KEY POINTS:
Debt is one of those good things you can have too much of.
Finance Minister Bill English faces the unenviable task of ensuring that what is a no-brainer in the near term does not turn into a calamity in the longer term.
There is no question the Government
has to put all its weight on the fiscal accelerator right now, to mitigate the effects of a serious world-wide recession coming on top of the local one we have been in all year.
The Treasury estimates the cumulative boost to the economy in the current fiscal year and the next one will be equivalent to 5 per cent of gross domestic product or about $9 billion.
That is more than we have seen for many years, possibly ever, and at least comparable to packages announced with more fanfare by other countries.
But the combination of weaker growth, less inflation and a loosening of the fiscal purse strings means that, after 15 years of fiscal surpluses, we are now looking at deficits as far ahead as we can see.
And that means a steep rise in the Government's debt and in the interest bill taxpayers will have to pay.
On the present course and speed, gross government debt measured against the size of the economy is projected to be back within 15 years to near the levels prevailing in the early 1990s - at the time when ageing babyboomers will be driving up pension and health costs.
At the moment a sharp deterioration in the debt outlook is camouflaged by the fact that many governments are in the same boat. New Zealand does not stand out.
But its overseas debt - almost entirely incurred by the private sector - is already very high by international standards.
Put sharply deteriorating public sector debt in that context and the chances are that the risk premium built into New Zealand interest rates will climb, possibly quite sharply.
Mr English stressed yesterday that that relentless long-term rise in debt would not be allowed to happen.
But it will take more than careful stewardship of the Government's finances to reverse it.
It will require measures to lift the economy's long-term sustainable growth rate - productivity, in short.
And that's easier said than done.