Alison Brook asks if, in the context of our already high levels of household debt, we are relegating ourselves to a tepid, low-growth recovery

Alison Brook asks if, in the context of our already high levels of household debt, we are relegating ourselves to a tepid, low-growth recovery

The IMF recently warned of a “massive” increase in public debt as governments around the world pump unprecedented levels of stimulus into their economies.

Globally, net public debt will rise from 70% of national income last year to 85% in 2020. Meanwhile, New Zealand’s public debt is expected to more than double from under 20% to well above the 50% by the mid-2020s, a level not seen since the early 1990s.

By international standards, New Zealand’s public debt projections seem modest, but in the context of our already high levels of household debt are we relegating ourselves to a tepid, low-growth recovery?

How much debt is too much?

Expert opinion is divided about how much public debt is acceptable, and a lot depends on a country’s capacity and willingness to repay. Countries with chequered histories of servicing their debts may struggle to find sources of lending or to sustain high debt levels. However, unlike many of its trading partners, New Zealand’s government debt heading into the pandemic was relatively low.

Treasury’s advice in 2019, given our small size and high levels of personal debt, was that public debt should not exceed 50-60% of GDP with a “prudent” level of 30% to give a buffer against future shocks. Therefore by mid-2020 if current forecasts hold, we will have reached the top of the range.

Public Debt as % GDP New Zealand

Even at this level, public debt will be low by global standards. For instance, the IMF’s framework for Debt Sustainability Analysis suggests that advanced economies should not go above 85% debt to GDP to avoid the risk that debt will be unsustainable. There is a lot of debate about whether there is an “upper limit” on the amount of sustainable public debt for advanced countries particularly when interest rates remain below growth rates.

Negative impact on growth?

One of the common concerns about high levels of public debt is that it will constrain a country’s ability to grow which can be particularly painful after a recession. However, whether this is true, and what level of debt will strangle growth is widely contested. IMF research suggests that there is no simple threshold over which debt leads to lower growth, although it may lead to more volatile growth.

While countries with very high levels of debt tend to grow slowly, it seems there are no conclusive studies that show a direct causal link between high public debt and growth.

To pay it off or not?

Attempting to bring debt levels under control by reducing spending or raising taxes can itself be a drag on economic growth.

Using taxation as a way to raise money is falling out of favour with policymakers because of its negative impact on corporate investment and consumer spending which in turn dampens long-term economic growth. The IMF even advised in 2015 that for countries not likely to enter a fiscal crisis “raising distortive taxes merely to bring the debt down is a treatment cure that is worse than the disease.” They suggest the best solution is to learn to live with the debt as long as it is sustainable.

This is the approach the US used to bring down its government debt from the 1945 peak of 112% of GDP. In the following decades, the US. government didn’t try to pay down its debts but rather relied on economic growth, moderate inflation and low interest rates to reduce the debt. As a result, by the mid-1970s, public debt to GDP had dropped to around 20%.

Worryingly high household debt

Unlike government debt, New Zealand had some of the highest levels of household debt in the OECD, even before the pandemic struck. Most of this is mortgage debt due to the high cost of housing. Household debt to GDP reached an all-time high of 94% in 2019 compared to a low of 28% in 1990 (when government debt was similar levels now being forecast). This makes households particularly vulnerable in a downturn, as evidenced by the number of households who are already slipping behind on mortgage payments.

Household Debt as % GDP New Zealand

Economists Atif Mian and Emil Verner of Princeton University and Amir Sufi of the University of Chicago suggest high levels of household debt are a predictor of economic instability and lower economic growth. Ultimately, this can make the economy more susceptible to further recessions in the future. According to the Bank of Economic Settlements, household debt starts to impact on GDP growth when the ratio to GDP exceeds 80%, a point which New Zealand passed over a decade ago.

The net effect is the government will need to spend more and for longer to prop up the economy. As Ezra Kein wrote in the Washington Post “indebted households can’t spend, which means businesses can’t spend, which means that unless government steps into the breach in a massive way or until households work through their debt burden, we can’t recover.”

Expect to see more jobs programmes, sustained low-interest rates and even tax cuts, to support employment and give households a chance to pay down their debts over time.

