Bay of Plenty Times
  • Bay of Plenty Times home
  • Latest news
  • Business
  • Opinion
  • Lifestyle
  • Property
  • Sport
  • Video
  • Death notices
  • Classifieds

Subscriptions

  • Herald Premium
  • Viva Premium
  • The Listener
  • BusinessDesk

Sections

  • Latest news
  • On The Up
  • Business
  • Opinion
  • Lifestyle
  • Property
    • All Property
    • Residential property listings
  • Rural
    • All Rural
    • Dairy farming
    • Sheep & beef farming
    • Horticulture
    • Animal health
    • Rural business
    • Rural life
    • Rural technology
  • Sport

Locations

  • Coromandel & Hauraki
  • Katikati
  • Tauranga
  • Mount Maunganui
  • Pāpāmoa
  • Te Puke
  • Whakatāne
  • Rotorua

Media

  • Video
  • Photo galleries
  • Today's Paper - E-Editions
  • Photo sales
  • Classifieds

Weather

  • Thames
  • Tauranga
  • Whakatāne
  • Rotorua

NZME Network

  • Advertise with NZME
  • OneRoof
  • Driven Car Guide
  • BusinessDesk
  • Newstalk ZB
  • Sunlive
  • ZM
  • The Hits
  • Coast
  • Radio Hauraki
  • The Alternative Commentary Collective
  • Gold
  • Flava
  • iHeart Radio
  • Hokonui
  • Radio Wanaka
  • iHeartCountry New Zealand
  • Restaurant Hub
  • NZME Events

SubscribeSign In
Advertisement
Advertise with NZME.
Home / Bay of Plenty Times

Opinion: Beware of personal debt - it may come back to haunt you

By Tim Wilson
Bay of Plenty Times·
27 Apr, 2021 10:00 PM3 mins to read

Subscribe to listen

Access to Herald Premium articles require a Premium subscription. Subscribe now to listen.
Already a subscriber?  Sign in here

Listening to articles is free for open-access content—explore other articles or learn more about text-to-speech.
‌
Save

    Share this article

    Reminder, this is a Premium article and requires a subscription to read.

Our current household debt stands at 95 per cent of GDP, writes Tim Wilson. Photo / Getty Images

Our current household debt stands at 95 per cent of GDP, writes Tim Wilson. Photo / Getty Images

OPINION

One of the biggest financial impacts of Covid-19 has been debt.

Last year alone added US$24 trillion to the global debt abyss, as calculated by the Washington-headquartered Institute of International Finance.

The world debt to GDP ratio surged by 35 percentage points during the year of Covid to 355 per cent.

Much of this is sovereign debt. In response to the pandemic, governments turned on the money pump: Borrowing it, loaning it, printing it.

Advertisement
Advertise with NZME.

The New Zealand Government's net core crown debt has ballooned from 19 per cent of GDP to 30 per cent.

By 2025, it's expected to be up around half our GDP, but in the current global context we are relatively prudent borrowers.

Unfortunately, the real risk in New Zealand is our very high levels of private debt and almost no one is talking about it.

Advertisement
Advertise with NZME.

Private debt here includes household debt such as mortgages, student loans, credit cards, hire purchases, to buying a car in instalments.

Compared to our relatively low levels of public debt our current household debt stands at 95 per cent of GDP.

Discover more

Opinion

Opinion: Avoiding the 'crater' effect of rent controls

12 Apr 11:00 PM

Opinion: Is there a power imbalance between Government and individual citizens?

17 Mar 08:00 PM

To put that in context, this is not far from double Singapore's rate, and much worse than ex-economic basket case Spain, which is a mere 61 per cent.

Such numbers may help explain some of the topsy-turvy aspects of the Covid economic picture: A galloping local housing market, sales records for luxury cars shattered, and the best year for spa pool sales ever.

One Nelson company grew by 400 per cent during the past year.

But runaway private debt is often an indicator that asset bubbles are forming. When these bubbles pop bad economic times ensue.

