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Brian Fallow asks just how freaked out or sanguine we should be about burgeoning public debt

Brian Fallow asks just how freaked out or sanguine we should be about burgeoning public debt

By Brian Fallow

As the electioneering ramps up a key point of contention between parties will be how freaked out or sanguine we should be about burgeoning public debt.

The Budget projected net government debt will rise from around $60 billion pre-Covid to $200 billion in four years’ time, or from under 20% to around 54% of gross domestic product. These numbers will be updated in the pre-election fiscal and economic update shortly.

So we have National and Act declaring that all that debt has to be repaid, you know, and Labour must come clean about what taxes it plans to increase.

And we have Labour pointing to National’s talk of reducing net debt to around 30% of GDP by 2030 or thereabouts as a recipe for austerity and demanding it come clean about what spending it plans to cut.

But all of this rather reductive way of framing the issue ignores a couple of things, one elementary, the other (for us) novel.

Taken literally it is wrong to say government debt has to be repaid. It almost never falls in dollar terms. As bonds mature new ones are issued.

Instead the usual metric of fiscal prudence is the ratio of net debt to GDP – and that’s nominal GDP, a proxy for the tax base, which increases at the real growth rate plus inflation.

A better metric would be finance costs, or the Crown’s interest bill, which reflects both the level of debt and interest rates applying to it.

The Treasury projects that the interest bill will rise from $3.7 billion or 1.3% of GDP in the fiscal year just ended to $13 billion or 2.6% of GDP in 10 years’ time. The projections assume no policy change and beyond 2024 no business cycle, but an expectation that the 10-year bond yield will have recovered to around 3.5% by 2030.

But the state’s interest cost is also affected by the other factor the political rhetoric glosses over, quantitative easing.

It makes a difference whether debt the Government issues is held by private sector custodians of people’s savings or has been bought up with freshly printed money by a central bank which is, after all, part of the core Crown.

The Reserve Bank has been buying bonds with gusto since March and by the end of June had $22 billion on its books. It has continued buying at a rate of around $900 million a week. Essentially it has been monetising the deficit at that rate.

Market economists expect it to raise its self-imposed cap of $60 billion for the large scale asset programme, perhaps as soon as next week’s monetary policy statement, and extend the timeframe for the programme.

It has indicated it would be uncomfortable holding more than half of the total stock of government debt, however, lest the bond market become illiquid and dysfunctional.

Quantitative easing is not costless or riskless.

It expands the supply of base money, specifically the aggregate level of settlement cash that trading banks have on deposit at the RBNZ, on which it pays interest at the official cash rate. But right now that is just 0.25% and may even go negative some time next year.

To ignore this conspicuous feature of public finances at the moment while inviting alarm about the mounting debt level is arguably to exaggerate the problem by as much as a factor of two.

I put that proposition to National’s finance spokesman Paul Goldsmith this week at an event organised by the government and public relation firm Silvereye.

He had just told us, “Our big worry is that the Government is planning to spend whatever it takes to keep their [poll] numbers up until September 19th and on the  20th they will present everyone with the bill, which is higher taxes, and that is the last thing New Zealand needs at the moment.”

Goldsmith said now was not the time to reduce taxes  – beyond inflation indexing the income tax thresholds and accelerated depreciation – and that talk of austerity and $80 billion of cuts was nonsense.

“But you do need to have a path to get [debt] back under control to a prudent level over an extended period.”

His plan for that is to deliver, through business friendly regulatory settings, a higher economic growth rate than the Treasury is projecting and to keep a tighter fiscal rein, for example by shaving a few hundred million off the annual operating allowance for new spending, and suspending contributions to the New Zealand Superannuation Fund.

“Does it matter in a world when central banks are printing money like nobody’s business? I don’t think you can find anyone in the world who can give you a clear answer to that question of what will be the consequences of all the quantitative easing,” he said.

