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Secretary to The Treasury Caralee McLiesh says current debt levels are manageable and the Government has options when it comes to deciding who should bear the burden of repaying the debt

Secretary to The Treasury Caralee McLiesh says current debt levels are manageable and the Government has options when it comes to deciding who should bear the burden of repaying the debt

Treasury believes New Zealand’s government debt levels are manageable, but the issue of debt targets should be revisited once the country is out of the COVID-19 woods.

Speaking to, Chief Executive and Secretary to The Treasury, Caralee McLiesh, said: “Given the uncertainty in the economy, our view [is] that it is not an appropriate time to be setting new debt targets. Our view is that debt levels are within prudent levels and that debt levels are manageable overall.

“We think that it would be appropriate to revisit the question of debt targets once the economy stabilises; once we’re certain we’re closer to full employment levels. At that point there will be choices for government as to how they wish to manage debt.”

Asked whether McLiesh believed net core Crown debt at 30% of Gross Domestic Product (GDP) was a prudent upper limit longer term - as her predecessor Gabriel Makhlouf said as recently as 2019, McLiesh said: “I think there’s no one single optimal number.

“Treasury’s previous work was about a framework for understanding prudent levels of debt. We’re still operating within that framework.”

The Public Finance Act 1989 sets out the framework that governs New Zealand’s approach to fiscal strategy.

Net core Crown debt fell below Finance Minister Grant Robertson’s 20% target pre-COVID. As at January, it sat at 31.3%. Treasury expects it to peak at 52.6% in 2023.

McLiesh said, “The sorts of things that matter include the sustainability of debt servicing payments - and we know now with interest rates low, and expected to remain low, that servicing payments are within acceptable bounds.

“We also look at market access - so the ability to access debt. And we have a strong investor base, and debt levels for New Zealand are quite favourable compared to other countries.

“And then importantly, we look at intergenerational welfare. So really. The question is, the trade-off between the benefits of additional debt now, versus the cost of debt for future generations.

“In a time of global pandemic, where there’s a possibility of severe loss of lives, but also the possibility of severe economic scarring, our view [is] that the increase in debt is appropriate and still remains within prudent levels.”

McLiesh didn’t know off the top of her head how much of the $52 billion allocated towards the COVID-19 response (of a $62 billion pot made available for the response) had been spent. The Auditor General earlier this year estimated $18 billion, with much of this funding being for the wage subsidy.

Options available as to how govt debt is repaid

As for who bears the burden of repaying the debt, McLiesh said this was a decision for government to make.

“There are choices in terms of increasing revenue. There are choices in terms of managing expenses - reprioritising expenses so that the pressure on expense can be managed at lower levels, and also strategies around growth - driving productivity,” she said.

She said the question of who bears the cost of repaying this debt is separate to the question of how the debt is structured.

Asked whether Treasury would consider issuing a 100-year bond to push the cost of repaying the debt out to the future, all the while inflating much of it away, McLiesh acknowledged this would reduce refinancing risk.

However it would likely come at a higher cost to the Crown, as investors would need to be paid a premium to take account of the risks associated with such a long-dated bond.

McLiesh made the point: “Issuing a 100-year bond is broadly equivalent to issuing a 10-year bond and rolling it over 10 times.”

In deciding how to structure debt, she said Treasury would need to consider investor interest, the impact on investor diversity and how developed markets for that particular debt instrument were.

Asked whether some of the issues could be worked around by the Reserve Bank (RBNZ) buying the 100-year bond directly from Treasury, McLiesh said: “We don’t see a need for money financing at this point…

“Monetary financing does have the potential to erode the institutional arrangements - the independence of monetary policy and the independence of inflation targeting. And also, the possibility of eroding fiscal discipline as well.”

Note, the bond-buying the RBNZ is currently doing through its Large-Scale Asset Purchase programme is through the secondary market. It is also being done with the purpose of boosting inflation and employment in line with the RBNZ’s monetary policy mandate. It isn’t being done to finance government expenditure.