Some have even called for household debt to be partially written-off or refinanced by the government on the basis that this is a relatively inexpensive way to avoid the drag on economic growth. Despite the potential moral hazard of this approach, the argument is that cancelling personal debt and resetting the household balance sheet would be a better outcome – not only for the individuals stuck in a debt trap, but for the economy as a whole.


*Alison Brook is from the Knowledge Exchange Hub at the Massey University campus at Albany, Auckland. She is on the GDPLive team. This article is a post from the GDPLive blog, and is here with permission. The New Zealand GDPLive resource can also be accessed here.

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101 Comments

Debt forgiveness or indefinite money printing ? Any other suggestions?

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Liquidations, then start again.

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Land value tax. Significantly reduces land values and subsequently mortgages going forward. Use the proceeds to reduce GST to 10% and/or create an income tax free threshold.

Edit: Effectively what you're doing is taking money that would have been given to banks via mortgage interest and giving it back to the productive in lower taxes.

Agree.
Will it happen? Not a chance.

Not if Labour or National are in power.

Debt forgiveness for individuals would just incentive incredibly speculative behaviour. There are better ways to encourage deleveraging.

Alternative: Reserve Bank buys Treasury Bonds at 0% and then forgives the principal at some rate that pushes inflation along (via increased government spending as debt is purchased and forgiven.)

Debt forgiveness would be viable if the government built houses of similar quality and gave them to the unhoused at the same ultimate price (after debt forgiveness). Otherwise it's just more robbing the poor to benefit the rich.

"Some have even called for household debt to be partially written-off or refinanced by the government"
Good idea, but.....
Guess what the ratio of household debt would return to in, say, 5 years? 94%? Don't be silly! More like 150%.

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"Most of this is mortgage debt due to the high cost of housing" -

I would rephrase this statement to "the high cost of housing is due to the large amount of mortgage debt"

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Exactly. Only the banks share holder benefit from endless debt. Everyone else suffers.

LENDING is now the sucker's game. You get paid back in inflated poor man's dollars on an asset that has skyrocketed-- the worst of both worlds, whereas BORROWING has the best of both worlds, cheap or free money to endlessly invest in limited assets, that by so investing pushes their prices even higher! Link

Too simplistic thinking; Look at what is actually driving the cost of housing. Most of the top end of the housing market is being purchases by wealthy people without mortgages, that pushes house prices up causing wage earners to get in to deep debt so they can even get on to the property ladder.
If you want to reduce the cost of housing and therefore wager earner debt, you need to tax the wealthy. Example you could introduce CGT from properties over a certain value, lets say $1.2 million to be generous. And Stamp Duty tax for properties over the $1 million mark. That will slow down mortgage debt significantly.

"Most of the top end of the housing market is being purchases by wealthy people without mortgages" - incorrect.

"that pushes house prices up causing wage earners to get in to deep debt" - non sequitur.

"you could introduce CGT from properties over a certain value" - why over a certain value? If a CGT were to be applied, it should be applied evenly to every property. That makes it both easy to administrate and difficult or impossible to avoid.

So are you saying that wage earner are buying up multi million dollar homes ST? Can you prove that because I can show you that they wouldn't even earn enough to qualify for a mortgage on a multi million dollar home.
The reality is that it's still off shore investors who are buying up NZ million dollar homes: Herald article - Singaporean-based Kiwis duke it out: $2.3m for Ponsonby bungalow valued at $1.95m. https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=123...

I'm saying that even those purchases at the top end of the market largely involve mortgages. Even if you had the wealth to pay cash for one of those properties, you generally wouldn't - your wealth is likely better put to use earning a return for you elsewhere with interest rates so low.

Oh and yes, wage earners are out there buying multi-million dollar homes with mortgages. I work with many.

Absolute BS! We all know REA's like you have no understanding of wages ST. Where is your evidence that wage earners have the means to buy multi-million dollar homes? Have you even looked at affordability reports?

