Best bite: KiwiBank's Jarrod Kerr on debt that builds the future

One of our most thought-provoking conversations this year. Kiwibank chief economist Jarrod Kerr on why New Zealand struggles to think long term — and how smarter investment could shape the next few decades.

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Episode Transcript

Speaker 1 (00:00):
You're listening to a Chersias.

Speaker 2 (00:03):
Podcast and welcome to Shared Lunch, brought to you by Chasy's.
I'm Garth Bray and I'm probably taking a break right
now along with the rest of the Chasas team, but
they have been very busy gathering all sorts of great
insights from people in the know.

Speaker 1 (00:17):
Now.

Speaker 2 (00:18):
One of the crispittle conversations I had this year was
with Kiwibanks chief economist Jared Kerr, who had some fascinating
insights about debt and how much we could be using it.

Speaker 3 (00:29):
If we went out to the market and issued an
infrastructure bond and said hey, we want fifty billion dollars
and we're going to issue that and it's going to
go towards infrastructure, then most people will turn around and
go okay, fine.

Speaker 4 (00:47):
New Zealand Good Risk will put over money THEREAPORTOG going.

Speaker 3 (00:50):
Into building assets. People, there's going to be a return
on it, hopefully, you know, it might be a toll road,
it might be whatever. Get the private people involved, do
what you need to do to build the infrastructure. I
don't think the rating agencies or investors would even blink.
It's like, yeah, okay, you're finally playing catch up for
thirty years of not doing enough, cutting taxes, spending more

(01:16):
on beneficiaries or whatever. That's what gets the rating. Agent's
more concerned building a bridge, building a road or whatever.
That's not as that's building in the productivity of your economy.
And we sit here looking at these really disappointing productivity

(01:40):
numbers for New Zealand and elsewhere, but for New Zealand
in particular, and we just go, you know what, A
lot of that's just the lack of infrastructure. We haven't
invested in ourselves. And governments need to realize that if
you think about the long game, and unfortunately they're only
thinking about three year games. If you think about the
long game, spending more on infrastructure today will give you
a harder, faster, stronger economy. Oh and that's a larger

(02:04):
tax base tomorrow. We don't seem to be able to
think in ten, twenty fifty year chunks. We're only thinking
in three yearly chunks. You know, I've got this government
now that they haven't been in there that long, they're
kind of halfway through and they're already looking to next year, going, jeez,
we've got to deliver in order to get voted back in.

(02:25):
It's not enough time, not enough time for either side
of government.

Speaker 4 (02:28):
We might get to decide on a four year term
at the next selection.

Speaker 3 (02:31):
Here are, but it's like you want to give them
a four year term with the expectation of getting two
almost like the US, you kind of expect them to
get two terms and you've got them in there for
a chunk of time and you can kind of get
stuff done over that over that time frame, but three
yearly and then the complications of coalitions, it's just, you know,

(02:54):
it really inhibits their ability to get stuff done.

Speaker 1 (02:59):
Well. Ideas, yeah, possibly, but I mean you get ideas,
you get minority parties like ACT with the Greens that
are living in sort of slightly saltier suggestions like we
should run hard on that deficit or we should you
really pull the chrucks out and go for an extremely
similatary position and that what function does that have?

Speaker 3 (03:21):
Well, I think you get you get these two centralist
parties and then you get some on either side recommending
the more extreme, and a lot of votels will look
at the two central parties and go, you know what,
they're not really either size, not really give me something,
so I'll go to the ones that are a bit
more extreme and we and we see that. I just

(03:41):
wish we would have a better debate about the type
of debt that we could issue and what that money
would be used for. If we went out to the
investment community and said, give us fifty billion dollars, we
want to do these projects over the next ten years,
will you fund us? Absolutely they would absolutely. They are

(04:02):
looking for ten twenty thirty year debt. Acc is a
great example. Insurance companies. They want long term bonds to
invest into, so they would be, you know, etching to
buy twenty thirty year bonds.

Speaker 4 (04:16):
We were the world champions of comparing ourselves and seeing
how everybody else is doing it better? Who's doing it
better than us?

Speaker 2 (04:25):
Right now?

Speaker 3 (04:27):
I think Australia is definitely up performing US at the moment,
and that's because they are and you know, their central
bank didn't go as hard on the rate hikes, so
therefore the Ossie economy didn't slow down as much. They
didn't record a technical recession. They've got a recession in

(04:47):
per capita terms, but it's quite shallow compared to ours.
So we just look at the Aussie economy and go,
oh man, it's just growing nicer than ours. The labor markets, tighter,
wage growth is more more, they're just more buoyant than
we are at the moment. And that's why we've seen
a net forty three thousand kiwis leave in the last year.

(05:09):
So we've seen seventy odd thousand kiwis leave and then
some coming back. But that net forty three is huge.

Speaker 4 (05:17):
How much of it is off savings and just a stronger,
you know, a better national superannuation structure so that people
are putting more money aside.

Speaker 3 (05:26):
Oh, I mean that's been a strength of Australia for
a while. Now they've got I think the fifth largest
sovereign wealth fund on the planets for an economy, which
is less than two percent of the global economy. To
have that sort of savings there, and do you know what,
they don't think they've got enough. They are still increasing
their compulsory I think it's gone up to twelve percent now.

(05:49):
It was nine percent when I was working there. I'll
tell you what, working thirteen and a half years in Australia,
I've actually got this nice little nest egg sitting there
that I wouldn't have had otherwise, way I could afford
to put nine percent away over that entire period. But
it's sitting there and it's great, and we're doing it
here now. Should be compulsory, should be a much higher rate.

(06:11):
But you know, some things Australians just do do better
than us. One thing they are pretty good at, and
particularly at the state level, is the big infrastructure stuff.
You know, they just seem to get stuff done. And
I use Sydney as a classic example, where you've got
this bridge and it's got heaps of lanes, it's got

(06:35):
a train track gone both ways, so trains can go across,
you can walk down one side, you can cycle across
the other side of it. And that was built you know,
fifty years ago. That's not enough. Their city grew and
they've got a tunnel going underneath. Now you've got theories,

(06:55):
You've got plenty of ways to get across the Sydney Harbor.
Right here, You've got a bridge that was built in
the sixties, I think, on the cheap. On the cheap,
it reached capacity five years later, so we tacked on
some clip ons and we've done nothing since. It just
highlights the difference between us. They can deliver these big

(07:19):
projects in Australia and they can think a lot further ahead.
For some reason, and I just wish we would snap
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