Brian Fallow : Half time score shows NZ vulnerability

Photo / Mark Mitchell

The famous $250 million a week the Government needs to borrow has turned into $300 million a week.

As expected, the half-time score for the Government's financial year shows it losing ground compared with its expectations back at the time of the May Budget.

The operating balance for the current year is now expected to be $11.1 billion in the red, $2.5 billion worse than the Budget forecast.

We can blame $1.5 billion of that, and change, on the Canterbury earthquake.

But the Government it is also suffering a $1.4 billion hit to its tax revenues from much weaker economic growth than it expected. Half of that is less tax from the self-employed, but the company tax take and GST are also falling short.

In cash terms the forecast deficit this year has blown out to $15.6 billion from the $13.3 billion expected on Budget day.

That's the amount the Government will have to borrow, largely from foreign lenders who have become a lot less tolerant of highly indebted nations.

New Zealand certainly qualifies as that.

Perhaps the scariest numbers released today are the forecasts for the country's (as opposed to the Government's) net overseas liabilities. They are expected to climb from $166 billion now to $221 billion or 90 per cent of GDP in five years.

In a debt-averse post-global financial crisis world, that is more than an Achilles heel. It's an entire leg.

And that vulnerability is why we are going to hear a lot more next year about the need to lift national savings.