By Jason Walls
The National Party has been notably absent from the debate around Government debt for the last few weeks.
At first glance, it makes sense why. As a right-wing party, National should be championing policies that limit borrowing and spending.
As prominent economists called Finance Minister Grant Robertson’s Budget Responsibility Rules a “fiscal straightjacket,” the Opposition stayed out of the debate.
Finance Spokeswoman Amy Adams issued no press release when ANZ said the 20% debt target was an “arbitrary number.”
Finally, after some weeks of the debate marching on, I asked National leader Simon Bridges if he thought the Government was wrong to commit to the rules.
“No, I don’t,” he told me.
“I think debt matters. I think it is important to pay it down, I actually agree with the Prime Minister on her point that we do need to be resilient to shocks.”
A fairly predictable answer and one I was expecting.
But this week, it’s clear the Opposition changed tact.
“Can he confirm that the Half Year Economic and Fiscal Update (HYEFU) shows the Government borrowing an extra $10 billion of net core Crown debt?” Adams asked Robertson in the House on Tuesday.
Robertson gave a calculated answer.
“I can… confirm that the Government will, using the debt measure that the previous Government did, reduce net core Crown debt to 20% of GDP by 2021-22.”
To break it down – both Robertson and Adams are right, in a way.
The Government is planning to increase debt by $10 billion to $69.40 billion by 2020. But that number drops to $66.76 billion by 2022.
By then, $66.76 billion will account for 19.3% of New Zealand’s GDP because of the growing economy, according to HYEFU projections.
It’s worth noting that debt as a dollar figure also increased by almost $5 billion under National’s latter five years in Government but decreased as a percentage of GDP.
Let’s look at the numbers
But where Adams trips up is around debt servicing costs.
“So at the same time that he’s touting large Government surpluses and a growing economy, thanks to the previous Government, why is he racking up billions of dollars in extra borrowing and committing hundreds of millions of dollars in financing costs to New Zealanders?” she asked in the House the same day.
Her criticism was a bit more pointed when I asked her about the $10 billion in extra spending before she went into the House on Tuesday.
“Just because you can borrow, doesn’t mean you should.
“It’s like saying ‘spend everything on your credit card limit.’ That will have considerable debt servicing costs that New Zealanders are going to have to pay for.”
My advice to Adams? Tread carefully on this issue.
According to previous Budget figures, between 2013-2015 (when National was in Government), the cost of servicing Core Crown debt was on average 1.48% of GDP – or $3.63 billion a year.
Under HYEFU projections over the next five years, the cost of Government debt will be an average of 1.10% of GDP – or $3.35 billion a year.
That’s a difference of almost $300 million a year.
National’s tactic has long been to paint Labour as irresponsible managers of the books, but it’s clear Adams lost this round.