“To my mind, if money is created and put into the system eventually it will have an impact of some sort and the most logical one is inflation at some point. We seem to be very far away from that at the moment. But I do think there is a big difference between what you can get away with as the US or EU or China, and what you can get away with as a very small country with your own currency and reliant on the support of capital markets generally.”

People commonly said New Zealand had nothing to worry about, when its public debt was so low compared to most other developed countries. Pre-Covid the average level of net public debt to GDP across advanced economies was already 76% of GDP.

But New Zealand has a very high level of private (especially household) debt.

“And that is why over the past three decades we have held the view it makes sense for the government’s debt to be relatively modest at around 20% of GDP. Now I think the world has changed a bit and we can afford to be a bit more relaxed about that. But not totally relaxed. Because of that pressure of being a small isolated country prone to natural disasters and biological threats it makes the have a moderate and responsible approach to getting on top of it,” he said.

“But I agree fundamentally we don’t have to get obsessed about it and we are not saying we have to get down to an exact number by an exact date no matter what happens.”

When asked what the point of suspending contributions to the Super Fund would be when it just shrinks both sides of the balance sheet and does not reduce the obligations future taxpayers have to future superannuitants, Goldsmith said not many people right now were increasing their mortgage to put it on the stock exchange.

“Yes, it doesn’t change our ultimate position, although the debt has to be paid back whereas any investment can go up or go down.”

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"New Zealand has a very high level of private (especially household) debt...that is why over the past three decades we have held the view it makes sense for the Government’s Debt to be relatively modest"
And, Paul, that is why that equation has to be reversed! We need LESS Household Debt at the expense of MORE Public Debt, and there's an easy way of doing that! Stop lending to households when interest rates are so low and they can bear the debt cost associated with any fall is the asset value that may finance their debt. Conversely, Government Debt cost has never been so low.

To talk about a V-shaped or any other shaped recovery based on past history is sheer absurdity. The future recovery...will be unlike anything we have ever experienced, including... the Great Depression. This is a completely different economic animal.
As much as it pains me to say, even acknowledging some of the stimulus money was wasted, without it the US and therefore the world would be in a deep depression. Whatever stimulus package comes out ....will be absolutely necessary to keep the economy from truly collapsing.
I have a business associate who has excellent credit He has several high-limit credit cards he rarely uses. In the last month, seemingly out of nowhere, three card issuers cut his limit to a paltry few thousand dollars. But he illustrates a point. If even highly rated, stable borrowers are seeing their limits cut, imagine what is happening to marginal borrowers.

The high level of private debt is the other side of the equation of pursuing a low level of public debt. I agree with your point that "the equation has to be reversed".

Given that all cashflows net to zero at the macro level (Government balance + Non-government balance = 0), and that one sector's in-flow is another sector's out-flow (Government surplus = Non-government deficit), if we want to reduce non-government debt, i.e. run a non-government surplus, we will have to run a government deficit (Non-government surplus = Government deficit). Time to get over our fear of government debt (backstopped by the RBNZ), otherwise the private debt (backstopped by nothing) will keep growing until it collapses.

"When asked what the point of suspending contributions to the Super Fund would be when it just shrinks both sides of the balance sheet and does not reduce the obligations future taxpayers have to future superannuitants, Goldsmith said not many people right now were increasing their mortgage to put it on the stock exchange."

Typical National short-term thinking which cost us dearly when they suspended payments between 2009 and 2017.

Goldsmith shows his ignorance. It's not a mortgage and it's not invested in the Stock Exchange. Government borrows cheaper than anyone can and it's invested in a diversified portfolio of worldwide assets which long-term will always return an excess over Treasury bonds.

The other criticism thrown around by the like of this commenter is that National borrowed massively from 2009, after Sir Michael the Redeemer had fixed the economy and government debt. They claim this as a sign of economic failure, conveniently forgetting that Super Fund contribution payment suspension was the a cost of the GFC and earthquake crises, otherwise we would have had 50% of GDP in government debt to start 2020. One might note that the Clark/Cullen government was the only one since the late 1980's without a significant economic shock during their tenure.