See part 1 of the interview with McLiesh here

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I suppose one can have some sort of sympathy for Ardern and Robertson when the advice they rely on comes in a form similar to the above.
Occam wouldn't have stood a chance against Caralee.

McLeish has no experience in Treasury management at a country level. She was probably fine as a state Secretary in a federal system, but states and countries have different priorities. Where were the NZ candidates for Treasury Secretary? The imports haven't had a good record then they've taken off afterwards leaving other people to pick up the mess (Makhlouf looking at you).


I'd be happy for a permanent 1% increase in my upper tax rate if it meant my children would be able to afford a home

The NZ Dollar seems to be collapsing. TAXing an extra 1% isn't going to change things. Best to covert your NZ Dollars as soon as they hit your account.

Not saying the NZD is in a death spiral, NOT YET. I am saying the domestic purchasing power is collapsing though. Not interested in entertaining replies referencing the CPI.

And the age-old answer to stopping a currency from collapsing is = higher interest rates.

Treasury will meet its own goals even if that means the cost is drowning households in debt by strangling infrastructure and other spending? Good to see no lessons are being learned, same old conservatives clearly in need to a good shakeup.


Jacinda, Grant, and Adrian have betrayed and failed us. Shame on these people because they are creating the inequality through their Keynesian worship.

The RBNZ, at the behest of the BIS, on behalf of the NZ government, has irrationally increased the supply of fiat currency units, which has devalued their value. Asset price inflation. Which means it takes more pieces of coloured paper to buy real assets.

Add to this the perverting of the price of money, interest rates, and you have a fake monetary system. Further add to this the supply and demand of housing because NZ Politicians do not have any vision and here we are. But the worst is yet to come when the velocity of the fiat currency units picks up, consumer price inflation will sky rocket even more.

The only way out is to restore the value in our currency by raising interest rates and anchoring it to something real, like a commodity, like gold. That is what the 'Great Reset' will be.

Until then, Jacinda will keep telling us how she doesn't really, really want house prices to go up and the RBNZ is an independent organization. Buy silver, gold, and land as many of you are doing and prepare for a hard landing.

Well said. And yes, a pack of Keynesian frauds.

I'd peg my currency to the number of houses houses if I were them. Fungible, needed (unlike large quantities of gold or blockchain bits) and useful. Want to increase your currency? Build more houses!

Understand mease...., side effect of democracy cannot throw them out and opportunity for politicians, once get power can rule for 3 years specially when are able to fool and convince people to get full majority.

Only way out ...people on street....that time is too not far away

It is the banks themselves which create the money for housing not the government. The Bank of England tells us this here.

As an aside, her predecessor career bureaucrat Makhlouf has been raising eyebrows in his latest role in Ireland. Also on record for more or less stating that Bitcoin is a con.

I'm not a fan of bureaucrats, including this [edited] woman who Jenee is interviewing.

“And then importantly, we look at intergenerational welfare. So really. The question is, the trade-off between the benefits of additional debt now, versus the cost of debt for future generations."

She just hit a nail on its head!

People think it's easy doing her job- classic D-K sufferers.

I personally think she's been out performing her role and absolutely deserves a bonus.

All that comment suggests is that she's smoke signalling higher debt servicing costs in the future. The reality is that the dogma of her kind has given the sh#t sandwich to younger people. No "D-K"whatsoever.

Or to put it another way:

“And then importantly, we look at intergenerational welfare. So really. The question is, the trade-off between the benefits costs of additional debt now, versus the cost benefit of debt for future generations."

Note: She implies the words 'costs' and 'benefit' in different forms in her quote.
There is the 'cost' of money and the 'cost' of an action.

Why is Treasury so active now just before the election ????

Neo-liberalism is alive and well in New Zealand and we are the worlds last bastion of this failed economic theory where its last few advocates still cling on in our treasury.