GDP and Debt
At the end of the last National government, the debt to GDP ratio was 35.6%.
Under Labour, it has fallen year on year: 32.9%, 31.4%, 29.1%, 27.7%, 25.43%, 21.6% and 18.2%.
This is significant for two reasons.
Firstly, because National are proposing a disastrous raft of tax cuts for this nation in the unlikely event that they would get into power. Significant borrowing (debt) would take place in order to fund this policy, along with spending cuts. That would increase the debt to GDP ratio, and that’s problematic for the economy of the nation, particularly at a time of recession. We won’t have seen the likes of it since Muldoon, who was PM when I was a kid.
Secondly, while the data is accurate, it’s also incomplete. It’s certainly true that KiwiSaver, seeking to address the saving patterns of NZers, is an attempt to change behaviour and reduce debt in this nation. Their aim is that we would benefit through our own savings, rather than the borrowing of the government. So rather than cut taxes, they have deliberately focussed upon increasing and incentivizing saving opportunities. In a nation like ours, in which spending and borrowing is mistakenly normalised, this is a good habit to promote, and creates personal capacity for spending and increased financial independence in the future.
However, GDP has gone up significantly in recent years. The relationship between the two (GDP and debt) is important, and should obviously be understood in the relative terms in which it is set. GDP has gone up in part because of a global economic boom. That boom is now over, and the Labour led government benefited greatly from this. It has taken advantage of it to put in place some significant and important frameworks which, if left alone, will help with the long term economic security of this country.
National doesn’t seem to be aware that it can’t spend tomorrow as if it was yesterday without us all paying a pound of flesh for the privilege.
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