Those same people now are advocating massive uncontrolled borrowing, which, in some articles reference a tripling of the interest rates for Bonds within the next 10 years. You can't argue both sides of the argument and still be right.

I don’t think you can find anyone in the world who can give you a clear answer to that question of what will be the consequences of all the quantitative easing.

The quote of the decade. No one knows what's going to happen. But it's not going to be nothing, and it's not going to be good.

I assume that Snider was expecting QE to do this ( bring economy back to its growth curve )...???
He is the ONLY one who held that view, as far as I know.
If not ...why is he showing these charts...???
Seems pointless to me.
Even back in 2010, people I listen to, were talking about the "new normal" of very low growth. ( ie. growth in the face of a deflationary credit contraction in the private sector .... a private sector debt burden )

Why criticise the efficacy of QE based on an extrapolated growth curve that is/was always a nonsense..??

I don't think that's what he is saying all at - central banks claim assets, sovereign bonds in particular, purchased from the public will bring term interest rates down and thus ignite economic growth. Well it hasn't. So it's time to find out why because repeatedly trying the same thing over and over is not a quantitative solution to the compounding low growth environment we endure. All we have is trickle down economics for the already wealthy.

Wealth effect or wealth illusion?
The other therapeutic effect of lower-for-longer interest rates is the wealth effect. By driving up the value of future cash flows with lower rates of interest, all manner of assets – stock, bonds, and houses – increase in value and, thereby, can stimulate our marginal propensity to consume. More simply put, the imperative was to make rich people richer so as to encourage their consumption. It is not so hard to imagine negative side effects.

There are the obvious distributional effects between those who have assets and those who do not. Returning house prices in California to their 2005 levels may be good for those who own them, but what of those who don’t?

There are also harder-to-observe distributional consequences that flow from the impact of lower-for-longer interest rates on the value of our liabilities. This is most easily observed in pension funds.

Consider two pension funds, one with a positive funding ratio and one with a negative funding ratio. When we create a wealth effect on the asset side of their balance sheets we also drive up the value of their liabilities. Lower long-term interest rates increase the value of all future cash flows – both positive and negative. Other things being equal, each pension fund will end up approximately where they started, only more so.

The same is true for households but is much more ominous, given the inequality of wealth with which we began the experiment. Consider two households: one with savings and one without savings. Consider also not just their legally-defined liabilities, like mortgages and auto-loans, but also their future consumption expenditures, their liability to feed and clothe themselves in the future.

When the Fed engineered its experiment to promote the wealth effect, the family with savings experienced an increase in the present value of their assets and also an increase in the present value of their liabilities. Because our financial assets are traded in markets and because we receive mutual fund and retirement account statements, we promptly saw the change in the value of our assets. We are much slower to appreciate the change in the present value of our liabilities, particularly the value of our future consumption expenditures.

But just because we don’t trade our future consumption expenditures on the stock exchange does not mean that the conventions of finance do not apply. The family with savings likely ends up where they started, once we consider the necessity of revaluing their liabilities. They may more readily perceive a wealth effect but, ultimately, there is only a wealth illusion.

But what happened to the family without savings? There were no assets to go up in the value, so there is no wealth effect – real or perceived. But the value of their future consumption expenditures did go up in value. The present value of their current and expected standard of living went up but without a corresponding and
offsetting increase in assets, because they don’t have any. There was no wealth effect, not even a wealth illusion, just a cruel hoax. Link

My understanding is that the main purpose of QE was to have an influence on long term rates.
Whether that leads to economic growth is out of the feds' control.
Even if it only helped to reduce the debt burden , it was useful in the deleveraging process .
Deleveraging did not happen because it requires the will to suffer short term and a coordinated fiscal and monetary policy as well as a restructuring of debt ( haircuts)... Etc
Instead... The can got kicked down the road.
Is that the FEDs fault ??
I agree with what u say about the wealth effect.
For me , it raises the issue of the nature and growth of the fire economy, the financialisation of almost everything.... Which was enabled by neo-liberal ideas ( Reagan and thatherism ) and facilitated by central banks allowing unfettered credit growth, with the blessings of the State

Even if it only helped to reduce the debt burden , it was useful in the deleveraging process.
We traded lower coupon costs for greater issuance.

