fund sitting there at our disposal. The temptation for the finance generalissimo to use it for political purposes and simply disperse patronage to his allies and mates must be there. Absolute power and all that! And if you look closely, it is already happening.

Interesting how the travel bubble with Rarotonga starts the same week as the budget announcement. A nice distraction for the public so they miss what will probably be a piss poor budget?

I am sure lifting the travel bubble with Rarotonga will boost NZs economy.
Our tourist operators can't wait for all the tourists from Rarotonga!


It's an endless game of distraction for 'the great communicator' and her army of media managers / spin doctors.

The AM Show is campaigning for the state to provide free lunches in all schools. Yesterday Duncan Garner said “it may cost an extra $500 million but so what: it provides employment”.
Today they interviewed a girl and her mother. The girl gets free lunches at her school. She said the lunches are way better than the lunch her mother used to send her to school with. Her favourite free lunch is the meatball sub, her second favourite is the chicken katsu.

We should ban the word FREE.

Sounds like we are working at creating a generation of customers for the like of my food bag, next thing we will see is a chain who cook it for you as well, sounds like restaurant meals every night,


Screw it, I'm on board. Free lunches in all schools can be considered a reward/gimme for good parents and a leg-up for kids of shitty ones. The older I get, the less I can justify putting kids in a shitty situation because the adults who they didn't choose as family are dropping the ball. Otherwise you're just creating another generation of shitty adults.

In our new MMT utopia, everything is possible. We can all be millionaires via our houses. I expect the streets will soon be paved with gold. And there will be no inflation (bonus!).Next the government will legislate against people being born ugly or blind or short. Absolute fairness is attainable!

Yes, excellent point, because we can't be absolutely fair, let's not try to make sure that kids have enough to eat.

It's not just 'enough to eat', it's meatball subs and chicken katsu every day. Hell, why doesn't the state give them dinner as well, plus a roof over their head. It started with breakfast, next it's lunch, why stop there: also dinner, and then a hot supper to finish.

Do you think the government should spend money on lunches in schools that kids won't eat, so that it's thrown out instead?

I get it mate, you want full on wall-to-wall socialism and you want it now. And it must be the gold standard as well. You'll be pleased that we seem to be 75% of the way there.

Avoiding the question via the ad hom route. Don't have a good answer, just start calling people socialists.

Yep. My street is becoming a millionaires row. My neighbours from both sides are quite happy about it - they both got flash cars last year, renovated kitchens and one couple is going to Oz for holidays. At the same time, they looked pretty stressed when their cat got sick last time - no cash to bring it to the vet.

MMT utopia? Do you know what you are talking about?

You display yet again that you have no understanding of MMT.

Hear hear! We've got to break that cycle, investing in children up front is better than the $120k a year it costs to house a prisoner.

You mean like the social investment approach that Labour sadly dropped because it was against their ideology even if it did work?

Bill English wanted to take the social investment route, and Winston was like "No, I have to partner with Labour to stop these waves of immigration".

Truely one of the worst decisions Labour made was getting rid of the SIU as it was. Govt spends so much money on useless crap that to me feeding all our children isn't the worst use of money. We can't stand by and let kids suffer because of the parents they "chose" to be born to.

So the kid throws away the sandwiches mum gave her and eats the chicken katsu that the state provides her. A couple of marmite sandwiches, a packet of raisins, and an apple saw us right as kids but the state will lay on a gourmet lunch courtesy of the taxpayers / MMT (Magic Money Tree).

I agree with you on the food quality argument. It doesn't have to be flashy food, good old sammies and fruit which did us well will be just fine. I'm ok with my tax payer money going on a lunches as long as it's basic. Better off kids will stick to their homemade lunches as they're more attractive (assumed) but at least poor kids will not go hungry. My concentration levels when I'm hungry drop significantly so my hope is that previously malnourished children will now be able to concentrate better in the classroom leading to more academic success. It's not perfect or bulletproof but it's got to be better than the current situation right?!

What specifically was the "social investment approach" doing? Specifically.

