You're listening to a shares these podcast I feel a part of my job, the responsibility I have, is to be optimistic and to remind people of the good things going on, because, you know, for all of their own reasons, our mainstream media will often emphasize conflict or crime or negative things, and you don't.
Often see stories of By the way, did you know that this new business is doing amazing stuff? Did you know that the Hawthorn Institute is coming up with world leading scientific breakthroughs into algay and seaweed with Nesley is their major major research partner because they think they're the best in the world that creating protein from the sea, Like did we hear about that? And I get to see these success stories all the time. You know Picks peanut Butter.
I was there the other day.
There's a little business that started with a fifty five year old who decided to make peanut butter in a concrete mixer for the market, and he is now making twenty five thousand jars of peanut butter a day. So we need to tell these stories about ourselves because we're awesome. I've just been at the Fintech Festival meeting all these people who are taking a risk to run a new
financial business because they see opportunity. And I see that opportunity, and I think we should talk ourselves into that and not into the things that are hard. Yes, there are challenges, of course there are, but let's also highlight the positive coming.
Back to these geo political situations where all as businesses trying to make changes to our business and thinking about that. You've made some early announcements on the budget and just interested to hear how much of this change, which has come very quickly over the last couple of weeks, is playing into you're thinking there and what New Zealanders should start to expect for the budget.
In a month or so. Yeah, well, look, I feel quite a solemn durty in this job to deliver responsible budgets because hey, look I'd love to be generous and spray the money down around. That would make my job a lot easier, to be honest, But I'm very aware of the context in which we're operating, which is that New Zealand rightly took on debt during COVID. We can have a debate about whether we took on too much, but we now have dead at levels not seen since
the mid nineteen nineties. For context, we're at forty two percent government debt to the size of our economy. Historically it's hovered between five and twenty five percent.
Now, the problem, what do you think is like a good level?
Now, what we'll we I'd like us to see come back down to forty and then hover between twenty and forty over time, depending on where we are in the side, because.
We're still low globally, is that right?
Yeah, we are, and we should borrow for investments that are going to drive our future productivity. Absolutely on board for that. The problem that we always need to be aware of is that if something major happens, you know, big earthquake, big biosecurity incursion, we're then going to have to go out to the world and borrow a lot more. And there's a ceiling. Yeah, that's right, And there's a ceiling at which we don't look as good as proposition.
And so it's about having enough headroom that when that big event can't, we can borrow without getting into it's basically, I worry about the death spiral of a really high interest bill on our debt. So for context, right now, our interest bill is nine billion dollars a year on our debt, up from hovering just around three previously. Right now, we are borrowing to pay for the groceriy, so we're not just borrowing for assets, we're borrowing for our day
to day spending. There's a thirteen billion dollar deficit this year between what we as a government are taking in in revenue and other earnings and what we're spending to keep the economy going. That's the right thing to do because New Zealanders need stability and their welfare supports and the funding for our schools and hospitals. It just can't go on forever. Now. I've taken the gradual approach. Some
people would say sort that out immediately. I think that would create a lot of pain for people, and it would actually create instability in the economy. So we've set a path that says we will get the books back and balance by twenty twenty nine. We think that's reasonable period of time to narrow that gap between what we spend and earn, and that will allow us to start
paying down debt. Now, because of the Trump stuff, the forecasts I've been receiving told me you're now going to be off track to meet that goal of getting the books back and balance unless you make some change.
It's an interest rate has been held up because of what listening to answer and do you or what is it that's driving well.
It's basically that because growth will be lower, we're forecast to be taking in less revenue, which has two effects. One the deficit grows larger now and two we then have to borrow more, which then creates a larger cost there in terms of interests, investing involves the risk you might lose the money you start with. We recommend talking to a licensed financial advisor. We also recommend reading product disclosure documents before deciding to invest.