I work in IT xxxxx xxxx [no need for the smear. Ed]. Using the affordability test of 30% household income with a household income of $300k, they could service $90k per annum. At current rates of 2.55% over 30 years, that's a mortgage of $1.89m. Assuming a 20% deposit, that's a house worth $2.36m. And that is starting from scratch. If they were a FHB couple in the previous 10 - 15 years and are trading up, they will have a higher deposit and lower mortgage etc, so hhold income can be even lower.

$300k household income is high, granted, but not uncommon. A professional couple, or those in IT, or successful small business owners etc. will be easily be at or above this level.

Again total BS!!! No way do you work in IT, absolute lie!!! NZ IT wages are no where near that type of income, not even if you head a department! How do I know this because I work in the Tech Industry which is why I know you are lying! Tech industry salaries have stagnated due to globalization.

Even a professional couple in NZ IT would only earn a max of $120K to $150K! Do you really think people believe your BS!!

Also NZ Tech Industry wages are around the same salary level as Canada (Well a bit lower since NZ Tech industry is so much smaller). This article will give you an indication of the Tech industry salaries and how increased house prices push wage earners out. Better Dwelling article: Vancouver’s Tech Scene Shows Just How F**ked Up The City’s Real Estate Is. https://betterdwelling.com/city/vancouver/vancouver-tech-scene-shows-jus...

CJ, I don't need an indication of IT salaries - I draw one.

And we do not believe you!

I do

If US Tech workers can't even afford multi million dollar homes, how on earth can NZ tech works who are on much small salaries in a much smaller industry segment. Here's an article for you. Most Tech Workers Can’t Afford to Buy a Home in San Francisco or Seattle. "Over 3,600 workers from 21 tech companies in the Bay Area responded. Can you guess which one had the highest percentage of employees who said they can’t afford to buy a home? It was Tesla — 76% of its employees who responded did so with a ‘No’." https://www.teamblind.com/blog/index.php/2019/03/04/most-tech-workers-ca...

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Any senior role would earn $120k - $150k+, so a couple would earn $240k - $300k. Unless you are suggesting IT salaries are $60k - $75k? Maybe for grads.

Again you are lying, even senior Programmers and Project Managers in NZ do not earn that about. Stop lying, this is not Australia!

If you really are in IT and are genuinely bewildered at those figures, perhaps this is an opportunity for you to pick a Hays salary guide and find a new employer.

Oh and by the way, they haven't been called Programmers in many years now. The term is Developer.

I don't need to I'm a tech freelancer. And I have looked at those salaries guides and they don't report the kind of salaries that you are fabricating.
You wouldn't even know what it is to be a Programmer ST of which there are many different titles and roles. But you are making yourself look stupid.

https://pingpdf.com/pdf-hays-salary-guide.html

You clearly haven't read anything.

Now you're just digging a hole for yourself ST. We've already proven your wrong statistically! Now stop wasting our time.

Excuse me, but I have to object to your using my perfectly valid criticism to further your needless ad hominem attack on this poster. He's already conceded that he was being a little hyperbolic, and retracted his statement, replacing it with a more credible assertion. In terms of time being wasted, while he appears perfectly willing to engage in adult debate, you seem to be fixated on mudslinging. May I suggest the comment section of stuff, or perhaps the herald, if you're interested in that kind of nonsense. This website aims a little higher.

That's ok I've already deducted you point. You should read the Better Dwelling article that I posted instead, since I post may different sources for information to provide evidence.

"Oh and by the way, they haven't been called Programmers in many years now. The term is Developer."

Both of you are old hands and need to keep up. The latest terms are:
Developer: UX Designer
BA: BP Analyst, UX Analyst
Testers: UX

CJ, I have seen few ads in Linkedin for a BA in Wellington, they offered salaries of around 90-120k mark.

Ha ha. Point 1; That sill wouldn't earn you a multi million dollar home. Point 2) Everyone knows that the actual salary will turn out to be lower then the advertised salary. At least that's what I and all of my colleagues have found to be the case here in NZ.

