Prime Minister Jacinda Ardern says the Government appears to have the balance right given mixed responses to planned changes to its debt target 

Prime Minister Jacinda Ardern says the Government appears to have the balance right given mixed responses to planned changes to its debt target 
Jacinda Ardern by Jacky Carpenter.

Prime Minister Jacinda Ardern says the mixed response to Finance Minister Grant Robertson’s plans to increase the Government’s debt to Gross Domestic Product (GDP) limit is a sign the Government’s on the right track.

She made the comments in a pre-Budget speech at a Business NZ event in Auckland on Friday.

Finance Minister Grant Robertson said in a speech on Thursday that he's looking at changing the net debt target from the existing 20% of GDP to a range of between 15% and 25% by 2021-22. At 25%, the Government could borrow an extra $15 billion.

New Zealand's core Crown net debt is low by international standards and the debt restrictions have been criticised for restricting government investment. Robertson has said the increased debt target would give the Government more options if it wanted to combat the impact of an economic recession, or fund high value investments that will produce future economic dividends.

Ardern admitted the response to Robertson’s proposed changes has been mixed.

“Some of you may have heard from a speech he gave yesterday that he confirmed we will meet all of the Budget Responsibility Rules as we did last year as well. For anyone who needs or wants a reminder, these were a set of self-imposed rules to demonstrate our commitment to sound economic management covering our debt-to-GDP ratio, core Crown spending and Budget surpluses,” Ardern said.

“The reaction to his news that following the expiry of the Budget Responsibility Rules in 2022 we would be moving from a net debt target (of 20%) to a net debt range (of 15% to 25%) received positive and negative attention – usually a sign we have the balance right.

“He also spoke a little about the domestic economy in general and some of the challenges that may be heading our way. Our economy is strong but, as you all know we will always be impacted by global headwinds. Which of course doesn’t mean we can’t prepare ourselves to be resilient and future proof, but does tend to mean that we always keep one eye on the rest of the world.”

She said there are a number of significant challenges facing the global economy, and none-more so than the ongoing US-China trade war. While uncertainty in Europe was being fuelled in large part by the UK’s protracted Brexit debacle. International events that all have the potential to threaten New Zealand economically.

“Fortunately we are well positioned to face this instability and uncertainty. Although growth rates are set to be lower than we have seen in recent years, the IMF projections for New Zealand are that we will still grow at around 2.5% in 2019 and 2.9% in 2020. We are still tracking ahead of most of our major trading partners. The average growth for advanced economies in the same period is projected to be 1.8% and 1.7% respectively."

Her comments are in keeping with the IMF’s World Economic Outlook (WEO) released last month which projects a global slowdown in 2019 for 70% of the world economy. With global growth expected to drop from the 3.6% recorded in 2018 to 3.3% in 2019.

The IMF report blames the global slow down on a number of events, including the US-China trade tensions, credit tightening in China, disruptions to the German auto industry and the normalization of monetary policy in the larger advanced economies.

But Ardern said New Zealand is still performing well compared to a number of other developed countries.

“We are projected to grow faster than the US, the UK, Japan, Canada, the Eurozone and Australia. Just this week the OECD released its latest outlook which also shows us growing faster than our peers, while last week the Reserve Bank of Australia further lowered its 2019 growth forecast for the Australian economy,” Ardern said.

"We continue to have historically low unemployment and stable, low inflation. This is supported by Budget surpluses and low public debt due to our Government’s responsible fiscal management.”

But she said we can’t afford to take anything for granted.

“Our relatively solid position does not mean we should simply ride out the conditions around us. Nor do the existing parameters successive governments inherit mean we should use traditional frameworks to make decisions or measure success,” Ardern said.

“My hope is though that this year, by meeting both the Budget Responsibility Rules and with the new Wellbeing Budget, you’ll see us doing exactly what is needed – setting a strong foundation for both our country and our people.”

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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Opening the door for Fiscal stimulus as opposed to just cutting the OCR.

Those dark clouds that Winston predicted are starting to threaten along with the housing market on the slide, money has to be injected somehow.

I would prefer a balance of tax cuts and fiscal stimulus so the effect is widespread

That's all this is. The Government knows there's a lot of trouble ahead, the Australian politicians seem oblivious even though APRA and RBA are making moves to try to reduce the damage. Nothing is really being done to address the massive reduction in liquidity from banks trying to follow the rules.

I think Australia is going to be our biggest economic drag, then later the US where default rates on car loans are increasing.

