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Kiwis owe more than ever, but Covid-19 has brought a new question: Is $120,000 a head too much debt, or not enough to get the economy back on its feet?
"There is room to accommodate more debt in the economy," says Chris Bloor, manager of financial systems analysis at the Reserve Bank of New Zealand.
That's a big shift in attitude from the central bank, which spent much of the past decade trying to slow the rate at which Kiwis were borrowing.
Latest figures show New Zealand's total debt continues to rise, thanks to increased government borrowing and a housing market that has so far refused to be stalled by Covid-19.
But unlike previous years, when the Reserve Bank had concerns about rapidly-rising private debt, the bigger problem now may be New Zealanders not borrowing enough.
"To a degree we're trying to lean against the inherent cycles in lending," Bloor says.
"So, taking on too much risk in the upswing and not enough in the downswing.
"We have kind of switched mode a little bit in terms of what we are concerned about."
In simple terms, the Reserve Bank has to assess which is the lesser of two evils: debt levels so high that they make us vulnerable to financial crashes, or an economy which stalls because people aren't prepared to borrow, spend and invest.
RBNZ credit data for the year to July shows business borrowing has been completely stopped in its tracks by the pandemic.
Consumer credit - the borrowing we do to go shopping - has also plunged.
Business lending as a share of GDP was already "flat as a pancake", says economist Cameron Bagrie. The annual rate of increase to the end of July was just 0.1 per cent, but with a sharp drop-off in borrowing since April.
That reflects access to credit becoming more of an issue as banks get cautious, Bagrie says.
But also the fact that "firms' desire to put cash to work has been diminished in a highly uncertain world."
That's a worry.
If business is afraid to borrow and invest, then it is not well placed to drive the economic growth and productivity improvement the Government is banking on to help us deal with rising Crown debt.
"We do tend to see increased risk taking in boom times and decreased risk taking in a downturn," Bloor says.
The Reserve Bank wants to see both banks and business "taking a long term view and looking out for opportunities," he says
As well as setting monetary policy to keep interest rates low, the Reserve Bank has made a number of moves to keep credit flowing, he says.
LVR (loan to value ratio) restrictions have been removed for house buyers, the capital review for the banking sector has been deferred by at least 12 months and core funding ratios have been eased for the banks.
Bloor also notes RBNZ support for the Government's mortgage deferral scheme and Business Finance Guarantee scheme.
"So there's a range of things we've done with that goal of trying to keep credit flowing to the economy and to try and prevent an excessive contraction in lending and credit to the economy."
For all that, Bagrie believes the RBNZ faces an uphill battle in the face of a profound shift in public attitudes to their finances.
"Uncertainty is the antithesis to investing," he says.
"We're seeing that on the other side of bank balance sheets, when you've seen a $29 billion surge in deposits since the start of the year."
Term deposit numbers have fallen and transactional and savings account balances are up sharply across households and the business sector.
"Some of it is we've been in lockdown and we can't spend that money, but there is a very strong hoarding of cash going on," says Bagrie.
"It's all about liquidity and cash … and having that on hand."
Household savings rates rose after the global financial crisis, and Bagrie believes we'll see that again.
"It's about examining our priorities but also I think people are going to be looking at the government balance sheet and re-examine their savings," he says.
"You do tend to see a bit of an inverse relationship between private sector savings and debt versus the government sector."
Overall, New Zealand's grand total of gross debt now stands at $603.5 billion, or about $120,000 per head of population.
That total has risen by 20 per cent since 2016 when the Business Herald started tallying our debt levels.
The latest figure, up 5.4 per cent on last year, is bolstered by the rise in Crown debt to cope with the Covid-19 shock.
Core Crown borrowing for the year to May 31, 2020 was $121.73b - up 23 per cent from $92.94b a year earlier.
It's worth noting that in nominal terms government debt has never stopped rising.
The debt reduction programme of the past several years is always framed as a reduction of net core Crown debt as a ratio of GDP .
But the figures to May 31 do capture some of the extra billions borrowed in the immediate wake of the Covid-19 lockdown to cover the initial wage subsidy.
Clearly there is much more to come.
The Debt Management Office - which issues government bonds - plans on borrowing $60b this fiscal year and $40b the year after.
The Reserve Bank now has a quantitative easing policy in place to buy up to $100b worth of Government bonds.
Few argue that this is not necessary right now.
And we are reminded regularly that, even after all this new borrowing, New Zealand's Crown debt levels will be moderate compared to other countries.
But in a report last week, Westpac chief economist Dominick Stephens warned that it will still create issues.
"The debt the Government has incurred in the course of its economic rescue may be perfectly manageable," he wrote.
"But New Zealand will still face the long-term fiscal challenges related to an ageing population, such as the cost of New Zealand Superannuation and the provision of health services.
"With that in mind, future governments are going to have to make tough choices – either spend less or tax more."
Across the last three finance ministers, a counterpoint to taking on more government debt has been the need to offset this nation's precariously high levels of mortgage debt.
