Editorial: Debt mountains over deluged valleys

Infrastructure Minister Megan Woods with Finance Minister Grant Robertson and Prime Minister Chris Hipkins on their way into the House for the reading of Budget 2023. Photo / Mark Mitchell

EDITORIAL

Much of the attention on the Finance Minister this week was on his “nice-to-haves” such as early childhood education, prescription charges and public transport.

However, the big ticket item, and worth much more attention, is the $71b in infrastructure spending. This is what will tip our country into an unforeseen level of debt.

Illustration / Rod Emmerson

Grant Robertson’s sixth Budget revealed that net debt will be $21 billion or 31 per cent higher by 2027 than he said as recently as December.

So what’s changed since then? Go ask the people of Eskdale Valley or Pohangina Valley East. Cyclone Gabrielle is New Zealand’s costliest non-earthquake natural disaster, with economic losses expected to exceed the $2b-$4b of losses from the 2016 Kaikōura earthquake.

Sticking with higher debt levels for longer does leave us vulnerable to another external shock, touch wood. S&P Global Ratings has also warned that we risk running out of “headroom” on debt if our current account deficit (our trade balance with the world) doesn’t start to come right in coming months.

As Liam Dann wrote this week, that’s a big “if”. But it’s reassuring to read S&P expects our trade balance to correct. With tourism returning fast to pre-Covid numbers, and stronger rebuilt communities, we have cause for cautious confidence. Building back sturdier is also attractive to immigrants seeking to escape world turmoil.

Yes, we need to keep a steady eye on spending in areas less necessary. But New Zealand desperately needs resilient infrastructure. Sorting it now, and requiring future New Zealanders to help pay for it, is the sensible course.