Perhaps the most striking thing about the Budget Policy Statement Grant Robertson released on Tuesday was what it did not say.
He has dropped any quantified target for net government debt.
But this is not a case of drawing a veil over a profligate approach to fiscal policy.
Rather, the eloquent omission should be seen as a further step towards focusing fiscal policy on wellbeing, rather than an arbitrary financial measure. It is about reducing the risk of a penny-wise, pound-foolish approach to public finances.
Robertson's three previous Budget Policy Statements all declared the short-term intention of bringing net core Crown debt down to 20 per cent of gross domestic product within five years of taking office (which would be by next year).
The 2020 statement added that "we will continue to maintain debt at prudent levels (a range of 15 to 25 per cent of GDP)". The intentions for spending, revenue and the operating balance all had to be consistent with the net debt target.
The pandemic has blown that target out of the water, of course. As of November net debt had climbed to just under 31 per of GDP and the Treasury is forecasting it to be just under 40 per cent of GDP by the end of the fiscal year in June.
Its latest forecasts have the net debt ratio continuing to rise from there, but peaking three years earlier (in 2022/23) and nearly 4 percentage points lower (at 53 per cent of GDP) than it expected as recently as September's Pre-Election Economic and Fiscal Update.
Instead of setting a new numerical target, the 2021 Budget Policy Statement on Tuesday said the short-term intention for debt is "to allow the level of net core Crown debt to rise in the short term to fight Covid-19, cushion its impact and position New Zealand for recovery." The long-term objective is to "stabilise net core Crown debt as a percentage of GDP by the mid-2020s and then reduce it as conditions permit (subject to any significant shocks)".
All words and no numbers to provide a rod for the Finance Minister's back.
The latest Treasury forecasts, for what they are worth — and all economists' forecasts lately have a wide error margin around them — have the budget deficit falling to 1 per cent of GDP by 2025, while government spending declines from 35 per cent of GDP this year to 29 per cent four years out.
Budget allowances — the pot of uncommitted new money ministers fight for a share of — are set at $2.6 billion for each of the next four Budgets. There is also $10b left in the Covid Response and Recovery Fund set up in last year's Budget.
In the wake (or possibly the midst) of a grievous economic shock, these numbers could hardly be seen as throwing fiscal caution to the wind.
So though Robertson baulked at being described as a fiscal conservative — "I like to think of myself as progressive" — his rhetoric on Tuesday was about the need to get the balance right between the good things the Government wants its Budgets to achieve and the need to "keep the lid on debt".
Those good things are dealing with the continuing risk of Covid-19, the housing crisis, child poverty and a just transition to a low-emissions economy.
Robertson said the country's strong fiscal position going into Covid-19 had allowed the Government to move quickly and at scale to protect lives and livelihoods.
And even at a peak above 50 per cent of GDP, New Zealand's net debt would be about half the levels expected in the United States or United Kingdom.
Even so, as he acknowledged, we are looking at government debt levels a lot higher than we have been accustomed to.
The forecast peak would put net debt, relative to the size of the economy, back at levels prevailing when Ruth Richardson's Fiscal Responsibility Act was passed in 1994.
But it makes no sense to look at debt levels in isolation from the interest rates applying to the debt. It is finance costs — the taxpayers' interest bill — that matters.
And interest rates have been trending down for decades now, to the point where policymakers are bumping up against the zero lower bound.
In 1994, the previous peak for public debt, finance costs were around 5 per cent of GDP. In the current fiscal year, as falling interest rates outweigh rising debt levels, they are expected to fall to $2.6b or 0.8 per cent of GDP. The Treasury is forecasting finance costs to run around 0.5 per cent of GDP for the following two years.
Its longer-term projections do not have finance costs getting back above 1 per cent of GDP until 2028 and still just below 2 per cent of GDP by 2035, by which time they expect the effective interest rate on government debt to be back above 3 per cent.
These are projections spat out by the Treasury's fiscal strategy model, which means they are even less reliable than forecasts. They depend on a bunch of assumptions, including that we are not sideswiped by another shock — we should be so lucky — and no change in policy settings.
In reality, pressure to tighten fiscal policy is likely to mount, if only because, while government debt levels may still be relatively low by international standards, the opposite is true of household debt.
According to the Bank for International Settlements, New Zealand household debt at 97 per cent of GDP by mid-2020 was the seventh highest among the 43 economies they track and well above the 74 per cent average for advanced economies.
As a nation and as a people, we are far more inclined to borrow than to save. It is a rational response to our messed-up tax system.
But the resulting reliance on importing the savings of foreigners means the views of credit ratings agencies cannot be blithely disregarded. And they have long pointed to the contrast between public and private debt levels.