Treasury accounts show Covid-19 pushed up debt by $19 billion in two months

Finance Minister Grant Robertson (centre) leads a group of ministers into a media briefing on the Government's initial economic response to Covid-19 in March. Photo / Mark Mitchell.

New Zealand's debt levels are climbing at close to $10 billion a month as new Treasury figures reveal the brunt of the response to Covid-19.

Today Treasury released the Government's financial statements for the 10 months to April 30 which revealed a deficit of $12.8b.

The figures, which cover the period up to just after New Zealand moved down to Covid-19 alert level three, show a sharp increase in borrowing.

Between the end February - the last figures previously available - and the end of April, New Zealand's net debt rose by just over $19b, an increase of more than $300m a day.

As a share of gross domestic product, net debt climbed from 19.2 per cent at the end of February, to 25.3 per cent at the end of April.

Prior to Covid-19, Finance Minister Grant Robertson had dropped his target of having debt below 20 per cent of GDP within five years of taking office, moving to a range of 15-25 per cent.

However, when the significance of the impact of Covid-19 became clearer, he said the target would be dropped.

"Our strong economy heading into this global pandemic, and low debt compared to the rest of the world means we have the ability to use the Government's balance sheet to support businesses and households through this 1-in-100 year global shock," Robertson said in a statement.

Robertson focused on the fact that the accounts presented on Tuesday were slightly better than Treasury had forecast in May's Budget.

"The impact of global Covid-19 pandemic is clear in the accounts. Even though the [operating balance before gains and loses] was better than expected, it showed a deficit of $12.78 billion.

"This reflects the significant investments to support businesses and workers during lockdown through the wage subsidy scheme of cash grants and other cashflow measures, including tax refunds."

National's finance spokesman Paul Goldsmith said "debt-fuelled Government spending on an industrial scale" appeared to be the Government's economic plan while the world waited for a vaccine.

"While some increased spending during this crisis is to be expected, we can't lose sight of basic disciplines around the quality of spending and a focus on results," Goldsmith said.

"Because the debt eventually has to be paid back, before the next crisis."