"The actual salary will turn out to be lower than the advertised salary"
Huh?
What I have found is that in NZ very few companies advertise jobs for a published salary. That stopped about 15 years ago. So its cat and mouse now.
The best you can do is ask what the salary band is. This is occasionally revealed before you get to the interview stage. But more commonly this will only be revealed at the interview stage. After that, if they like you, negotiation can occur. Sometimes it is a take it or leave it salary offer.
The best one ever was where a prospective boss asked "What would it take for us to attract you?" I didn't go crazy because I have integrity. And because I did that, I got regular pay rises after that without even asking for them.
This is my experience.
PS. I am not in IT. I would not want to work in IT. Ever!

Well there you go you already stated that you don't know what it's like to work in IT, so you don't have a clue what it's like. I've worked in the Tech industry for over 20 years both in the UK (Where it was a lot better) and here where the the tech industry here is so small you could pick it up with tweezers and part of the reason for that is the tiny salaries here.

"The actual salary will turn out to be lower than the advertised salary"

I have never found that to be the case. The opposite in fact.

I knew a few people in IT (I am also in IT), if you have a certain skills set (esp in SAP, Cloud app or security) earning $120-150/hr isn't unheard of. There are quite few of them in a organisation in a tall building at bottom of Albert st, (you can guess which company that is). They have been on contract rate since 2011.

Yep, There's a big difference in working freelance on contract high hourly rate then working fully time. And there's only very few individuals that can wangle keeping that going with a large corporate company (Usually connected to banking). Thing is there are so few large tech companies here in NZ and the sad part is they're being pushed out due to the high cost of living in NZ (which means they have to pay higher salaries to keep staff).

Cost of living isn't driving tech companies out of NZ, "crony capitalism" is. Our government can't match the huge subsidy packages that other "free market-obsessed" governments do.
We've lost many of our tech companies to the likes of SF, where the cost of living is considerably higher but there are heaps of other financial benefits to shareholders like legal tax dodging and taxpayer-funded growth capital, that more than make up for the high salaries in the area.

Sure there is more human capital to be tapped in those areas, thanks to some of the world's leading educational institutions but that's also largely a chicken and egg thing - Stanford number 2 global ranking in tech and management has a lot to do with its high local employability and alumni network scores, benefits of being so close to the Valley. See how UofWashington dropped in ranking and UofT at Austin rose as more innovative companies chose Austin over Seattle as their HQ.

I knew a few people in IT (I am also in IT), if you have a certain skills set (esp in SAP, Cloud app or security) earning $120-150/hr isn't unheard of. There are quite few of them in a organisation in a tall building at bottom of Albert st, (you can guess which company that is). They have been on contract rate since 2011.

Yes. I think I know some of these people. I think it's a bit of a gravy train and their employer doesn't really know any better so nothing has changed. One of them had made big money in Europe and was looking at the NZ salary just to pay the bills like good schools, family bills, ski holidays, etc. It wasn't going to fund the Remuera property portfolio. That all came from the OE income.

might be the same person i know.. LOL

ShoreThing, I'd like to offer some concrete information, rather than opinion. Statistics New Zealand in 2018 identifies 4.5% of males, and 1.4% of females as having a personal income of more than $150,000 P.A. Assuming that not all of these high income earners are married to each other, and that the majority of couples in New Zealand are heterosexual, then we can safely assume an upper bound of around around 1% of couples earning more than $300K P.A., with the true figure being much more likely to be below this, a figure of under 0.5% would not be surprising.

Your assertion that this level of income being common is factually incorrect, and likely colored by the company you keep. With an incidence of less than 1 in a hundred, and more likely 1 in 200 or more, a more accurate statement is that these 'high-income families' are fairly uncommon here in New Zealand.

That's a fair callout. CJ's claim was that no wage earners could afford multi-million dollar properties, I merely provided an example of wage earners that can afford multi-million dollar properties. It was an extreme example assuming they were FHBs, however. As I said, if they had already built up equity in a home for the prior 10 - 15 years, the mortgage required is lower and so is serviceable by lower household incomes. The point of my comment is merely to demonstrate to CJ that wage earners (not the average wage earner) can afford these types of property.

Many will have inherited money as well. Bumping up their wealth stakes.

.

If "1 in 200" is correct then that still means more that 5,000 such households in Auckland. More of the high paying jobs will be in Auckland and Welly too so it's probably safe to say at least 10,000 households earn over $300K in Auckland.

