Thursday 21 April 2016

The story of New Zealand debt

The article below is almost a case of "now you see it, now you don't"; it disappeared off RNZ's headlines almost as soon as it appeared.

It is talking about private debt and the debt of householders' and talks about it as if NZ householders are making an irresponsible decision to go into debt.

The truth is that most New Zealanders are just trying to get by and with the banks and everyone trying to tell them to take out another loan who can blame them for thinking there's no problem.

That's what government and media tells them every day.

Debt to income ratios 'at record levels'

New Zealanders are being warned they are back on a debt-fuelled splurge that could end in tears.
no caption

21 April, 2016

A Westpac report says low interest rates have sparked a sharp jump in borrowing but wages are not keeping pace.

Since 2012, households' annual disposable incomes have risen by around 10 percent, while debt levels have increased by 22 percent, sparked by low interest rates.

Debt was at 162 percent of annual disposable income at the end of 2015, compared with 159 percent in September 2009.

Westpac's senior economist Satish Ranchhod said that was higher than the peaks reached before 2008's financial crisis, and completely reversed the reduction between 2009 and 2011.

"Over the past couple of years we have seen some very subdued income growth in response to low inflation.

"But now, with interest rates at very low levels, households have been taking on that debt and the combination of those two has meant that household debt to income ratios are at record levels."

Mr Ranchhod warned households were vulnerable if the economy took a turn for the worse.

"We're certainly more vulnerable to shocks with household's debt servicing requirements at stretched levels.

"It's likely that interest rates will remain low for some time given the inflation environment. But eventually interest rates will adjust. When it does occur many highly indebted households could find that they are in a tough position."

Economist Shamubeel Eaqub said for now, many people were managing to meet their loan repayments but he warned debt-driven growth was not the way to build an economy.

"It's really been pushed into things like the dairy sector in recent years and into Auckland housing. And these are not productive areas to drive debt into. So we're not creating the platform for future economic growth."

A shake-up was needed, and regulators should make it harder for banks to lend to home owners, and easier for entrepreneurs, he said.

He also pointed the finger at the government.

Interest rates were low, and there was no better time to upgrade ageing roads, bridges and other infrastructure.

"For the government, I think it's really around investing in nation building stuff. So the infrastructure deficit that we have in New Zealand, that has been accumulating for the last 30 years, this is the best possible time to borrow and invest because interest rates are at a life time low."

New Zealand Federation of Family Budgeting Services chief executive Raewyn Fox said tepid wage growth meant many of her organisation's clients were turning to debt to make ends meet.

"We're seeing clients that haven't seen wage increases for several years, but their outgoings have crept up, even if it's only by a few percent. If their wages haven't moved they still haven't got enough money."

Council of Trade Unions economist Bill Rosenberg said stronger wage growth would ease the financial burden on households, as well as lift the Reserve Bank out of its low inflation hole.

"If you lift wages then that it is one way of more rapidly paying off debt in real terms. So it is useful when you get into a higher debt situation.

"It is also one way to lift inflation by a small extent which is what the governor of the Reserve Bank wants at the moment.

"But it would do a lot of families a lot of good."

The government could do that by tightening immigration, lifting the minimum wage further and encouraging collective bargaining, Dr Rosenberg said.

The real untold story is of national debt that has gone exponential under this government.

The level of debt is $NZ 24,222 for every man, woman and child 

We are paying $171 in interest every second.

Debt represents nearly 48% of our GDP of $236 billion. which admittedly isn't as high as for countries like Japan and the United States (which is 106% or $US 59,000 per citizen)

Here again, because it is so important, is that graph of NZ national debt

The fascist government of New Zealand is cutting back on EVERY aspect of public spending except for those areas like public works which help maintain the fiction of an economy that's functioning.

It's not as if they are cutting back in other areas.

And some other stories (that are as rare as he's teeth) about New Zealand's debt problem

9 November, 2013

Government debt has reached $60 billion, having climbed $27 million a day since John Key became prime minister - and forecasts show it will rise for years to come.

Despite tax revenue being higher than expected and expenses lower in recent months, Treasury figures show net Crown debt reached the highest yet at $60,015,000,000 at the end of September.

It already equates to 28 per cent of New Zealand's economic output, is more than $13,000 for every person in New Zealand and is forecast to climb by another $10b by 2017.

When National took control of the Beehive in 2008, debt was just over $10b, but Finance Minister Bill English said it inherited an expanding public sector at a time when the economy was shrinking.

"The financial crisis cut government revenue just at the time when its spending was rising pretty sharply," he said yesterday.

Since that time the economic recovery had taken longer than expected and there were added costs from the Canterbury earthquakes.

Treasury forecasts, which were last updated around May's Budget, show debt increasing every year until at least 2017, which is as far as its forecasts run.

Since the Budget the economy has generally performed better than expected and Mr English appeared to hint that next month's half-year update would show debt forecast to start dropping in the future.

"We can now see on the horizon an actual reduction in the dollar amount."

While it was likely to take discipline, Mr English said he could "see a time" when debt was less than 10 per cent of economic output.

"New Zealand is going to have to deal with its ageing population, and it's important that we get that debt down while those numbers of older people are still lower because as they rise there'll be a lot of upward pressure on debt," he said.

Labour finance spokesman David Parker said that in the first update after National become government, debt was forecast to be $45b in 2013, and only a third of the difference related to the impact of the earthquakes.

National had weighted its tax cuts towards high-income earners; if it had directed it towards those on lower incomes it would have boosted consumption and consumption tax, he said.

19 May, 2013

Budget numbers reveal our national level of indebtedness will skyrocket by $61 billion over five years, which is an economic ticking time-bomb, says the Green Party.

"New Zealand's national debt will skyrocket by $61 billion over the five years from 2012 to 2017 according to figures in National's own budget," said Green Party Co-leader Dr Russel Norman.

"John Key said on the Thursday the next election will be about the economy. National's failure to manage debt is a major risk to our economy and will hurt his electoral chances.

In just five years National will blow our level of debt to the rest of the world by over 40%. John Key is building our economy on debt, and history tells us that such a reckless economic strategy is likely to lead to collapse
"The real story from Thursday's budget is how indebted we will become under John Key and National. In 2012, New Zealand's Net International Investment position was minus 70.7% of GDP of $208 billion, which means we owed $147 billion in net debt to the rest of the world.

"By 2017 National's Budget projections show New Zealand's Net International Investment Position will skyrocket to minus 80.9% of GDP of $257 billion, equating to $208 billion in net debt to the rest of the world.

"In just five years National will blow our level of debt to the rest of the world by over 40%. John Key is building our economy on debt, and history tells us that such a reckless economic strategy is likely to lead to collapse.

"The wafer thin surplus in the government accounts is marginal when you look at the real debt vulnerabilities in the New Zealand economy.

2 March 2016

The burgeoning level of student loan debt is a ticking time bomb, the Labour Party says.

About 720,000 people have student loans, according to official figures. 

Student groups around the country are calling for action as student loan debt reaches $15 billion.

Student chiefs fear the airport arrest of a Kiwi over an unpaid loan will create "student loan refugees", and that many New Zealanders living abroad will be "scared to come home".

The New Zealand Union of Students' Associations says the IRD's hardline policy on unpaid student loans was not likely to encourage people to meet their obligations.

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