GV 27, i have no problem with free lunches at schools. But I have an honest question to ask: if your parents fail to provide you with the minimum care you need as a child, are they fit to be parents? The material needs are actually the easiest to cater for. But the real deficit comes in how much attention and love, how much direction and care they fail to provide. How they fail in providing a good role model to their kids. Etc.
If you ask me, material poverty is the least damaging to a child's ability to grow and prosper. That is why you see kids from extereme poverty, but with loving caring, responsible parents, prospering.
I am not saying that to object giving food and clothes to children that need it. Just the sad observation that this will not help them in the long run, no more than a pain killer helps you with your serious illness.

110% agree. Children grow up to be products of their environment which requires a holistic approach. Will food at school fix a poor environment at home? No. But at least hunger at school and the lack of concentration that results is one less barrier to a child's potential success. Definitely more can be done.

Just because they have special names, doesn’t mean they are expensive to make. For some kids it might be the only decent meal they get. Not sure I’m a fan of free lunches for all at school but saying the parents should feed them properly doesn’t stop the kid going to school hungry. It does increase the chances of kids been given equal opportunities though.

While this commitment helped the bond market function smoothly at a time it was flooded with NZGBs, it also helped reduced interest rates. The RBNZ wants interest rates to remain low to boost inflation and employment.

It just doesn't matter what the Fed or at what level its balance sheet and the useless bank reserves it throws off are. Again, with everything supposedly going for inflation, it keeps coming up tame - just as bonds have been pricing all along.


Take it away Dick Fisher:
"MR. FISHER. In summary, I want to mention that, as I said earlier, most of these variations that have been suggested are very un-Bagehot-like. And what I mean by that is, twisting [or QE] entails purchasing assets that investors are fleeing toward, not assets that they are fleeing from." Link

Sorry, but this is a 'fail'.

Cash isn't anything, if it was debt-raised. It even isn't anything, if there's nothing to buy.

Following the illogic, the assumption would be that issuing debt can put food on the table. It can't. Fossil energy, sunlight, rain, etc etc, put 'food on the table'. Money doesn't; we merely used it as an apportioning-tool and lost sight of the real.

The so-called 'stimulus' efforts of the last decade, have done nothing more than run up ponzis (particularly housing). Not hard to see why; not enough opportunities and too much issued debt.

But never call it ' cash in the bank' Jenee. It's keystroke-issued debt, which is a n expectation that there will be energy/resources available in the future, to pay it back. The currently-held debt (global) is unrepayable; which effectively means NZ's is too.

How about investigating that? Yes, it would stretch your relationship with the 'pollies'. But it would be good journalism.

So will they spend it on more ambulances, or more fences, or better-designed pathways so you don't need the fences or the ambulances?

So far they have spent it on poorly designed pathways, no fences, and not enough ambulances.

nah -- so far they simply haven't got the nous to actually spend it - mental health - fraction of what was promised -- KIWI BUILD - lmao - Light Railway - Shovel Ready turned out not actually ready but possibly they compensated with fat salaries to working group members to regurgitate and reframe virtue signalling

Mr Robertson Talking about Housing Affordability / Crisis as Top priority along with climate change and child welfare (Even for child care - Housing is important).

He mentions that will take time to solve the crisis (must be talking about supply) and agree that cannot be solved overnight but while waiting for supply, what is stopping them from targeting Speculators by stopping interest only loan - reason many Speculators are able to speculate.

This is the first time in Decade that government has atleast accepted that crisis is caused by supply and speculative demand otherwise they all hide behind supply

Acceptance is good and first step, now what ?

Stopping IO loan will send a signal that government is serious and it is this perception that is must to break FOMO.

"........ and the Government doesn't spend all it borrows........"
Who borrows but doesn't spend it? Really?
They don't want to upset financial markets. But is that not what markets are for?

We all should race out and borrow $1 Million, spend $800,000 of it with no intention of paying it back, and keep $200,000 sitting in our accounts.
Surely we too would be acclaimed as great fiscal managers like the apparently prudent Mr Robberson.

The problem is that $42B will barely buy a bag a chips by the end of Robertson's term.

Labour Government Lolly Scramble as per normal to get another term in Government nothing new here !

Oh joy. A tax hike for all NZ's rich pricks, whoever Robbo deems them to be.

Anyone who's out there productivity working then. The asset class will remain untouchable.

