NZ government lifts borrowing plan for 2010/11 by a further NZ$1.5 bln to NZ$16.5 bln; up NZ$3 bln in 5 weeks. Your view?

Wow, the trend in that graph is scary...MMP can be blamed for big part of it...National is too scared to implement proper reform, as with MMP they have to keep most people in the room happy...

Hi Bernard

Do you have any idea what maturity the bonds are going to be issued at?

If we need to issue debt, it makes sense to do it now before the global issues for sovereign debt hit the fan. Also judging by the language from Bill English, I suspect that the Government has already been told by the rating agencies that NZ will face a ratings downgrade soon resulting from a combination of our deterorating debt position and the change in metholodogy S&P are applying to sovereign debt. I would suggest they lock in the rates now and issue long term maturity. Fill you boots while you can. 

Personally I doubt the capacity of NZ to repay its debt it is accumulating. The tax base is still heavily reliant on a limited, and diminishing number of PAYE earners. These are the same skilled people most in the demand across the ditch and elsewhere. And NZ is demographically doomed. It has an aging population, with unfunded pension and health liabilities and its population growth is weighted towards the welfare dependent. 40% of children are now in families dependent of welfare!!! 

Oh well, I guess if a low populated island with  limited military capacity, but which has the valuable water, arable land and energy sources vital for the future, is willing to sell you its future via debt issues, all to maintain unsustainable "entitlements", then just smile and wave boys!!!

At first it is understandable to think planned debasement will erradicate the debts...but remember these loans are for shortish terms and once the lenders catch a whiff of the decay, they will raise their price and shorten their terms.....the only people hurt in this debasement game going on are Kiwi who keep their savings in Kiwi$....you can bet Key and fellows have their money well offshore.

We need to face reality 

Given the Earthquakes , SCF , a benign GDP Growth , things are going to get a lot worse before they get better .

The problems at AMI are an unforseen consquence of the earthquake and some more of these are going to bite us on the backside.

NZ is facing a deep economic structural adjustment , and the sooner Dr Bollard , John Key and every Kiwi acknowlqgde this the better .

$NZD monetary supply (amount of actual money) = 200billion http://en.wikipedia.org/wiki/Money_supply#New_Zealand

$NZD total debt = 253billion http://en.wikipedia.org/wiki/Economy_of_New_Zealand

At an estimate 5% interest you need to borrow 12.6billion just to cover the interest another 7.5billion to pay some principal (assuming it's a 20yr loan) just to keep the monetary supply the same.  (actually once you borrow it increases the monetary supply but you get my point.)

If NZ inc attempted to have ZERO DEBT it would be a mathmatical impossibility.

If you stop borrowing you guarantee deflation/bankruptcy etc. etc. 

As incredible as it sounds the only way for NZ inc to keep up with it's debt obligations is to keep borrowing/creating money http://en.wikipedia.org/wiki/Fractional-reserve_banking

If the serfs wont do it then the Govt is more than happy to oblige. 

Feck me, could I even imagine running my household finances like this? Oh, hang on. I'm not trying to buy votes.

Hi Boatman

The issue is not with Earthquakes or SCF, it is will unsustainable and unfunded entitlement spending.

Please remember NZ was borrowing $250m p.w. before any earthquake or SCF collaspe. And all of this when the first unfunded babyboomers only start retiring and consuming vast amounts of welfare and even more scary health budgets.

Remember, those skilled PAYE earners who we pillage are not bounded slaves. They are free to hope on a plane any time, take their skills, tax base and assets, and to leave behind the debt.

And as Wolly notes, it also intends to punish savers by debasing the currency.

On a positive note, other Western Populist Democracies are in the same boat and sometimes worse.

As Alexis de Tocqueville noted in his 1835 classic book Democracy in America: "Democracy will last until Congress discovers it can bribe people with their own money".

In NZ we go a step further and bribe people with other peoples money!!

Re. "NZ Heads of Finance" - agree, as the saying goes, debt is the express lane to slavery.

