New Zealanders learned this week that our output did not increase in the second half of last year.

Yet our spending in total and our wages rose over that period, as did population and spending per capita. How did we spend more per person than we earned per person? Essentially, we borrowed from offshore or we sold assets to foreigners.

Other figures out this week showed we ran a current account deficit of 2.3 per cent in the December quarter.

That's much less than the 8.8 per cent hit in the December quarter of 2008, but it's still a deficit and means we imported capital equivalent to 2.3 per cent of gross domestic product and spent it.

Importing capital is another way of saying we borrowed money or sold assets.

That 2.3 per cent also looked better than it was because of reinsurance money flowing in after the earthquake on September 4.

Yet again, we engaged in a national delusion we could spend more than we earned.

New Zealand's real GDP per capita is now below where it was in 2004. For at least the past eight years New Zealanders have believed we're worth it.

Over the 10 years of the naughty oughties (2000s), New Zealand borrowed or sold off a total of $350.3 billion.

That's about two times GDP. We used that money to increase our wages and income. We didn't use that money to reinvest in new equipment or skills to boost our ability to produce more in the future.

The proof of that is our appalling record on productivity or output per hour worked. It has gone nowhere for a decade, largely because we have not reinvested profits or saved.

Virtually no one was guiltless. Households kidded themselves first by borrowing heavily against the value of their houses between 2004 and 2008.

That has stopped now and households are saving. Corporates have been less profligate, but they're borrowing offshore again too because they can get very low interest rates.

Now, the government has taken over as the borrower-in-chief. On Thursday the Treasury's Debt Management Office took advantage of a gap in the financial market turmoil to borrow $950 million in one week on international markets. The immediate reaction was a rise in the New Zealand dollar as foreigners bought New Zealand dollars to buy the bonds.

This is another side effect of continued heavy borrowing. These capital inflows push up the value of the New Zealand dollar and punish exporters, the very people the Government wants to encourage.

The upshot of all this borrowing is now whenever our economy looks like recovering, the benefits of any growth are shipped offshore as profits and dividends from now foreign-owned assets here and as interest payments on the debt incurred over the last decade.

Last year, New Zealand paid $15.5 billion in profits and interest payments to foreign investors and creditors.

Only $3.3 billion was reinvested.

That is the size of the drag on the New Zealand economy. It is unsustainable.

We have to stop spending money we aren't earning.

If we don't, we will get poorer and poorer until either there is nothing left to sell or we can't pay the interest on the debt. It's time we stopped kidding ourselves.