Bernard is an economics columnist for the NZ Herald

Bernard Hickey: Debt overload leaves youth no choice but to leave


This week, the Government went to its bankers and asked to borrow a record $1 billion in one week.

The Prime Minister did not jump into a helicopter for a photo opportunity with the Debt Management Office as it gave the results of its latest bond tender on Thursday afternoon.

It just happened. No one was outraged. The opposition didn't call for a vote of no confidence in the Government.

Even the bankers were happy. They were so happy, they offered to lend us almost $3 billion in the tender. And they were willing to pay a higher price (meaning a lower interest rate) than in last week's tender for $700 million.

It was as if your retiring parents went into the bank to increase the mortgage on the house to pay for the $50,000 once-in-a-lifetime, round-the-world trip and the bank was so keen to lend them more that they walked out with an extra $20,000 to buy a new boat.

That is effectively what this Government is doing. It is re-mortgaging an already indebted house just as its retirement costs are about to surge and the ability of its taxpayers to support that cost is about to sag.

The results of Bond Tender number 394 on Thursday are interesting reading if you have a thing for spreadsheets. They show the Government sold $800 million worth of bonds maturing in March 2019.

How will we repay that debt in 2019? By then many of the baby boomers making the decisions to borrow now and pay later will be retiring, asking for their "free" national superannuation and "free" health care.

That inevitably means those in their 30s, 40s and 50s in the 2020s will have to pay higher taxes or cut government services.

John Key and other politicians won't be around when the debt has to be paid off and the really tough decisions taken. They may argue this extra debt now is simply to rebuild Christchurch and to deal with the recession - but that is not true..

Most of it will go to fund a structural budget deficit created by the bribes to middle class voters issued in the past seven years. This generation in power is living beyond its means, hoping youngsters graduating into the workforce don't notice. If they do notice, they may revolt in the only way they know how: by buying a one-way ticket out.

- Herald on Sunday

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Bernard is an economics columnist for the NZ Herald

Bernard Hickey is the publisher of Hive News, a Wellington-based political and economic subscription news email service. He also writes for and appears regularly on Radio New Zealand, Radio Live, TVNZ and TV3. He has been a financial journalist for 25 years, having worked for Reuters, the Financial Times Group and Fairfax Media.

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