This year's Australian budget has fiscal stimulus written all over it. Individual tax cuts across the board, SME tax cuts and instant asset write-off, $100b over 10 years towards transport infrastructure, to name a few.
I don't know how far this will go but will jump-start the economic machine for the time being.

I don't think it will do jack. A recession helps to reset overinflated asset prices and the structure of the economy (misallocation of capital). The can has been kicked down the road since the GFC, at least in the US. We are well overdue for a reset, only then will stimulus have any effect imho.

I disagree here, tax cuts dont do much in terms of an effect multiplier and are then locked in for ever. We can look at the recent Trump tax cuts and see how little they achieved long term and their significant negative impact over the longer term. A one off targetted stimulus for is max effect on the other hand usually has a multiplier help the areas most in deed and have no long term [negative] impact.


except the money wont be spent on infrastructure, it gets wasted on social engineering

“we can’t afford to take anything for granted.” So we are now resorting to cliches and platitudes. Bill Rowling was rather good at those too, as I recall it. That government lost its way after they lost their leader. This government looks in need of a reliable compass given all the pre-election rhetoric, compared to what is actually being delivered.


Any person who has ever held a gig outside of being on government/council paycheck would know that borrowing for operational expenditure is a recipe for fiscal disaster. Surely, most senior leaders in this government wouldn't understand any of that.
If the funds raised through debt instruments in the future aren't strictly earmarked for acquiring return-generating assets (not necessary profit-generating, but generational dividends from improved productivity), we are doomed to fail the same way Spain, Italy and Greece have failed through their fiscal mismanagement over the last few decades.

yea... that's is.. just ignore the GFC and the Christchurch earthquakes. The fact National has us back in surplus within 5 years of the earthquakes was astounding... if the current mob was in charge we be still dancing around in circles and having talk fests about what to do with the Christchurch rebuild

My god! You obviously don’t live anywhere near the non blue east side of Christchurch. Just take a casual glance through the court lists.Just perchance, have you yourself been on the receiving end of EQC and/or Southern Response, or other Insurers’ policies for your wrecked family home? Don’t think so, otherwise you would never have written what you wrote! Now at long last they are getting their comeuppance. National screwed the ordinary folk of CHCH, the ones who couldn’t defend themselves, hand over fist all for Mr Key’s surplus. And what Christchurch rebuild??. Everybody left town yonks ago. Just walk through whats left. Worse than Dresden 1954.

The CHCH earthquake cost the govt $6.7 bill and spurred a lot of economic activity that would have bought in a lot of tax to cover some of that govt spending. The government borrowed $50billion. That's $10k for each man woman and child. All while selling our state houses and power utilities. They're terrible economic managers.

Their motive is "starve the beast" to keep growing money at the top of the pyramid. Bridges himself still believes in trickle down economics.

An ordinary person or household is NOT a government. An ordinary person or household does not have a magic money tree. A monetarily sovereign government does and the only constraint it faces in spending is REAL CAPACITY not financial. Furthermore, a NZ government is not a Spain, Italy or Greece tied to a currency (euro) it does not create via Excel spreadsheet entries. It is important to grasp these differences when understanding macroeconomics, government spending and when trying to explain Japan or attempting to short JGBs.


"Ardern said Budget 2019 would have five priority areas which evidence showed offered the greatest opportunities to make a difference to New Zealanders' wellbeing.
They were:
* Creating opportunities for productive businesses, regions, iwi and others to transition to a sustainable and low-emissions economy.
* Supporting a thriving nation in the digital age through innovation, social and economic opportunities.
* Reducing child poverty and improving child wellbeing, including addressing family violence.
* Supporting mental wellbeing for all New Zealanders, with a special focus on under 24-year-olds.
* Lifting Māori and Pacific incomes, skills and opportunities."

Well, my thoughts are these have nothing to do with your promises during election campaign, and they seem to be just very cheap slogans without any substance.

These points are alright but almost 2 years in power and they still haven't formulated a concrete plans with delivery timelines for those abstract ideas.
The fact that they are concerned about funding sources before presenting an actual plan of action makes me sceptical about our future under this government.

All the Government has stated is they are going to borrow more money and do nothing with it. Then the PM talks about how NZ is better than the rest of the world, which has nothing to do with achieving the election promises that you have listed. I think we can officially declare that we have a Government that is mindless and has no vision.

Mindless and no vision...gotta agree wholeheartedly. Amazing how one can become so knowlegeable on economics so quickly these days! Takes most people many years of diligent study. I once referred to her as a vacuous halfwit for which I now apologize in the light of such progress.