Housing accounts for the single largest chunk of our private debt - and thus far Covid-19 has not stopped that from growing.
At an annual rate of 6.4 per cent, mortgage debt's growth is down from rates above 9 per cent we reached in the boom of 2016 and 2017 - but still strong.
"Overall the housing market story is different factors pushing and pulling," says Bloor.
"There's weakness in the labour market, with unemployment rising significantly, we've had a reduction in household incomes and we've seen a dramatic reduction in net immigration. These two factors usually result in significant slowing.
"But at same time, interest rates have come down significantly."
Right now, low rates seem to be winning that tug of war.
ASB economists last week increased their forecasts for the property market.
They now see house prices falling by just 3 per cent due to Covid, as opposed to 6 per cent.
"We think term deposit rates could fall below 1 per cent with mortgage rates for some terms below 2 per cent," said ASB senior economist Mike Jones.
The promise of extremely low interest rates for years to come will continue to boost asset prices.
"It's worth remembering that all of this is exactly what the Reserve Bank is trying to engineer as it tries to reflate the economy," Jones said.
"Boosting asset prices, encouraging debt accumulation, and the associated increase in inequality are unfortunate side-effects of the way easy monetary policy works."
But Bloor says the RBNZ still expects to see some more downward pressure on house prices - and mortgage borrowing.
"The labour market and lack of immigration will start to weigh on the housing market in the coming quarters," he says.
"It is still our expectation that the housing market is likely to slow and with that we would expect household debt accumulation to slow as well."
The worries the RBNZ had about housing debt in previous years haven't gone away, but its concerns about the rising risk have diminished, he says.
"Generally our concern is that during boom times for the economy asset markets become over-heated, there is too much debt accumulation and there is too much risk taken.
"The big worry is that as you go into the downturn phase, those risks are actually realised.
"So right at the moment we probably don't have a great deal of concern about risk building up in the financial system, it is probably more of a concern about previous risks crystallising.
"This is where things like the LVR policy were really important," says Bloor.
"That prevented a large amount of debt being taken on at low deposits. So as we go through the downturn it's less likely that a large number of borrowers get into difficulty because they have those buffers built in."
The other red flag for the Reserve Bank in the past few years has been the build-up of agricultural debt - primarily due to the dairy boom.
But now, nominal agricultural debt has dropped 1.3 per cent in the year to July.
The dairy sector has been de-leveraging in a relatively orderly fashion over the past 24 month, Bagrie says.
"The problem child is becoming less of a wayward child."
Ultimately, looking at New Zealand's overall debt situation in 2020, the most important point is that interest rates have dropped substantially and are expected to remain low for a long time, Bloor says.
"That does allow higher levels of debt in the economy – both the public sector and private sector."
Both he and Bagrie point out that overall debt servicing ratios are now very low by historic standards.
RBNZ data shows that interest payments as a percentage of household disposable income are the lowest they've been since at least 1999 (when the data series began) - at 7.1 per cent, compared to a peak of 13.8 per cent in 2008.
"Monetary policy is working," says Bagrie.
There's about $150b worth of fixed term mortgage debt that's going to refinance on much lower rates in the coming 12 months, he says.
"So the cash is there. But the surge in those deposit numbers tells me that monetary policy is having to work pretty hard to get out there and get people to spend as opposed to save."
Covid-19 has created problems that central banks can't fix, things like lockdowns and supply shocks, he says.
"Monetary policy is the supporting actor in this crisis and fiscal policy needs to be the lead actor," he says.
Meanwhile, the RBNZ faces a difficult balancing act.
"They need to be careful about what they do, monetary policy is contributing to more of a social imbalance across New Zealand. There is still financial stability risk if the property market surges again … at what point do you act?"
• That big ugly number in our graphic ($603.48b) is New Zealand's total gross debt.
• It combines the latest Reserve Bank figures for private debt with Treasury numbers for Crown debt and Local Government Funding Agency data on council debt.
• The Reserve Bank figures include housing debt, consumer debt, business debt and agricultural debt to June 30. These are updated monthly by the central bank as part of its brief to monitor and maintain financial stability.
• The Crown debt figure is taken from Treasury's Interim Financial Statements to May 31 and is the figure for Core Crown Borrowings.
• This is different to the Net Core Crown Debt figure often used by politicians when they talk about debt-to-GDP ratios.
• We use this (on Treasury's advice) as it is a gross debt figure but excludes debt held by state-owned enterprises which would have been covered off in the Reserve Bank statistics.
• Finally, the debt figure supplied by the Local Government Funding Agency is gross debt for the year to June 30, 2019.
• It captures all core council activities (Watercare, Auckland Transport etc) but excludes some commercial activities (e.g. Christchurch City Council's Orion lines company, Port of Lyttelton, Christchurch Airport) as these would also be included in RBNZ data.
Correction: An earlier version of this story understated future Government bond issuance plans. The lower figures were actually based on Westpac forecasts. As they applied to the fiscal year ahead they did not effect our total debt tally.
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