Govt lifts debt plan $3b in 5 weeks

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The New Zealand Government's Debt Management Office (NZDMO) has announced a further increase in its domestic bond programme for the current 2010/11 fiscal year by $1.5 billion to $16.5 billion, saying it was seeing strong demand for such debt.

About 60 per cent of the domestic bonds issued in New Zealand dollars are bought by foreign investors, many of whom are keen to diversify away from European sovereign debt, US Treasuries and Japanese government bonds.

The increase is the second is just over 5 weeks.

The NZDMO announced on March 30 an increase in the borrowing programme by $1.5 billion from $13.5 billion to $15 billion.

The government is grappling with a blowout of spending linked to the Christchurch earthquake on February 22 and weaker than expected tax revenues from GST, corporate tax and income tax.

This follows last year's tax package where income tax rates were cut, the GST rate was increased and corporate tax was cut.

Since the earthquake the NZDMO has issued an average of $500 million of new debt every week.

"Since announcing a revision to the programme to NZ$15 billion on 30 March, strong nvestor demand has continued, with NZ$14.4 billion now completed," the NZDMO said in a statement.

"Today's increase allows for the ongoing issuance of bonds ahead of the scheduled update to the programme to be announced in conjunction with the Government's Budget on 19 May 2011."

- INTEREST.CO.NZ