Covid-19 has changed the way we live and shaken the foundations of our economy in ways nobody could foresee.
That change has been reflected in the nation's debt profile.
The pandemic's most obvious economic impact is that we are now much deeper in debt - much, much deeper.
And for all the concern about the huge Covid blowout in government borrowing, the housing boom of the past 18 months has seen Kiwis' new mortgage borrowing outpace Grant Robertson's best efforts.
New Zealand's total gross debt - including Crown and private debt - now exceeds $663 billion. That's up by $92b from $571b since the middle of 2019, before the pandemic.
Back then, that $571b equated to an average of $115,000 of debt for every New Zealander. This year that average figure is closer to $130,000.
Clearly, the big drivers of the post-Covid borrowing blowout have been two-fold.
On the public front, the Government has blown the roof off its self-imposed debt limit with a view to supporting the economy as it deals with lockdowns and the ongoing costs of closed borders.
A figure of $50b in Covid borrowing still gets bandied about in commentary about Crown debt. But a better-than-expected economic performance during the pandemic (so far) has meant we've borrowed far less.
Our snapshot - which compares core Crown borrowing at May 31, 2019 with the same figure from May 31 this year - shows government debt has increased by $37.7b.
Yes, that is still a huge leap and we may have to dig deeper yet as the Delta variant and a new lockdown pushes out the pandemic timeframe.
But when it comes to borrowing, the house buying spree of the past two years was the blowout we really didn't need.
In the past two years, Kiwis have added $50b to their housing debt. At June 30, total housing debt sat at a staggering $317.56b - up 19 per cent in two years.
New Zealand wasn't alone in reacting to the pandemic by rushing for the safe haven of property investment.
Bloomberg Economics runs an Index of countries most at risk of a housing market bubble. The index uses annual house price growth as well as measures like the price-to-rent ratio and price-to-income. We lead the field on all three.
New Zealand, Canada and Sweden rank at one, two and three as the world's
"frothiest" housing markets, the research found.
That spike in house prices has fuelled exactly the kind of borrowing boom the Reserve Bank didn't want to see.
"We have certainly seen some impacts from Covid," says Chris McDonald, RBNZ manager of financial system analysis. His job is to keep track of what is happening with New Zealand borrowing trends so the Reserve Bank can assess the economy's financial stability.
"Pre-Covid you'd seen some pretty moderate growth across the different sectors we look at," he says.
Household debt, business debt, all of them had moderated and were in the region of 5 per cent growth, says McDonald. "Since Covid hit we've seen quite a divergence, where household lending has increased - particularly in the last nine to 12 months."
While mortgage borrowing has soared, other sectors like business and agricultural lending have been quite soft, he says.
Business lending has lifted by just 1.2 per cent in the past two years. It actually dipped in the 12 months to June 30.
The business trend has very much been about the uncertain economic outlook, McDonald says. "It's adjusting to that, pulling back their investments.
"More recently, though, we've seen the economy has started to recover, we've continued to see business borrowing stay soft. What has a happened is that business income has increased so they've been able to spend and invest out of that."
Meanwhile, businesses had also seen a significant increase in savings from last year.
"They've been able to use some of that to fund some of that investment as well. So as confidence has come back into the economy they haven't necessarily gone out and borrowed a lot at this stage".
Consumer lending has also taken a hit in the past two years. In other words, Kiwis have been more cautious with the credit cards since June 2019.
Our total consumer debt has dropped 15 per cent in two years from $16.76b to just $14.2b.
"Some of it is a confidence story but there is more to it," McDonald says.
He cites recent StatsNZ data that showed the savings rate increased sharply last year.
Our net worth - the value of all assets owned by households minus the value of all their liabilities - was $2.3 trillion at March 31 this year, StatsNZ said. That was $118b, or 5.5 per cent, higher than at 31 December, 2020.
The rising value of households' owner-occupied property contributed $172b of that.
But financial assets, including shares, businesses, equity in rental properties, bank deposits and retirement savings owned by households, contributed another $245b to the increase.
"I think some of that savings has meant that consumers have had more cashflow again, similar to businesses," says McDonald. "They've been able to use that to pay down some of that consumer borrowing, credit cards or the likes."
As well, there's the fact that it's harder to spend during lockdown. "Incomes kept going in, so [people] ended up saving quite a significant amount. Over the whole year you did see higher saving and that's resulted in lower consumer spending growth."
Should we be worried about our debt level?
In the past, the Reserve Bank has cited New Zealand's low level of government debt as a bright spot - and a counterweight to high private debt.
Despite the Covid borrowing, McDonald still believes that story holds. "I think when you look internationally, we're still sitting at the low end of where other countries are at," he says.
Our net core Crown debt is about 34 per cent of GDP - up from 20 per cent pre-Covid.
In Japan that figure is 235 per cent, in the UK it is close to 100 per cent and even Australia is at 47 per cent.
More worrying, says McDonald, is the increase in the debt-to-income ratio of recent borrowers in the past 12 months.
In other words, the ones who have really stretched themselves to get onto the property ladder.
"Recent borrowers are most concerning," McDonald says.
That is why the RBNZ recently asked the Government for the right to set debt-to-income lending restrictions limits if it sees fit.
"The ones that borrowed earlier, obviously their balance sheets - loans relative to assets - are very good," he says.
By the numbers:
• That big ugly number in our graphic ($663b) 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, 2020.
• 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.
- These figures are updated when councils publish annual reports in November.
