New Zealand's total debt is poised to hit half a trillion dollars as mortgage lending surges to levels not seen since the global financial crisis.

That is a big, scary number - more than $100,000 for every man, woman and child in New Zealand.

What really worries economists is housing debt at $217.5 billion. It is growing at more than 8 per cent a year and appears to be accelerating.

Where does it end? The higher the house prices, the more Kiwis have to borrow. And the banks are obliging.


That's fine as long as prices keep rising. But there is a big risk we are headed into a housing bubble. If houses prices fall sharply then New Zealand is in trouble.

Investors and those who've bought at the top of the cycle could end up owing more than their properties are worth. We'd see the borrowing costs rise, spending drop and it could push the country into recession.

Unfortunately, many economists and market watchers now think this is a case of "when" not "if". Parallels are being drawn between this housing "euphoria" and the stock exchange madness before the 1987 crash.

Finance Minister Bill English is aware of our growing private debt risk. It is one reason he is focused on paying down government debt - already relatively low by global standards.

If we crash we wouldn't face the kind of double whammy of austerity Greece did. But some will argue the Government and Reserve Bank should be doing more to address things now.