For example, increasing private debt in the US foreshadowed the collapse of the housing market and the global financial crisis.

Private debt also grew massively before the 1997 crisis in Asia, and Japan's 1991 crash.

Advertisement
Advertise with NZME.

A compounding problem with private debt is that unlike our growing public debt (that's largely held by the New Zealand Reserve Bank through its Large Scale Asset Purchase Program) our personal debt is often owed to overseas financial institutions.

Should the bubble burst, these institutions are unlikely to be sympathetic to overleveraged New Zealand borrowers.

Collectively we need to become more financially literate and wise to the risk we are taking on.

Many banks have financial literacy programmes in schools, and the numbers are encouraging but these numbers show us that adults might need a refresher course.

This is especially so if we have become used to borrowing to increase our consumption of stuff.

The government's decision to slash funding for budgeting services in 2016 was potentially short-sighted.

Budgeting services help adults make wise choices around their financial futures.

We would all do well to think about our spending priorities and create a rainy day financial buffer of savings.

In an economy awash with low-interest loans it is easy to feel like personal savings are boring and unnecessary.

Think of it like a car seatbelt, slightly uncomfortable, and most of the time you are fine without one.

But when a crash happens it could save you.

Tim Wilson is the executive director for Maxim Institute.

Save

    Share this article

    Reminder, this is a Premium article and requires a subscription to read.

Latest from Bay of Plenty Times

Bay of Plenty Times

'It was unreal': Orca pod amazes Tauranga jetskier near Whangamatā

08 Jul 04:03 AM
Bay of Plenty Times

BoP shooting happened at 'private dwelling', suspect still wanted

08 Jul 01:36 AM
Bay of Plenty Times

Boat in perilous position in Tauranga Harbour

08 Jul 01:04 AM

From early mornings to easy living

sponsored
Advertisement
Advertise with NZME.

Latest from Bay of Plenty Times

'It was unreal': Orca pod amazes Tauranga jetskier near Whangamatā

'It was unreal': Orca pod amazes Tauranga jetskier near Whangamatā

08 Jul 04:03 AM

The pod, including a large male, circled him and his group for about half an hour.

BoP shooting happened at 'private dwelling', suspect still wanted

BoP shooting happened at 'private dwelling', suspect still wanted

08 Jul 01:36 AM
Boat in perilous position in Tauranga Harbour

Boat in perilous position in Tauranga Harbour

08 Jul 01:04 AM
'Risk to the public': Police search for wanted man

'Risk to the public': Police search for wanted man

07 Jul 11:57 PM
Solar bat monitors uncover secrets of Auckland’s night sky
sponsored

Solar bat monitors uncover secrets of Auckland’s night sky

NZ Herald
  • About NZ Herald
  • Meet the journalists
  • Newsletters
  • Classifieds
  • Help & support
  • Contact us
  • House rules
  • Privacy Policy
  • Terms of use
  • Competition terms & conditions
  • Our use of AI
Subscriber Services
  • Bay of Plenty Times e-edition
  • Manage your print subscription
  • Manage your digital subscription
  • Subscribe to Herald Premium
  • Subscribe to the Bay of Plenty Times
  • Gift a subscription
  • Subscriber FAQs
  • Subscription terms & conditions
  • Promotions and subscriber benefits
NZME Network
  • Bay of Plenty Times
  • The New Zealand Herald
  • The Northland Age
  • The Northern Advocate
  • Waikato Herald
  • Rotorua Daily Post
  • Hawke's Bay Today
  • Whanganui Chronicle
  • Viva
  • NZ Listener
  • Newstalk ZB
  • BusinessDesk
  • OneRoof
  • Driven Car Guide
  • iHeart Radio
  • Restaurant Hub
NZME
  • About NZME
  • NZME careers
  • Advertise with NZME
  • Digital self-service advertising
  • Book your classified ad
  • Photo sales
  • NZME Events
  • © Copyright 2025 NZME Publishing Limited
TOP