Global govt debt on course to fresh ATH. Debt/GDP ratio has reached almost 90% at the end of Q1 this year. Q2 numbers, when available, are highly likely to show, that global sovereign debt/GDP has reached a new high, surpassing the previous WWII peak of 104%, BoA says Link

This is great stuff Audaxes. It's madness thinking we have infinite control over a closed system (the earth) with finite resources. People should be getting cagey about governments eroding their personal purchasing power through this, but we're mostly going to be lambs to the slaughter. There's also case studies elsewhere that give us a window into the future

"I don’t think you can find anyone in the world who can give you a clear answer to that question of what will be the consequences of all the quantitative easing."

Actually you can.

One minor example would be that NZ conducted QE in 1938 onwards, and had no significant issues whatsoever by doing so.

As above, net "government debt" level is a red herring although interest payments are relevant. The clearest sign of imprudent spending/QE is inflation rate. Going by CPI, we are fine. Going by housing price inflation, not so much.


Paul Goldsmith provides two excellent points - 1) A great reason not to vote National and 2) Destroying the myth that National are better economic managers

Paul Goldsmith should study MMT and that would tell him everything that he needs to know. Also some study of sectoral balances and stock flow consistent modeling by economist Wynne Godley would help with his understanding about money and the economy.
it wouldn't hurt for our mainstream economists to learn a few facts either. Most of them don't even seem to understand that the banks create money when they lend. They have a very odd idea that money is a commodity that comes out of taxpayers pockets or that it has to be borrowed from overseas.

How do banks create money?

They just type numbers into your bank account when you take out a loan. They don't lend out other peoples savings they create the money in the same manner as the government does but only the government can create currency, banks create credit money. The Bank of England explains it here.

Errr, that's not how it works. I mean, if they can just create money then why bother lending, just create it for themselves.

For every new loan, they have to finance 97% of it through deposits or issuing debt. The 3% is capital they put in.

They basically can create capital for themselves and did, everything else follows on:

The link between bank credit creation and bank capital was most graphically illustrated by the actions of the Swiss bank Credit Suisse in 2008. This incident has produced a case study that demonstrates how banks as money creators can effectively conjure any level of capital, whether directly or indirectly, therefore rendering bank regulation based on capital adequacy irrelevant: Unwilling to accept public money to shore up its failing capital, as several other major UK and Swiss banks had done, Credit Suisse arranged in October 2008 for Gulf investors (mainly from Qatar) to purchase in total over £7 billion worth of its newly issued preference shares, thus raising the amount of its capital and thereby avoiding bankruptcy. A similar share issue transaction by Barclays Bank was “a remarkable story of one of the most important transactions of the financial crisis, which helped Barclays avoid the need for a bailout from the UK government”. The details remain “shrouded in mystery and intrigue” (Jeffrey, 2014) in the case of Barclays, but the following facts seem undisputed and disclosed in the case of Credit Suisse, as cited in the press (see e.g. Binham et al., 2013):

The Gulf investors did not need to take the trouble of making liquid assets available for this investment, as Credit Suisse generously offered to lend the money to the Gulf investors. The bank managed to raise its capital through these preference shares. Table 11 illustrates this capital bootstrapping (not considering fees and interest). Link

Further links:

Banks don't create their own capital.

That article does not support your point, in fact it tells you exactly where capital comes from - investors.

The investors were funded by a Barclays bank loan which underwrote their capital purchase - furthermore, in other articles it is claimed the interest on this loan was covered by contested cash transfers from Barclays Bank to Qatar.

