Ryan Bridge: We need economic headroom

I've seen a lot of commentary in the past few days about our government debt position. 

We're up over 40% of GDP - that's doubled on pre-Covid.

There are those on the left who say that's too little. We should borrow more. Forget a debt ceiling, borrow more and throw it at the public service and create some jobs - any jobs.

This is what Carney is doing in Canada. His budget would double Ottawa's debt to $80-odd billion. 

They've got Trump tariffs and weak domestic demand, so, he's getting out the deficit and trying to revive it. 

Make no mistake, if a Labour-led government were to get in, that is the approach we'd have taken here. 

Chris Hipkins has made that very clear. TPM and the Greens would make sure of it, too. 

What we haven't heard from them yet is how much more they're wanting to borrow. Remember Robertson has a debt ceiling of 30% of GDP. Well, didn't that go well?

The fact is it's popular to spend more. It sounds like you're doing something. The more you spend, the more you care, goes the theory. 

Average public debt ratio to GDP for advanced economies is roughly 110%.

So, we're well under that. But we're a small, isolated and trading-exposed country in the middle of trade war. 

What we need is headroom. Morningstar, who've just given the government AAA credit rating, said as much. 

And as for those banks making massive profits?  

Well, turns out that's actually quote important, too. Morningstar said we weathered the housing market correction so well because of well-capitalised banks that are also very liquid, and they have strong buffers to absorb losses.

So not all is as it seems. Bank profits and seemingly stingy insistence on returning books to surplus not only keep our interest costs down, but also keep us afloat during touch times. 

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Episode Transcript

Speaker 1 (00:00):
I've seen a lot of commentary in the last couple
of days about our government's debt position. We're up over
forty percent of GDP, doubled on pre COVID. You already
know all of this, but there are those on the
left who say that is way too little. Basically, we
should borrow more. Forget about a debt selling, borrow more,
throw it at the public service, create some jobs, any jobs,
who cares, just get them out there, right And that's

(00:22):
what Karne is doing in Canada right now. His budget
would double the debt position, debt to GDP ratio. They've
got Trump tariffs coming at them, they've got weak domestic demand.
So he's basically getting out the defenb and he's trying
to revive the economy and make no mistake, if a
labor lead government were to get and that is exactly
what they would be doing here, maybe not to the

(00:44):
same extent. The problem is we don't know. Chris Hopkins
has said, yeah, we need to invest more, yeah Knes
in economics, et cetera, et cetera, but how much don't
know to party Maldi and the Greens, you know, will
make sure that they do more and spend the money
on what that is the question. Now, remember Robertson had

(01:04):
a debt ceiling thirty percent of GDP. Well, that didn't
go very well. Didn't last very long, did it. The
fact is, it's quite popular to spend money. It sounds
like you're doing something. The more you spend, the more
you care. That's the kind of prevalent theory, isn't it. Actually,
if you look at average public debt, the ratio to
GEDDP for big economies advanced economies, it's roughly one hundred

(01:25):
and ten percent. So we are way under that. But
we need to remember we're a small country. We're a
trading country. We are exposed, and we're in the middle
of a trade wall. It's not forget. What we need
is headroom. Now. Morning Star, they've just given the government
the triple A credit rating. They said as much. And
as for those banks we've been talking about this week

(01:47):
making massive profits and everyone's saying, oh, so evil, it's
so nasty. Well, turns out in the same morning Star report,
it's actually quite important that we have profitable banks. Morning
Star says that we've weathered this housing market corrections so
well because in part of well capitalized banks that are
also very liquid that have strong buffers to absorb losses.

(02:10):
So not all is as it seems. Bank profits and
a seemingly stingy government insisting on returning the books to
surplus not only keep our interest rates down, but also
help keep us afloat. For more from early edition with
Ryan Bridge. Listen live to News Talks at B from
five am weekdays, or follow the podcast on iHeartRadio