Hardly, Go look at the stats for Auckland which has lower GDP and higher unemployment then the rest of NZ. Infometrics; https://ecoprofile.infometrics.co.nz/auckland/QuarterlyEconomicMonitor/Gdp

Why would you link something completely irrelevant? Here is their earnings data showing Auckland 10% higher than the NZ average.
https://ecoprofile.infometrics.co.nz/Auckland/StandardOfLiving/Earnings

First home buyers on average incomes would struggle to raise a 20% deposit in most parts of the country. https://www.interest.co.nz/property/103355/house-prices-have-risen-more-...

I don't disagree, but this comment thread isn't about first home buyers on average incomes.

Have you got data to support this statement? Regardless, most wage earners aren't going to be buying top end houses.

Sorry - very hard to tell who you were replying to this far down the page.

Exactly:

The phrase "Housing Bubble" is all-too-familiar territory for most of us, but in hindsight it shouldn't be anything new. Japan beat us to the punch back in the early 90s. Japan's real estate bubble got so 'irrationally exuberant' that the grounds under Tokyo's Imperial Palace were assessed at a value greater than the entire state of California.

Now we have stock market bubbles at the same level of madness

Tech is eating the world. The combined market cap of FANGMAN (Facebook, Apple, Netflix, Google, Microsoft, Amazon, Nvidia) has hit fresh ATH at $8.4tn, almost equal to the combined GDP of the world's #3 #Japan and #4 #Germany. Link

It would interesting to lay the interest rate over the top of that Household Debt as % GDP New Zealand graph line.
The lower the interest rate the greater the amount of debt that can be serviced. (But we all knew that.)

Yes if I recall interest have reported on this previously highlighting that lower rates have resulted in larger and larger loans

That is an interesting graph.
As with most things it doesn't tell the whole story. One factor is that mortgage duration's have been increasing. another is that with women earning more now, certain families earn very large sums of money. Plus with there being more singles around due to the relationship property act and with the Govt bailing out solo parents, these increasing numbers of people will rarely own property so won't be on the graph at all.

Weld - no we didn't "all know that".

Some of us have been asking, for a long time, whether the combined principal is repayable sans interest. We have figured 'no'. We are therefore not surprised at the trend to - and below - zero interest-rates.

The RBNZ graph has servicing as a percentage of income and interest rate weighted average. Note that the quarterly data this is based on is updated tomorrow.
https://www.rbnz.govt.nz/statistics/key-graphs/key-graph-household-debt

I'm surprised how few people are under mortgage stress given the circumstances. Per Scoop link 55,000 missed payments. Lets say conservatively 3 ppl per house, 1/3 of those with no mortgage = 555,000 mortgages? So only 10% miss a payment in a global pandemic including nationwide shutdown? If that's as bad as it gets mortgages really are as safe as houses.

But if you're on deferral, there aren't any payments to miss

Obviously a pretty crude estimate but regardless I think most people with any financial acumen understand that the worst is yet to come

We've been telling ourselves this since 2008 when the worst just didn't happen at all and we kicked it down the road for 12 years. The worst should have happened a long time ago.

I’m really not sure you can even remotely compare this economic crisis with the GFC. This crisis is making the GFC look like a speed bump.

They are very different economic crises.

Writing off debt for homeowners would be great for inequality. The economy will thrive!

Yes exactly. We will all be queuing down at the bank to find out how much we can our borrow given our new found equity.

I cannot wait for the prosperity brought by the creation of more banking jobs, real estate jobs, not to mention the demand for building inspectors to tell us they couldn't go onto the roof but the handrail from 1950 is not up to code.

This is an ignorant article, and Interest.co should hang their heads in shame. They chose - and they were well warned - to give oxygen to the nonsense that is GDP - they dug their own hole. Caveat emptor.