The other charges dismissed were against Barclays plc and Barclays Bank plc for “unlawful financial assistance contrary to section 151(1) of the Companies Act 1985 in relation to a $3bn loan provided to the State of Qatar in November 2008”.

I agree that's dubious if so, however the Qatari's were still liable for the debt and that is a very unorthodox transaction and not the norm.

So The Bank of England doesn't know what it talking about? The banks are highly regulated by the Reserve Bank, they can't just do as they please. When a bank lends it creates an asset on one side of its balance sheet but also a liability on the other side. If it had all liabilities and no assets then it would quickly go broke. It needs somebody able to repay the loan, the money is then cancelled again.

Four days ago Steve Keen posted a brilliant series of videos explaining how money is created, QE, and how the transactions work between the central bank, commericial banks, and Treasury. You have to know a little double entry book keeping to understand it though.

...lest the bond market become illiquid and dysfunctional.

Which it will.

Will it? - banks are falling over themselves to secure the liquidity sovereign debt offers and the return of their money, if not the return on it.

And remember banks are not being relieved of government debt when they sell Crown bonds to the RBNZ, just it's type and liquidity in reality.

These bonds were purchased by the Reserve Bank from a panel of commercial banks via auction, and were paid for with newly created money credited into banks’ Exchange Settlement Accounts (these balances do not count as deposits, as they are not held with the private banking sector) - pages 75-77 (79-81 of 104 PDF): "Box D: Recent Growth in the Money Supply and Deposits" embedded in the RBA's latest Monetary Policy Statement

[Fed's] 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

Grow the economy - grow GDP - how?

At one moment in time, in a vacuum .....
If you assume demand for consumables in the NZ market are currently fully satisfied the only way a single manufacturer or service supplier can increase their business (GDP) is by increasing their market share by cannabilising another entity's market share. In a state of market equilbirium it is unlikely the total market will consume more of any particular good or service. Why would it.

NZ's consumption is met by domestic production plus imports The logic of that would be import substition. However, import substitution does not increase GDP

NZ's real GDP can only increase by increasing exports (or consuming more). National, during its last term of office set out to increase NZ exports from a then base of 30% of GDP to 40% of GDP. Unfortunately exports have fallen to 27% of GDP in 2018. Don't know what the figure was for 2019

Let's have some real solutions rather than financial deception. Wage and welfare subsidies maintain consumption. Building infrastructure creates assets, and if it employs domestic resources and labour GDP will increase, while mathematically the share of exports will decrease further. The quick fix is mass immigration and building houses to accommodate them. Domestic production and GDP will expand to met their consumption needs

GDP can be increased by the government spending more and creating a larger demand for the goods and services that we supply to it.Unemployment is a sign the there is unused capacity within the economy. One persons spending becomes another's income and we can only spend when there is sufficient money created for us to do so, taxation is used to reduce demand within the private sector. The government could undertake a job guarantee to maintain demand within the economy. Stephanie Kelton tells us that exports are a loss for the exporting country as they are giving up their resources for the benefit of another country to enjoy, it's a way of seeing things anyway.

Foie Gras

..... "freaked out or sanguine about burgeoning public debt?" Me - I'm freaked out.

As long as the debt is held in NZ Dollars what does it matter, we only owe it to ourselves. Government debt can be though of as the nations savings account as a government deficit equals a private sector surplus (sectoral balances). Only the government can create the net financial assets to finance our savings.
This is explained by the economist Professor L. Randall Wray:
‘If the government always runs a balanced budget, with its spending always equal to its tax revenue, the private sector’s net financial wealth will be zero. If the government runs continuous budget surpluses (spending is less than tax receipts), the private sector’s net financial wealth must be negative. In other words, the private sector will be indebted to the public sector.’

It is impossible for the government sector and the private sector to run surpluses at the same time. If the government deficit provides the private sector surplus then implications for the economy should be clear. When we add in the third sector (Rest of the World) it can be seen that the three sectors always have to balance overall. In other words, as Professor Randall Wray points out, it demonstrates the ‘important accounting principle that the sum of deficits run by one or more sectors has to equal the surpluses run by the other sector(s)’. Therefore, surpluses and deficits will always add up to zero. As such, in a graphic representation, it will be easy to see that they balance identically as a mirror image.