This budget will be an interesting one, for sure. Will the govt look to bridge the ever-widening gap between the haves and have-nots? Will it be good news for Maori communities? I'll definitely be watching this one with interest. Perhaps the criticisms of inaction on certain issues will open up the coffers - we shall see.

can we get some billion dollars bank notes please?
im getting sick of loading the wheelbarrow in $100 notes to buy my next house

lol, first comes asset price inflation, next will come consumer price inflation. When commodity (raw materials) prices start going nuts then consumer price inflation cannot be stopped. Don't worry though, central banks have their blinkers firmly affixed and it will all be 'transitory'.

When commodity (raw materials) prices start going nuts then consumer price inflation cannot be stopped.

Commodity prices (except for gold) are not going nuts now?

Japan has been running large deficits for years and it still cannot create any inflation. It depends upon a populations propensity to save rather than consume. We now have large amounts of household debt that will need to be repaid without causing debt deflation and so the government will have to put a lot more of its own money into the economy to counteract this.

It is meaningless to talk about the government having a store of money when it is the issuer of the NZ Dollar currency and it creates new money when it spends.
The Levy Economics Institute tells us this,
Can Taxes and Bonds Finance Government Spending?
This paper investigates the commonly held belief that government spending is normally financed through a combination of taxes and bond sales. The argument is a technical one and requires a detailed analysis of reserve accounting at the central bank. After carefully considering the complexities of reserve accounting, it is argued that the proceeds from taxation and bond sales are technically incapable of financing government spending and that modern governments actually finance all of their spending through the direct creation of high-powered money. The analysis carries significant implications for fiscal as well as monetary policy.

How can this Govt come up with a budget when every policy seems to be made up according to popular opinion?

"The Government had $42 billion of cash effectively sitting in its bank account with the Reserve Bank (RBNZ) as at 31 March"

How ridiculous to call it money in the bank. It is a loan that has been created out of thin air. It still has to be paid back.

It is not hard to make the economy look good if you can borrow as much as you like & spend as much as you like.

In the future our productive economy will struggle to pay back the huge debt that this government has built up.

Most prudent investors would not continue to spend borrowed money without a business case.

The government has abandoned business cases. If it had it would have found that that latest changes to interest deductibility will have an overall dis-benefit.

The savings made by a small number of first homebuyers will be so small compared to increased rent costs for a large number renters (over & above what would have happened without the change). Further negative impacts will be the exponential increase in emergency accommodation costs & negative social impacts associated with being kicked out of rental properties.

Why has this change been allowed to happen when it is easy to see that overall there will be significant negative economic & social impacts for NZ & in particular renters at the bottom end of the market?

Worry about private debt levels, just as with the GFC that is what causes economic problems. The government can repay its own borrowings any time that it chooses to just by using QE to repurchase its debt. The issuing of debt is not even necessary for a government with a sovereign currency such as ours and as sectoral balances illustrates when the government runs deficits it creates a surplus in the private sector that adds to our savings which is all that the governments debt represents.

Hang on a minute. Our leaders keep saying we have done better than expected. Just what is that statement supposed to mean. If the government books are so good why are they collecting an additional $1.8 billion off the poor tenants and getting the landlords to collect it for them.

Things are so good in fact they have just extended the public servant pay freeze from one year to four!

If the economy is in such good shape why don’t we repay some debt? The $42 billion is just borrowed money.

Going on a spending spree without any business case to justify it is likely to result in poor & ineffective decision making

If you want to read something truly scary read today’s herald piece by ex Labour politician Richard Prebble on GR. “ Even Mexico, Nigeria and Venezuela are not as indebted to the rest of the world as New Zealand." and “ In one year, New Zealand has blown 30 years of hard-fought fiscal rectitude. Its public debt will explode from the equivalent of 19 per cent of Gross Domestic Product last year to 54 per cent by 2022, on the Government's own figures”.

Calling him ex-Labour is a bit thick

And his agenda is not in the public interest.

Neither, in the big picture, are Labour's.

I would say that Prebbles mate Roger Douglas was the worst finance minister that we ever had. He certainly caused the most harm to our welfare. Prebble cannot be taken seriously as he displays no understanding of how government finances work if he thinks that borrowing finances the government.

Continue to bash NZ's accommodation providers, tax "rich" workers more, more cash bribes for failing local media, and introduce some new headline grabbing nonsensical feel-good scheme. Budget 2021