"are we relegating ourselves to a tepid, low-growth recovery?"
"Expert opinion is divided"
"growth'"
"growth"
"growth"
"economic growth"

FFS. We chew into a finite planet. We consume (which is all they measure). We excrete. End story. And we do it ON that finite planet (as she references). Debt-issuance is forward betting on future chewing, consuming and excreting. End story. The game got exponentially bigger; now debt is over-reaching its underwrite. If you're still ignorant enough to myopically study just money, then you will see this showing up as more debt dollars required, than GDP numbers return. But you were already choosing a measure which avoids 2/3rds of the equation (the chewing and the excreting, and ramifications thereof); which merely focuses on 'consumption'. End story.

So why, at academic level, are we still seeing 'recovery' mentioned as if 'growth' is a given?

It is ignorance, in the base meaning of that word. And it shouldn't be peddled here. Not anymore. Even a total debt-jubilee cannot revive 'growth' from where it got to, physically.

'Writing off debt for homeowners" that would be something both DGMs and property hustlers can both agree on..
Imagine there's no mortgage
It isn't hard to do
Nothing to sell or bid for...

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And no economy too.

Imagine no possessions
I wonder if you can
No need for greed or hunger

chuckle - he was onto it, and it was possible 50 years ago. Pity we didn't listen......

Not all households have debt, how do you apply any solution equitably amongst all parties, certainly not by just addressing debt and writing it off in some way, because to be equitably applied you would need to also give those without debt the same amount of money.

Personal debt forgiveness? That seems like a way to guarantee people leverage up as far and fast as possible. It might work with government debt if RBNZ just forgave it.

I wonder if they could make it work so that you can't leverage of the forgiven amount.

Back in time when new kings take over a county in England the 1st thing the new king did was wipe off the peoples debt and start over again. The government does not actually have to pay off its debt because the debt is made up of electronic currency so its just a matter of pressing the delete bottom on Mr Orrs computer.

The government should write off student loan balances for all those borrowers residing in NZ. It would immediately provide them with another 12% of their salary that they can spend paying down other debt or spending in the economy;

https://figure.nz/chart/n9NZc0xbdwrHjLHp

Same action for WINZ debt;

https://www.scoop.co.nz/stories/PO2007/S00026/aaap-calls-for-winz-debt-c...

Good idea, would have the added bonus of riling the right wing shock jocks

Who are mostly older and paid little to nothing for their education. (Save the odd unqualified one.)

Could we not give everyone some cash, but if you have debt it has to go on that? Why punish those that put a lot of effort into paying off their loans?

Giving everyone cash still punishes those without debt as the cash will further inflate asset prices.

Exactly. What economist is it that we have to blame for the idea of 'helicopter money'?

You guessed it;
https://en.wikipedia.org/wiki/Helicopter_money#:~:text=The%20name%20%22h...'s%20Lost%20Decade.

The government should write off student loan balances for all those borrowers residing in NZ. It would immediately provide them with another 12% of their salary that they can spend paying down other debt or spending in the economy

Makes so much sense Kate

Thanks.

Yes as I have said before excellent idea. Have you contacted any MPs with the idea?

Thanks, no I haven't. I just keep thinking some of the real thinkers had to have already thought of it. And then they likely decided such a policy would become a massive target of electoral criticism - such that they might be better off just doing it after elected :-). I've got my fingers crossed.

Selective debt writeoffs?
sounds like you are playing the lottery

Why not let anyone who wants to add felt-tip zeros to their bank notes as they see fit...

It does bug me how much more attention is given to gov't versus personal debt. WON'T SOMEONE THINK OF THE CHILDREN, et cetera. Yet the absolute logical necessity of economic slow-down when personal debt levels are high doesn't make headlines. Every dollar spent on a massive mortgage is a dollar that won't be spent on something else... our housing prices will be a drain on the economy for decades to come.

Every dollar spent on a massive mortgage is a dollar that won't be spent on something else... our housing prices will be a drain on the economy for decades to come.

I've been trying to illuminate that for some time. The realization is growing though.

Won't someone think of the children?

Yes, it's very strange to see that rocked out when over the last decade it's not mattered at all that we've been requiring them to take on ever more debt. Seems like crocodile tears now, and the real cry is "won't someone think of the ma and pa investors?"

How about zero gst on new affordable homes where the capital value is under, say, $250,000?

