Finance Minister sets new fiscal rules for budget surpluses and net debt, including running regular surpluses of 0-2% of GDP on average; new net debt ceiling of 30% of GDP; new definition of net debt
This feels like one step forward, and two steps backwards, or a pre election fiscal responsibility marketing spin, perhaps a kernel of reality in the capacity restraint narrative though
Thanks Mr Anderson. The capacity restraint is real for now, but the Government has signalled it doesn't want to use the balance sheet much to solve the infrastructure crisis. It prefers demand management via congestion/water charges etc and 'sweating the assets' harder. Those congestion charges will never happen. Too easy to kill politically. So that means ongoing endemic infrastructure shortages.
Naturally, the government cannot wean itself from ruinous stats. Moving to fiscal surpluses is not in kiwis interest. But I guess it is excellent PR for the asset class. Inflation will have an impact on GDP while surpluses have no impact on the spiraling cost of living. The government’s obsession with fiscal surpluses will squeeze household balance sheets. The primary focus should be on the private sector finances.
Thanks John. Sadly for asset prices, the private sector's debt situation is also perfectly sustainable. Mortgage burden on household sector less than 6% of disposable income and less than half what it was in 2007. Businesses are also very lightly geared now. The growth in nominal household and business incomes will also inflate away the debt fast in debt to income ratio terms. Sadly, again, the Govt is not taking the opportunity to use its balance sheet in the long run to create a productivity tailwind for future generations. If you realise that median voters are focused on their own leveraged tax-free gains on housing, rather than higher incomes from real work, that all makes sense.
So Grant Robertson is looking more and more like a petty tyrant. He's actually planning to pull money out of the economy by running a government surplus! The gov doesn't need a surplus ladies and gentlemen. Plus he's refusing to adequately fund badly needed programs and services by raising the bogus spectre of debt and deficits, and so he's parroting the status quo nonsense about government finance. This is cognitive capture. He's a puppet of our financial masters and is therefore useless as a finance minister for the people. So much for democracy.
Thanks Marc. He certainly is part of overall policy consensus between National and Labour on keeping debt low to keep interest rates low, so as not to endanger asset prices.
Is it just me, or does this statement seemingly contradict itself all the way through? How can he acknowledge the $100B infrastructure deficit and then cap spending while obsessively targeting surplus? Having money in the bank when it should be spent on things the country desperately needs is a sign of total incompetence, which is what we’ve come to expect from this rabble.
It all depends on what you perceive is most likely to get you re-elected in 18 months. Higher interest rates, higher inflation and lower asset prices are a recipe to lose. Lower interest rates and inflation that prop up asset prices give Labour a chance. Young renters and the unborn don't vote.
Kainga Ora and NZ Super are added into the calculation of government debt which is a 'good thing' as it hopefully stops all these off-balance sheet efforts to play with the numbers to produce a desired political answer.
However what about debts that don't exist (yet) but are potential because of what might be called a gov't guarantee. Air New Zealand, Three Waters and bank bailouts are three that come to mind.
Have these significant shocks been quantified? Yeah, I know you can't put a figure on the cost of an earthquake but a reasonable number could be arrived at based on historical evidence - the costs of the Christchurch and Kaikoura earthquakes.
Where do these amounts fit into the overall debt limit? Is it 30% of GDP minus "allowance for significant shocks" of, say, 8% leaving the debt limit at 22% or is it just extra allowed debt over 30%.
I don't know but suspect it's intentionally vague. What I am certain of is they won't define significant shocks or answer your question re quantification.
So "Essentially, the Government has chosen to freeze its infrastructure growth plans to keep interest rates low, despite saying there is an infrastructure deficit of over $100b. " means push up housing demand and suppress surplus - deliberately inflating house prices...again.
> "Aotearoa-NZ [can] not afford to build its way out of the deficit."
I'm confused by this. What other way is there to get out of an infrastructure deficit than to build? Or does he mean that we will basically always have a deficit of some kind.
Is Grant Robertson talking about an operating surplus of 0-2% which would exclude capital expenditure? Any opex equation would be influenced by the interest portion of any debt incurred through increased capex.
So to get elected you have to be acting like National or be National? Looking at the IMF table on Govt debt and comparing NZ to Canada and Aussie our debt is about half of theirs can we sustainability have debt levels the same?
Yes we absolutely can, especially when servicing costs remain low and manageable. And we should be using it ALL to build public transport and infrastructure for new houses, schools and hospitals, strategically located in climate change resistant areas.
I like this. Similar to the tax fairness policy from last week, I feel the government is trying to plant the seeds of change. It would be great if they just did what needed to be done, but that is a quick way to be removed from power. So, it looks like they are trying to shine a light on how unfair and limiting the status que is, and get people demanding change, thereby giving them the mandate to actually improve things.
However, my main question is:
How are we able to to increase our debt limit while maintaining long-term average surpluses?
If your income is greater than your expenses (aka a surplus) then it is physically impossible to increase net debt... What am I missing here?
They’re not increasing it, they’re reducing it, and just dressing it up differently. It’s a very contradictory and deliberately misleading statement, that a minuscule amount of people will give any meaningful thought to.