Problem there Treadlighty. Underneath all that theory, we actually end up owing it offshore.
The theory you describe is irrelevant.

That happens because we run current account deficits and foreigners end up holding NZ Dollars and not because the government needs the money, the government doesn't need other peoples money it is a sovereign currency issuer. If the government doesn't finance our current account deficit then it will be financed by further private sector debt as sectoral balances describes.

In terms of economics, I see this kind of "financial thinking" as being somewhat myopic. ( Is saving purely a financial asset thing, or can it include the increasing/changing value of various forms of assets..?? )
Even thou what you say is true, in a balance sheet approach, the economic consequences might be very different.
If the Govt is running deficits and competing for funds with the Private sector, the savings it borrows is no longer available for productive investment in the private sector. ( which is better.... growing wealth or net financial savings..? )
I think the economic game is about increasing wealth ( function of productivity + resources ), which is NOT the same thing as financial savings. Money printing and credit creation is not wealth. Govts running deficits which create private sector savings is a misleading view , without regards to the bigger economic, landscape, view
I think the MMT view of deficits creating savings kinda takes us down the rabbithole...

There is no crowding out when the government borrows, there is not a limited pool of money that the government competes for. Banks can create all of the money that the private sector requires and the government only borrows back the money that it has already previously created through its spending. The government only borrows back commercial bank reserves which banks don't lend anyway and the banks have no reserve requirements that they must adhere to. They are only useful in the operation of their exchange settlement accounts. The Reserve Bank likes to control the level of bank reserves to maintain its interest rate settings. Economist Bill Mitchell explains here why governments borrow.
Part one.
Part two.

I'm freaked that it's being wasted. All that firepower! Going from 19->53% govt debt to GDP. I hope there will be some long term economic benefit for the country?

Debt was unrepayable (in understood taken-for-granted values) before the virus, it is even more so now.

So it will either be forgiven, or the system runs our of the other sort of cred - the 'ibility' sort.

There is an argument for building the resilience we need, and to heck with the debt. Our problems are, after all, physical.

Assuming that (a) QE continues as announced with (b) a substantial amount of NZDMO debt issuances purchased by RBNZ, then the following statement is incorrect:
"projected net government debt will rise from around $60 billion pre-Covid to $200 billion in four years’ time, or from under 20% to around 54% of gross domestic product"
This is because, when preparing budget forecasts and Crown financial statements, Treasury will need to eliminate on consolidation all NZDMO debt issuances purchased by RBNZ and interest paid on such. By way of illustration, using HM Treasury's financial statements for 2016-17 (this is a suitable reference as NZ Treasury will be settling its accounting treatment for QE purchases, see:
"1.129 Debt interest costs as a share of total receipts increased from 4.1% in 2015-16 to 4.4% in 2016-17. The interest costs exclude interest that is paid on gilts held by the Bank of England as part of its quantitative easing programme. Interest paid on debt held by the Bank of England is eliminated on consolidation as both parties to the transaction are within the WGA boundary. This reduces interest costs recognised in WGA by around a third."

See above:
Quantitative easing is not costless or riskless.

It expands the supply of base money, specifically the aggregate level of settlement cash that trading banks have on deposit at the RBNZ, on which it pays interest at the official cash rate. But right now that is just 0.25% and may even go negative some time next year.

Furthermore, the bonds remain on the RBNZ's balance until sold or redeemed by NZ Treasury, presumably to balance the liability to service and retire the settlement cash created to purchase said bonds.

