Red Alert

Graph of the day 3: Government debt

Posted by on October 20th, 2011

So, we’re poorer as a country after three years of National. Back in 2008, Key used to say we had a growth problem, not a debt problem. Now, we have both. Net government debt has increased a jaw dropping $38 billion under National.

2008 vs 2011 net government debt

The cost of the interest on this debt is now $10 million a day.

The size of this debt might be small by international levels, thanks to the last Labour government paying down net debt to zero despite National’s constant calls for tax cuts, but its rapid growth, as we’ll see in a later post was one of the major concerns of the ratings agencies when they gave the government a double downgrade.

Labour is committed to getting debt down. We have carefully designed our tax package to bring down debt further than National. By the end of the projection period, net government debt will be $10 billion better under Labour than it would under National.


19 Responses to “Graph of the day 3: Government debt”

  1. The Baron says:

    Moderation for being a liar. Ban next time. Learn to tell the truth or go on Kiwiblog or Whaleoil where liars are welcome. Trevor

  2. Whaleoil says:

    Haven’t seen you since bike race. You know our moderation limits. Stick to them or cop a ban. Trevor

  3. Spud says:

    Morning Trev! :-D

    38 billion! :o !

    Spudddy likes Labour’s plan! :-D :-D :-D !

    #ownourfuture :-D

  4. cmonlabour says:

    Don’t debate moderation or you too will be the subject thereof. We don’t have time. Trevor

  5. logie97 says:

    It’s looking good on RedAlert Trevor but how do we get this message onto Breakfast TV and commercial radio where the punters are listening?

  6. ghostwhowalksnz says:

    Regarding the ‘balancing the books’ is it true that that English uses the expiry of the Kyoto agreement emission reductions in 2012 as handy way to wipe about $1.2Bill of taxpayer payments off the books, when in reality the current system will continue past that time

  7. Gregor W says:

    TM – Do you have a profile of the debt increase broken down by spending area and fiscal fiscal years? Also, is there a comparative graph for those period that details change in the tax take?

    I think that might tell a really interesting story re the effect of tax cuts.

  8. cmonlabour says:

    Banned. Trevor

  9. Quoth the Raven says:

    Gregor – Cunliffe made a more informative graph here http://blog.labour.org.nz/index.php/2011/05/19/budget-faq-6-why-the-debt-hole/

  10. Gregor W says:

    Thanks QtR.

    Oddly, though these graphs tell a similar story, the numbers are quite different.

    Cunliffe:
    2008 surplus c. $5.5Bn
    2009-2011 (June FY) debt c. $26Bn

    Mallard:
    2008 surplus c. $2Bn
    2009-2011 debt c. $38Bn

    TM – Which is accurate or have I missed something obvious?

  11. jennifer says:

    Goodness me, does this mean these reckless Tories have borrowed $9,000 for every Kiwi, or $23,000 for every Kiwi family, and have absolutely nothing to show for it? And they have the audacity to ask for a second go? Unbelievable.

  12. Dean says:

    Gregor.

    You’ve missed a number of things.

    Cunliffe’s graph is of June year government balances. Trevor’s is of current net government debt compared to October 2008 net debt.

    Deficits and debt are different things. The first is your income net expenses. The second is your financial assets net your financial liabilities.

  13. lauran says:

    @ gregor “Do you have a profile of the debt increase broken down by spending area and fiscal fiscal years? Also, is there a comparative graph for those period that details change in the tax take?

    I think that might tell a really interesting story re the effect of tax cuts.”

    All this information is easily available on the Budget documents on Treasury’s website (except for what areas the debt has been spent on – that’s not a logical question). Look it up yourself and tell us if your assumptions are true, rather than assuming they are and insinuating that TM is lying.

  14. Gregor W says:

    @Dean

    Thanks very much for clarifying.
    I thought it must be my interpretation to have been so wildly different.

    So is the damaging story:

    (a) net debt increases are occurring because we are not running year-on-year fiscal surpluses, or
    (b) the rate of deficit growth is compounding the debt problem because the country’s ability to service that debt is reduced (i.e we can’t pay it back fast enough), or
    (c) both?

    Any way you read it the tale is pretty ugly.

    @ Lauran – you phrase deleted. Play nicely. Trevor
    It was a genuine question that I was hoping TM might have information on. QtR kindly provided a link to Cunliffe’s assessment. I had no assumptions and I didn’t insinuate anything. I went as far to suggest that I had clearly missed something and Dean set me straight.

    Feel free to tell me why asking what accrued debt might have been spent on is ‘not a logical question’. If my future is being mortgaged I’d quite like to know where the money is going.

  15. Rebecca says:

    The figures have been well publicized in many different forms so the missing ingredient is what would Labour have done differently? How could Labour have borrowed less? And would this have increased productivity thereby creating more jobs?

    I note that as Labour had started to reduce taxes while still in office in 2008 & the new policy makes no plans to put them back up (the top rate coming in at $150k is not something we have had before), so one would assume that Labour would have continued to lower the rates – which is good, as this means you recognised the rising cost of living (particularly in the past decade).

    So if you followed the same path re taxes then how would you have borrowed less in the face of massively reduced revenue and the massive cost natural disasters?

    Then in terms of getting the debt down, how? Will a high tax rate for $150k generate enough money given that group often lower their income via companies & trusts – a loop hole that has been wide open since 2000.

    Is Labour completely reliant on the CGT to provide the revenue to reduce debt? That the gain will not be outweighed by the ‘loss’ of those who have held their business for 15 years are selling due to retirement?

    And do you plan to reduce the business costs including keeping ACC down so businesses are more profitable and thereby able to push for sales & ultimately obtain the productivity which justifies employing more staff?

  16. lauran says:

    “Feel free to tell me why asking what accrued debt might have been spent on is ‘not a logical question”

    The government spent $70 billion last year and borrowed $18.4 billion to fund it.

    Which of the $70 billion was funded from the $18.4 billion? You can’t logically say. Cut any one of those dollars of spending and it means a dollar less borrowing. So, you can equally say the the borrowing is for roads or hospitals or superannuation.

    Or, for tax cuts. Because if it hadn’t been for the tax cuts then there would have been more revenue to pay for that spending and less borrowing would have been needed.

    So, you point to a dollar of borrowing and tell me what it was borrowed for. You can’t. It was borrowed equally for every dollar of spending and every dollar of foregone tax.

  17. Gregor W says:

    Lauren – Any dollar spent on EQ recovery. Wouldn’t that be considered an extraordinary item?

    What I wanted to understand is whether there were any other ‘one offs’ or significant changes to either spending priorities / significant change in tolerance within existing priorities.

    It’s a pretty simple question.

    Moderation stands. Clare

  18. Jenkins says:

    Wow, you sure like to ban people here!

    First step towards open government?{read our moderation policy. it’s clear. And we don’t enter into correspondence, so please no more comments along these lines, Grant}