More money for Solo Parents, Outdated Academic Institutions .. money to bailout Property Developers, poorly run Monopolies and Employers who depend on subsidized wages/salaries via Working for Families.

MORE money to bailout the Auckland-Super-City-Council which refuses to raise rates by a meaningful amount, to reflect their profligate spending ..

I'm fine with the government borrowing money, heck, governments earn money when they spend - it's call taxation! But these clowns seem to want socialism at the expense of capitalism!

Aren’t the government in surplus? Just like the Clark Cullen Labour Party were? In fact I remember the national party continually criticising the Cullen surpluses, until those surpluses kept us out of the global crisis and then national took the credit.

Oh yea.. I remember.. and National inheriting the chronically underfunded ACC debacle too.

2008 Prefu (pre election opening of govt books prepared by Treasury) projected govt debt to rise from 17% to 30%, due to massive structural deficit created by huge Clark/Cullen spending. "Cullen surpluses" indeed.
"Dr Cullen was gleeful in the hours after his final budget. He smirked and gloated that he had left no money for National. In fact he agreed in an interview with Gordon Campbell that his budget was a “booby trap” for National"


Socialism is great until you run out of others peoples money to spend which is always the case in the long run. I don't see why our government has the right to give a debt burden to unborn kiwis just because of their feel good ideology policies.

Indeed, that right belongs to the property industry alone, supported and perpetuated by poor governance.


I suggest that you stop using the word socialism until you understand what it actually means. Here is a definition from my OED; A political and economic theory of social organisation which advocates State ownership and control of the means of production,distribution and exchange.

Name me one policy from this government that fits the definition. No,of course you can't. This is a middle of the road coalition that wouldn't even campaign for a watered-down CGT. Socialist? Don't make me laugh.

Too many folk learning their word definitions based on contextual meaning they take when listening to Mike Hosking / Leighton Smith rant.


Have to hand it to 'er - she's adept at Polishing whatever Turd her hapless coalition produces.....

The IMF's projections are heroicly optimistic. Having had a few things to do with the IMF and OECD in the past, I've found them to be pretty poorly informed on the nuances of local economic factors.

Well we went in about 1961, the beginning of Holyoake. Much national debate at the time. About the same intensity, as the repealing of the Nelson railway line. The IMF, well now,high finance and the back corridors of power. Of course the French bloke though, wanted much more than that from the back corridors, it would seem to be.

Joyce "there is an 11.7bn hole"
Robertson" you are wrong"

Remember that. Well.... looks like Joyce was right after all.

See the link... lots of economists calling Joyce wrong.... turns out he was only wrong because 11.7bn was too low. Its only 4 % of GDP and Grant Robertson has decided he needs 5%.

I think the original claim was there was a faulty number and it was a "hidden black hole" This isnt a hidden blackhole, it is new, it is out there in the open so you can vote on it, do so wisely. PS Worst case its a black hole that is mainly due to the last Govn's refusal to address issues and can kick meanwhile making it look like there were surpluses.

National and Labour are both the same mindset. National ran artificial surpluses when it was precisely what they should not have done given the effect was to drastically disinvest critical parts of the economy, look at the mess Labour are trying to address but they have more or less the same mindset (being neoliberal also) so nothing will change. We need a government that will address the national obsession with not paying enough revenue forward to run the country adequately. Until that happens we are destined for 3rd world status

Slowly some sense creeping in. Better still, start to see government deficits as neither good nor bad - but functional - what effect do they have on the real economy? Do they increase real GDP or are they merely inflationary due to being at full capacity? Who cares about the level of the debt? It's the real effect of the deficit that matters.
And if you don't trust me, maybe you'll trust the view of successful market players like Dalio.... MMT is coming whether you like it or not.

agree...but keep an eye on the wasting.

Stephen Joyce was right : this shambolic government has a monstrous fiscal black hole . . . the stardust is shedding from the high flying Taxcinda's wings . . . the speaker of the house is highly biased and incompetent . . . our natural gas industry is being shut down , to protect the environment , cos importing Indonesian black coal is deemed to be a more acceptable option . . SIGH ! . . what a shower, what an absolute shower this lot are . . .

If the fin min actually read his emails he would have used a tidier solution to raise debt. Don't tap the glass I guess, can't help them if you try

As long as they don't start anything they cannot finish by the time they get voted out next election its all good by me.

someone hasnt been looking at the polls.....

Typical Pollie, still locked into the grow for ever on a finite planet mantra. F for fail unless the detail yields something positive and I really doubt that ie the taking on of more debt to simply throw at bandaids over our long term issues is most likely.