Just how much of the borrowing is needed because of the earthquake, and how much is blamed on the earthquake and actually needed because the books were never going to balance anyway?

It's all getting very bizarre that the Governement is talking about spending all of these billions on a rebuild that private individuals need to undertake.  Yes there are infrastructure costs but $3b on top of what was already allocated for Sept 4 would surely cover that.

It seems most of the extra borrowing will go to prop up their lost tax evenue and liabilities from EQC and AMI.

It's all very frightening that Government talk of driving the rebuild and getting on with knocking things down.  As a property person, I know that this is always the wrong approach, vacant sites are the downfall of most developers - so why encourage knocking down potentially salvageable or habitable buildings when you know that it will take years to rebuild - the only reason could be to make it look like you are doing something - which is never a valid reason at all.

Unfortunately there are people in charge who believe that progress is to erase history, and write out big cheques.

They don't realise that having a plan to best use existing resources, a plan to keep business owners, property owners and residents on side would be a far better way to solve current dilemmas.

Bernard is right with the heading on the graph - it's the kids we are expecting to pay. That's fraud, just as much as depleting their resource/pollution options.

We should be blody ashamed of ourselves. If we need the services Govt provides, one way or another we should pay the correnct price. Same with energy, and resources.

That, unfortunately, means either a substantial lowering of average levels of affluence, or a need to reduce population.

Notice nobody has suggested the obvious: reducing wages/salaries of the services we aren't paying for, until we are.

Of course, that won't give you 'growth' , but it was dependant on energy supply anyway.

She's a slow-dropping penny.............

The kids get the benefit of all the existing infrastructure in place, paid for by previous generations.

What's so bad about them paying for a little bit of what's being done in the economy now?

Inter-generational spending goes both ways you know.

My opinions of most baby boomers are best left unsaid on this website, as they do not contribute to good debate or discussion.

Yep the kids are going to have to pay for the well off to have tax cuts - its really as simple as that. When labour were in power they were constantly making big surplusses and paying off debt. Sure we have had a recession since, but the main reason the government's tax take is much lower these days is because they cut the top tax rate.  Im not a fan of Labours socialist crap, but I think their fiscal policies (tax the rich and give to the poor) were much better than nationals (borrow from overseas and give to the poor)

Don't worry, almost all of NZ debt is in NZD. We can do a Bernanke and print our debt away. (But to do that we need a powerful Army!!!)

The govt will not be able to balance the budget and produce a surplus without shrinking the state both in size and in the amount of money it sucks.

The households will not be able to save or spend more unless they have large income increases..highly unlikely...or until they have paid down a fair wack of their household debts....highly unlikely given the 100% chance of rates rising.

Figure the rest out for yourself.

Re. Jimbo Jones

Your comment "Yep the kids are going to have to pay for the well off to have tax cuts" is misinformed.

I suggest you look at the graphs of Govt spending over the last 10 years. During Labour's reign, Govt spending exploded on the back on unsustainable election bribes and a growth in wasteful spending on "entitlements" and big government. Particularly from 2003 when Queen Helen said to her man servant  - go forth and secure my reign, fool those clueless serfs with bribes. Tax the middle class PAYE earner to the hilt and ignore the fact the revenues we are collecting are based on the largest, debt fueled binge in NZ's history.

I am interested in how much tax you pay Jimbo? The skilled PAYE earner already bear the brunt of the tax and on that basis the cuts to the income tax rates were a good idea.

Ture the rich to avoid taxes, but it is not through PAYE. It is through exempting our largest asset base, property, from the tax net.

FYI from reader. Interesting suggestion. Anyone for a debt ceiling here too?

When are New Zealanders going wake up and demand that the political elite have rules around how they operate. One area that should be quickly addressed is the level debt and this would best served via a debt limit as a percentage of GDP, with the only out being, wars (this does not mean in bed with US in the middle east etc) and natural disasters.

After all they have laws about how fast we can drive etc and now Medsafe stops me from importing a multi vitamin and minerals because it has 2000ius of vitamin D3.

cheers

Bernard

Well put.    :)