English says more borrowing now because of interest rates

Photo / Martin Sykes

The Government is borrowing an extra $5 billion this year to take advantage of good interest rates, Finance Minister Bill English says.

Radio New Zealand reported Treasury figures today which showed that the Government was borrowing $19.9b, $5b more than required to fund the $14.9b cash deficit.

Council of Trade Unions economist Bill Rosenberg said the Government was misleading people by saying it was borrowing $380 million a week as he thought it was more like $274m a week over four years, with $176m of that new borrowing with the rest servicing debt.

English said the figure was what the Government was borrowing at the moment.

Labour Finance spokesman David Cunliffe told the broadcaster while the borrowing could be due to market conditions it could also be politically motivated.

"It may also be that it (the Government) would like to be able to say later in the year or next year that it had lowered its borrowing rate by ceasing to pre-borrow and perhaps use some of the drawings that have already been made.

"That would give the appearance that the borrowing rate was decreasing and that progress was being made where as actually it has actually stopped bringing it forward."

ACT leader Don Brash said while New Zealand's Government debt level was "quite modest" internationally it was increasing fast.

"That's really quite irresponsible both because we don't need to be increasing it that fast and secondly because it is hurting the export sector," he told RNZ.

English said throughout last year the Government borrowed about $300m a week and was borrowing more now.

"We've been quite open about the fact that we have been borrowing more than we need, particularly over the last three or four months, when the conditions have been favourable. Our interest rate has dropped from just under 6 per cent to just over 5 per cent... That is borrowing that has been bought forward."

From July onwards new borrowing would drop down to $100m a week on average over next three years.

English said "detail" about when the money was raised did not impact on the Government's focus on getting debt down and returning to surplus.

The Government was aware borrowing funded by overseas investors buying bonds could affect the currency and impact on farmers.

- NZPA