Finance Minister Grant Robertson placed a one-way $50 billion bet when he announced last year that the Government would borrow the extra amount to mitigate the hit from the Covid-19 pandemic.
It's fair to say that many in business viewed his intention to borrow such a hefty amount — without first undergoing a major cost-benefit analysis — posed a significant risk to a country which has long been fixated on keeping government debt levels down within very tight targets.
But fast-forward to February 2021, it would appear Robertson's decision to borrow up to an additional $50b has paid dividends.
He recently revealed New Zealand's Covid-19 economic recovery would cost $60b less than the Government was anticipating. The Government's books were in good shape, hence the temptation for Robertson must be to keep on spending to fund Labour's agenda, which has been to some degree neglected while the focus has been on Covid.
If so, it should be much better targeted than the quality of some of the prior coalition Government's first-term spend which attracted the attention of the Auditor-General.
The impact of Covid-19 on the Crown's fiscal outlook was "unprecedented" and required a "substantial increase to the forecast borrowing programme relative to the forecast at the Half Year Economic and Fiscal Upbeat 2019," was what the New Zealand Debt Management Office said following Robertson's May 2021 Budget announcement.
The poultice of cash thrown at the private sector through wage subsidies proved a godsend to many businesses and a source of OPM (other people's money) to some major corporates that really did not need it. Not all of the $50b "fund" that has so far been spent has been applied to meet a strict Covid-recovery agenda.
But for much of the private sector — as the current reporting season shows — the Government's decision to stand behind the economy has resulted in the kind of boost to confidence which is needed to invest and employ.
The companies which have been severely impacted by the Covid-19 pandemic do not surprise.
Robertson's mantra is the Government remains committed to "building back better". Big spending decisions such as Auckland's light rail project and housing investments have still to be unveiled. The rail project is expected to be announced in April and some aspects of Robertson's call on housing have been delayed.
He has teased a bold plan for housing to be unveiled in the May Budget.
But the upshot is the expected level of government debt had been slashed dramatically by the Treasury, given New Zealand's strong economic bounce-back.
For that the NZ private sector should also take a bow.
Three significant shocks this century: the 2007/2008 recession leading into the Global Financial Crisis, the Canterbury earthquakes of 2010 and 2011 and the Covid-19 pandemic have tested New Zealand businesses.
They have demonstrated extraordinary resilience.
But the crowning glory, which belongs to Robertson, is S&P Global's announcement that is has awarded New Zealand the first sovereign ratings upgrade since the global coronavirus pandemic began.
International investors will take that as a signal that the the NZ economy is in good shape. S&P raised the ratings of New Zealand's foreign and local currency government debt by a notch to "AA+" and "AAA", respectively, from "AA" and "AA+".
They are the best ratings NZ has achieved in more than a decade.