Ryan Bridge: S&P flags NZ's 10% debt interest - Tue 1 Sep

0:00You know how weak he was? Love it. Froff on it. Win foreigners, or media, or even tourists talk about us. You know, we get all giddy. There's always the most, they are always amongst the most red stories on news websites. It's like a national pastime for us, isn't it? Oh look, Jason Mahmoha did a bungee in Queenstown and he said it's beautiful. Oh my gosh, amazing. Did Brad Pitt just say we're beautiful? Is that like you so much? That right there, that face, that's the face we pull every time somebody says something nice about New Zealand. Anyway, I digress. S&P, the Global Ratings Agency, emphasis on global, has just done a bungee on our country's finances. It is mostly good news, low net debt growth of 2.5% a year, good government, safe sound, stable outlook, all that stuff. The equivalent of a four star trip advisor review, but there's one number that should be making headlines this morning.

1:00It probably won't. It's on page four. 10%. Our country has been borrowing money to fund stuff, including everyday spending and election promises. It may be some pot holes. They issue bonds or debt to investors to do this. And we pay them interest for the pleasure. Those interest costs are going up because of the bond market selloff we've been talking about on this show. And S&P says the amount we're paying on interest will reach 9% of government revenue, i.e. tax, by 2029. That means through every million bucks the government earns and tax, it pays almost 100k, just on interest on debt. We spend more on interest than we do schooling our kids through primary and secondary. It's the fourth biggest item in the government's books. S&P says interest costs of more than 10% of revenue. Remember we're at 9 and a couple years time. Anything 10% or over could result in what they call weaker debt metrics.

2:00Now this is not a good thing. It means we're stretching ourselves. We could get a credit downgrade. People start looking at a sideways going, can those guys pay back and really give us the money that we're owed? Or are they taking the mickie out of us? That is not the sort of reputation. This country can afford.