You're correct in that RBNZ's accounts will still show the asset and related interest income (just as Treasury's accounts will still show the debt and related interest expense).
... but the PERTINENT ISSUE issue here is that when the RBNZ and Treasury accounts are consolidated to prepare the Government's financial statements (the CFS: which is basis for debt disclosure and computation of fiscal indicators, including net and gross debt), these items are eliminated, hence QE involving purchase of government debt has NO IMPACT on Net Public Debt, Gross Public Debt, etc!

I think everyone is in dark where this is going to end. One thing is sure, and that it will come at a cost.

Debt is useful if it is used to increase the productive capacity of a country. Debt is not useful if it is used for unproductive expenditure.

I take the view that govt debt used to pay for the wage subsidy is useful because it preserves businesses and skilled employees for the future during a temporary period of sales and income collapse. I also think that there should have been more of it and that the debt issued should have been bought by the RBNZ.

The best use of debt is to fund future productivity. By adding value to the resources New Zealand and it's people have they can increase their income and pay for the measures needed for the nation to transition to sustainability. To use their natural resources wisely and live in harmony with nature will only be possible if we spend the money on RESEARCH AND DEVELOPMENT to enable us to do so.

You can only live a high income lifestyle with low carbon outputs if you know how to do so. You have to have the income, access to capital and knowhow to be able put in place the infrastructure to lead a sustainable lifestyle.

I don't hear anything from the Greens that lead me to believe they want to do anything apart from soak the rich, convert the countryside to native bush and entangle private enterprise in endless bureaucracy. I don't see anything from National apart from building roads, selling the country to the Chinese and giving wealthy people income tax cuts. I don't see Labour as much more than neoliberals with a small n with a side dish of endless bureaucracy. ACT want to do away with R & D credits and go into full blown austerity. I'm not sure what NZ First are up to apart from trying to be a handbrake.

So on the political landscape there is no party for me to vote for. This endless chattering about debt obscures the problem New Zealand is facing. The globalisation that New Zealand has benefited from is tottering. We need to spend money on new methods, research and ideas so that we have something of increased value to offer the world in an environment where every country is increasingly looking out for itself.

My heart lifts when I see Rocketlab send another payload into space or farmers on Country Calendar making a special type of lavender oil pressure vat. We need more of this type of thing and we need the govt to up the amount it spends to subsidise research, basic and applied.

It's the only way to get ahead and no-one in the political realm understands it.

Standing ovation. You've summed up much of my sentiment on politics exactly.

Compelling arguments and very well argued.
It is only by increasing the productivity, flexibility and innovation rate of the REAL economy that we can achieve real sustainable growth - something which is definitely not achieved by promoting parasitic housing speculation, whose only result is to divert resources from the productive sectors of the country.

tax and spend labour replacing itself with print and spend -- and as usual no idea or thought about how to repay

regardless of the short term gains - simply paying interest on the 200 billion they intend to print/borrow will be crippling in five years time - especially if interest rates return to even a low norm of 5% 10 billion a year in interest before you start!

Nah, all the immigrants coming in are incremental to the tax system (theoretically) and contribute to the GST tax take

Unfortunately, what happened in 2008-09 in Uk will happen again now, everywhere.
That is, revenue to government craters more than anyone expected and spending rises faster
So, deficit explodes.
And GDP has to recover by end of 2021.
Otherwise your measure (denominator) is itself severely lowered, making the debt as a % much higher for longer.
But the only alternative is making the hole deeper too early.
As NZ has to export, if rest of world does not emerge from its crater at same time as NZ (it won't) then who will buy exports. Not a good prospect I am afraid and this is nothing to do with DGM, its reality

Our tech sector exports will be ok as we can still be competitive. Our dollar will probably be devalued which will ironically be good for all exporters. But there's going to be some extreme poverty and unemployment figures like we've never seen before. The wealth gap is going to become a chasm. This will play into Labour's hands for welfare, and whoever on the right is willing to blame immigrants. As sentiment towards the hundreds of thousands we've imported to stave off a recession since 08 puts more pressure on welfare and job availability and turns sour. Wild cards are Chinese influence, foreign ownership of assets, and personal debt levels.