Economist Wynne Godley tells us with his accounting identity sectoral balances that as NZ runs a current account deficit then is not possible for the government sector and the private sector to both be in surplus at the same time. One or the other must be in surplus and the other in deficit. As the government is the currency issuer and households are only currency users then logically it is better for us if it is the government that is in deficit.
Economist Randall Wray explains here. https://www.youtube.com/watch?v=zxDVRISfsls

No disrespect but MMT is not 'new', even though it's only now cutting through to the mainstream. What people don't understand about MMT is the externalities. Talking about on a simplistic, over-arching level is wrong-headed IMO.

Wynne Godley wasn't an MMTer, he worked for the British Treasury but MMT uses his work. MMT was developed about twenty five years ago by Warren Mosler and others, so no it not new, but is certainly contains more logical thinking than anything that the mainstream can tell us. Everything that mainstream economists tell us displays their lack of understanding of banking and government finances.

One data point that's absent from this survey (and hence likely skews the results) is the non-house Assets within households. Because not all household 'expenses' are actually consumption goods: there may well be a proportion of capital goods (in strict terms, goods that can used used in the production of other finished goods) and also of pure Inventory - raw materials needed in that production. In my own case, that would include a full builder's workshop plus timber; in a neighbour's case a metalworking shop plus raw stock. None of this ever shows up in official surveys: the nearest accessible data would be of insurance Household Contents valuations. In both cases, this gear and inventory is likely worth (at replacement) around $50K apiece - say around 10% of house value (Christchurch prices, for you envious Awklanders). It also means a considerable degree of resilience, as proven by the ability to coast through earthquakes and Covid with fairly much zero change in overall lifestyle. But it's simply not measured, so remains opaque.

Oh yeah?! so let’s not share in the upside but Everyone needs to share in the downside. Hell of a deal!

Debt is wealth (and incomes)
thats the problem

How about we just tax the bottom quartile 7 to 10 thousand dollars a year. Call it poor tax. Ultra regressive stuff. Really break poor people's and their children's bones and grind them into the dust. That way we can honestly say "look these people are doing badly, and we need help them by lowering interest rates to stimulate the economy via the wealth effect". oh wait we're already doing that, poor tax = tobacco tax.

Wage subsidies aren't going to end. That's the new UBI introduced by stealth. If both government and private debt increase in unison then we'll really be in for a low growth future. I think the monetary system wont survive long enough for that bleak future to be realised though. As Kurt Cobain said "Load up on guns, bring your friends. It's fun to lose and to pretend" guns = debt.

The governments deficit creates a surplus for the private sector though, it's our savings. The government is the currency issuer, the source of NZ Dollars, spending occurs before borrowing it is only borrowing back what it has previously created. This is where the mainstream get it wrong. All QE does is return this money and cancel the governments debt.
https://www.economicsjunkie.com/sectoral-balances-and-private-saving/

Yeah it's a good point. I need to look at that. What do the sectoral balances actually sum to. Is it the money supply, and if the money supply is increasing then both private and public debt could conceivably increase at the same time, although history shows a very good negative correlation between private and public debt. Steve Keen recently posted a nice youtube series articulating QE using his financial dynamic modeling software. If government debt is rapidly increasing and one asserts that private debt will sharply decrease over the next few years then that has a significant implication for house prices.

Sectoral balances must sum to zero. This taken from Wikipedia, Godley wrote in 2005 that: "[T]he deficit of the general government (federal, state, and local) is everywhere and always equal (by definition) to the current account deficit plus the private sector balance (the excess of private saving over investment)."[8] Expressed as a formula, the sectoral balance identity is: (Savings - Investment) + (Imports - Exports) + (Tax Revenues - Outlays) = 0; or (S-I) + (M-X) + (T-G) =0, as described below.
https://en.wikipedia.org/wiki/Sectoral_balances
Each sector of the economy has its own inputs and its own outputs. The economy gains money by banks creating it, the government creating it and through exports. It looses money through savings, taxation and imports.

What if you include the central banks as a sector. Central banks are buying up all the worlds toxic assets. They're balance sheets are continuously increasing. Asset swaps allow commercial banks to continuously lend even into a recession / depression without ever worrying about negative equity.