This feels like one step forward, and two steps backwards, or a pre election fiscal responsibility marketing spin, perhaps a kernel of reality in the capacity restraint narrative though
Thanks Mr Anderson. The capacity restraint is real for now, but the Government has signalled it doesn't want to use the balance sheet much to solve the infrastructure crisis. It prefers demand management via congestion/water charges etc and 'sweating the assets' harder. Those congestion charges will never happen. Too easy to kill politically. So that means ongoing endemic infrastructure shortages.
Naturally, the government cannot wean itself from ruinous stats. Moving to fiscal surpluses is not in kiwis interest. But I guess it is excellent PR for the asset class. Inflation will have an impact on GDP while surpluses have no impact on the spiraling cost of living. The government’s obsession with fiscal surpluses will squeeze household balance sheets. The primary focus should be on the private sector finances.
Thanks John. Sadly for asset prices, the private sector's debt situation is also perfectly sustainable. Mortgage burden on household sector less than 6% of disposable income and less than half what it was in 2007. Businesses are also very lightly geared now. The growth in nominal household and business incomes will also inflate away the debt fast in debt to income ratio terms. Sadly, again, the Govt is not taking the opportunity to use its balance sheet in the long run to create a productivity tailwind for future generations. If you realise that median voters are focused on their own leveraged tax-free gains on housing, rather than higher incomes from real work, that all makes sense.
So Grant Robertson is looking more and more like a petty tyrant. He's actually planning to pull money out of the economy by running a government surplus! The gov doesn't need a surplus ladies and gentlemen. Plus he's refusing to adequately fund badly needed programs and services by raising the bogus spectre of debt and deficits, and so he's parroting the status quo nonsense about government finance. This is cognitive capture. He's a puppet of our financial masters and is therefore useless as a finance minister for the people. So much for democracy.
I know, but that's not the general perception.
Thanks Marc. He certainly is part of overall policy consensus between National and Labour on keeping debt low to keep interest rates low, so as not to endanger asset prices.
Is it just me, or does this statement seemingly contradict itself all the way through? How can he acknowledge the $100B infrastructure deficit and then cap spending while obsessively targeting surplus? Having money in the bank when it should be spent on things the country desperately needs is a sign of total incompetence, which is what we’ve come to expect from this rabble.
It all depends on what you perceive is most likely to get you re-elected in 18 months. Higher interest rates, higher inflation and lower asset prices are a recipe to lose. Lower interest rates and inflation that prop up asset prices give Labour a chance. Young renters and the unborn don't vote.
Kainga Ora and NZ Super are added into the calculation of government debt which is a 'good thing' as it hopefully stops all these off-balance sheet efforts to play with the numbers to produce a desired political answer.
However what about debts that don't exist (yet) but are potential because of what might be called a gov't guarantee. Air New Zealand, Three Waters and bank bailouts are three that come to mind.
Hi Martin
At a guess these funds don't matter if you are just talking about debt to GDP.
Presume these are covered under "allowances for significant shocks".
Hi Sean
Have these significant shocks been quantified? Yeah, I know you can't put a figure on the cost of an earthquake but a reasonable number could be arrived at based on historical evidence - the costs of the Christchurch and Kaikoura earthquakes.
Where do these amounts fit into the overall debt limit? Is it 30% of GDP minus "allowance for significant shocks" of, say, 8% leaving the debt limit at 22% or is it just extra allowed debt over 30%.
I don't know but suspect it's intentionally vague. What I am certain of is they won't define significant shocks or answer your question re quantification.
So "Essentially, the Government has chosen to freeze its infrastructure growth plans to keep interest rates low, despite saying there is an infrastructure deficit of over $100b. " means push up housing demand and suppress surplus - deliberately inflating house prices...again.
The NZ Infrastructure Challenge graphic shows population and economic growth of 1.8%. How many migrants per year does that equate to?
It’s described in the Government’s immigration policy……oh,they don’t have one. Fly by the seat of their pants.
> "Aotearoa-NZ [can] not afford to build its way out of the deficit."
I'm confused by this. What other way is there to get out of an infrastructure deficit than to build? Or does he mean that we will basically always have a deficit of some kind.
Is Grant Robertson talking about an operating surplus of 0-2% which would exclude capital expenditure? Any opex equation would be influenced by the interest portion of any debt incurred through increased capex.
So to get elected you have to be acting like National or be National? Looking at the IMF table on Govt debt and comparing NZ to Canada and Aussie our debt is about half of theirs can we sustainability have debt levels the same?
Yes we absolutely can, especially when servicing costs remain low and manageable. And we should be using it ALL to build public transport and infrastructure for new houses, schools and hospitals, strategically located in climate change resistant areas.
I agree
I like this. Similar to the tax fairness policy from last week, I feel the government is trying to plant the seeds of change. It would be great if they just did what needed to be done, but that is a quick way to be removed from power. So, it looks like they are trying to shine a light on how unfair and limiting the status que is, and get people demanding change, thereby giving them the mandate to actually improve things.
However, my main question is:
How are we able to to increase our debt limit while maintaining long-term average surpluses?
If your income is greater than your expenses (aka a surplus) then it is physically impossible to increase net debt... What am I missing here?
They’re not increasing it, they’re reducing it, and just dressing it up differently. It’s a very contradictory and deliberately misleading statement, that a minuscule amount of people will give any meaningful thought to.
Bernard: How does this all fit in with the PFA? Does it comply?