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Chapter 1: What is New Zealand's current debt situation?
We are back in your life. And today we're talking about New Zealand's $9 billion problem. We've got the government announcing their budget next week, May 28th. Michael, today is all about going, not about the budget, but about the debt levels and going, should we be worried about the debt levels? We're going to break it all down.
What do you reckon, mate? No, I reckon we're all good, G-Man. Like, honestly, let's take on a little bit more debt. And like, look, I'm a mortgage broker. I can help you out there. If you need some, come see Mike.
Yeah, so of course the mortgage broker says that, you know, surprise there. Once again, you need a mortgage, Mike is the guy for you, but let's move back to the nation and solving the problems that matter. So we're going to break down today, you know, should we be worried about the amount of debt and then also comparing to some other countries.
We're also going to be talking about the concept that we talk about all times. Sometimes using debt can be a good thing, Mike.
Yeah. And as you get closer to the election, you're going to hear more and more about people going, we've got too much debt, or we can borrow more, or actually the debt doesn't matter. Or like, we can't just keep putting things on the credit card. Or my favorite one, you've got to run the expenses like a household and the household is in debt. I'm like, you don't. That's not how an economy works.
And when politicians specifically are saying stuff like that, It's really nice to actually have a little bit of data in the background to be like, huh, here's what it actually means. And maybe it's not that much of a deal.
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Chapter 2: Should New Zealand be worried about rising interest costs?
Maybe I'm getting lied to a little bit.
I wonder how many of the politicians out there run their finances in their own household as a starting point before they try and run the country.
Should we ask them how many of them have a budget and how many stick to it? Yeah, yeah.
Let's get a pocket smith.
Do you blow out your own budgets? Like you blow out the country's budget? Yeah.
That's why they need to get reelected because they're going to pay all the bills personally. The country's bills are secondary. What? Our nation's children? I'm trying to worry about this weekend.
Imagine plugging them all into Pocketsmith and seeing how many of them stick to their own budget.
Yeah. Pocketsmith, could we get the government's budget in and attract live spending to budgets? Oh my God, that's such a good idea. So Michael, what is New Zealand's debt looking like right now? $182 billion.
Is it? Though, or is it actually nothing, right? So when we're looking at debt, a couple of different ways you can look at it. Obviously, you can look at it in the dollar figure in isolation. What does that mean? Or you can look at it as that kind of debt to GDP ratio. It's like debt to income, right?
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Chapter 3: How does New Zealand's debt compare to other countries?
to make that point, right?
So Japan's debt to GDP ratio is 230%. So definitely. Yeah. The U.S., debt to GDP ratio, 120%, right? Yeehaw. Yeah. So these are huge numbers. So again, if you look at New Zealand's debt to GDP ratio and our national debt compared to other countries like Japan and US, you would look at that and go, whoa, like this is fine, right? Like actually this doesn't mean anything at all.
But again, is that a fair comparison? Yeah. Do we have an economy like the US and do we have an economy like Japan? No, we don't.
We don't.
Be nice? They should be the big dogs. Would it be nice to have an economy like Japan? Maybe. Would it be nice to have an economy like the US? To a degree, yes, but probably not, again. The US economy is mainly held up by the fact that they're the reserve currency. So, yeah, I don't know about that either. Personally, my opinion on this is,
I think we've got a little bit of scope to borrow, but I actually don't want us to borrow too much more, right? And historically, New Zealand's economy is like, we've been a really good saver. You know what I mean? Like we have been taking money away, putting it away for a rainy day. And globally, our economy is recognized like that.
It is quite a safe economy, even though we should be quite risky because of our size and location.
were the Jess Hargreaves of budgeting and Pocketsmith compared to other nations.
Yeah, something like that.
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Chapter 4: Is borrowing for infrastructure a good strategy for New Zealand?
To a degree, it matters, but it's a very small degree. The US has been downgraded. Like, a whole lot of countries have been downgraded. France and Austria, UK, Japan, like... There's an argument that all of those rating systems are just a scam. I don't think it matters too much.
And I think in a world where increasingly flight to safety is a valuable thing, if we drop a couple of AAAs to A or something like that,
think it matters that much okay let's move on to uh what is nicola willis actually trying to do so ahead of the may 28 budget nicola willis messaging was pretty consistent new zealand cannot afford major spending blowouts um but critics are arguing the government solution so far has been largely focused on cost cutting rather than meaningful growth which i would i would agree with i think it's
It's fiscally responsible to go within my costs. Do I need all of these costs? What am I doing? But when we interviewed Nicola Willis, it was all about grow that pie, baby. And do you feel much of that?
No, I don't. And I completely understand it is fiscally responsible to review costs. 100%, right? My worry with just axing a whole lot of jobs in the public sector is that you are increasing the long-term cost at the expense of some short-term cost. What I mean by that is how many doctors and nurses are like, stuff this, I'm going to Aussie because it's just a better place to work, right?
I'm not under so much pressure. I have a reasonable workload and I get paid a little bit better.
so like yeah you can cut some costs in the short term what does that do over the next 20 years when we have more doctors under pressure a worse health system people are getting sick because they are on longer waiting lists so like there's definitely a kind of back and forth or like a tug of war around how much you should cut and what is fiscally responsible versus just responsible right
Nobody's talking about cutting doctors or nurses' jobs, though.
No, what they're talking about doing is cutting the people in the background, though. So people who might be doing the paperwork, for example, and helping them out, they're getting cut because they're not frontline staff. Where does that work go? It goes on to the frontline staff. So they're under more pressure. So again, like...
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