Ryan Bridge: Labour’s back to its old tricks

Ahead of the Budget we got the same message we got from a barefoot, jandal wearing Chippy on day one of his post summer break.

More debt. Borrow more and spend more.   

Name an issue, pick a portfolio, any portfolio, where Labour has not criticised the government for cuts and promised to restore spending to pre-Willis levels. 

The latest example is pay parity, but that is just the latest in a long and growing list of items on the wishlist. 

In case they didn’t get the memo, Kiwis voted for cuts at the last election. If we’re doing our bit, the government ought to do its bit. That’s the politics of it.

The economics have been up for debate.

Net core crown debt has more than doubled on pre-Covid to $182 billion or 42.6% of GDP.

Like our tourist arrivals, debt has unfortunately not returned to normal pre-Covid levels. 

Some of this is inflation but much of it is not. There’s spending that went too far and got baked in.

A couple of things to note.

Yes, government debt is low compared to other OECD countries.

But, the credit ratings agencies are telling us we must get back to surplus and start paying it down. If you risk a credit downgrade, then borrowing costs you more.

We’re already spending more financing debt than we do on defence, Police, Corrections, Justice, and Customs combined. 

And remember, we’re the shakey isles with huge exposure to trade. We need headroom to borrow big if shit hits the fan. 

Ask any economist or the person who runs your household and they’ll tell you borrowing for everyday spending is a bad idea. We’ve been doing that year, after year, after year, and Willis is actually still doing more of it. 

If that’s enough to convince you on debt, here’s the kicker. The real doozy. 

Private debt.

We have student loans and business debt and houses. We love houses. Loads of mortgages, and the problem is how much we owe and who we owe it to. 

Household debt is 120% of GDP and higher than America, Spain, Germany, Ireland a bunch of other countries.

What’s worse, much of it is owed to foreign banks. We don’t have enough savings to lend to ourselves. 

This makes us more vulnerable as a country, keeps Reserve Bankers awake at night, explains why Nicola Willis’s nickers are always in a twist when it comes to getting the government’s debt levels down. 

Willis could, and many argue, should go harder and faster as she’s still spending more than Grant Robertson. 

But one thing you can be sure of, because it has come from Hipkins mouth repeatedly this week, is that spending and therefore borrowing would be higher right now had they be given a third term.

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Episode Transcript

Speaker 1 (00:00):
Labour is back to its old tricks ahead of the budget.
We've got the same message basically we got from a
barefoot jandle wearing chippy on day one of his post
summer break. More debt, borrow more and spend more, name
and issue. Pick a portfolio, any portfolio where Labor has
not criticized the government for cuts and promise to restore
spending to pre willis levels. The latest example, of course

(00:21):
is pay parity. But that's the latest in the long list.
In case they didn't get the memo. Kiwi's voted for
cuts at the last election. If we're doing our bit,
the government ought to do it's But that is the
politics of it. The economics have been up for debate recently.
Net core crown debt and this is not debatable, has
more than doubled on pre COVID to one hundred and

(00:41):
eighty two billion dollars or forty two point six percent
of GDP. Some of this is inflation, but much of
it is not. Spending has been baked in. Couple of
things to note, Yes, government debt is low compared to
other OECD countries, and that's what you hear labours say.
But the credit rating agencies are telling us to get
it down back to surplus, or you risk a credit downgrade,

(01:03):
and then you're borrowing costs you more. We're already spending
more financing debt than we do on defense, police, corrections,
justice and customs combined. And remember where the shaky aisles.
We've got huge exposure to trade. We need headroom to
borrow big if shite hits the fan, Ask any economist

(01:24):
or the person who runs your household, and they'll tell
you that borrowing for everyday spending is a bad idea.
And we're doing that year after year after year after year.
And if that's not enough to convince you. On debt,
here's the kicker, the real doozy private debt. You know,
our student loans and our mortgages one hundred and twenty
percent of GDP, higher than America, Spain, Germany, Ireland and

(01:46):
a bunch of other countries. The worst part, we owe
most of it to foreign banks. We can't afford more debt.
And yes, Nichola Willis is still spending more, but it's
less than labor the lesser of two evils. For more
from early edition with Ryan Bridge, listen live to news
talks it'd be from five am weekdays, or follow the

(02:08):
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