Current government policies not suitable for long-term – Treasury outlook on fiscal future
The latest Treasury outlook on New Zealand’s fiscal future indicates current government polices are not suitable for the long-term and change is required.
Treasury’s 2025 Long-term Fiscal Statement, which looks 40 years out, has been warning for 20 years that population ageing will place increasing pressure on New Zealand’s long-term fiscal position.
The greatest mistake Labour did over Covid, was that they borrowed the money from private banking rather than do what Mickey Savage did, create Sovereign Credit!
In the 1930s–40s, the first Labour Government (Savage & Fraser) used the Reserve Bank to directly finance social housing, infrastructure, and employment schemes. This was sovereign credit creation — money issued into the economy for public purposes.
New Zealand used sovereign credit creation in the 1930s for housing and recovery. Since the late 20th century, reforms locked us into a bond-based system to satisfy global financial orthodoxy and inflation fears. The difference is simple: bonds create debt to outsiders, sovereign credit creates money internally.
Why borrow from private banks when we should be directly creating sovereign credit to build the vast infrastructure deficit and climate adaptation investment net we face.
Consider the actual borrowed debt vs sovereign credit…
…so what would happen if NZ created sovereign credit now?
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If the Reserve Bank or Treasury created credit for targeted, productive investment(say, green infrastructure, affordable housing, climate resilience):
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The economy could benefit from extra capacity and jobs.
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Inflationary pressure would be limited if the spending matched real productive needs.
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International markets might notice but wouldn’t necessarily “punish” NZ — especially if debt-to-GDP stayed stable.
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If NZ created sovereign credit now for targeted, productive investment, markets might grumble but wouldn’t punish us severely — especially if inflation stayed under control.
We could back this Sovereign Credit using ACC and KiwiSaver:
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ACC Fund: ~$50 billion+ investment portfolio to meet future injury compensation liabilities.
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KiwiSaver funds: ~$100 billion+ in private retirement savings, invested across shares, bonds, property, etc.
How backing sovereign credit with them could work:
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Collateralisation model
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The government issues new sovereign credit (say $10 billion for housing or climate infrastructure).
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To reassure markets, it pledges that this credit is “backed” by the assets of ACC or KiwiSaver (effectively saying: if inflation gets out of hand, or repayment is needed, we can draw on these assets).
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Investment direction model
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Instead of using them as collateral, the government could require ACC or KiwiSaver funds to buy sovereign credit instruments (like 0% or low-interest bonds).
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This would channel domestic savings into public projects instead of relying on offshore investors.
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Hybrid public wealth fund model
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NZ could merge sovereign credit issuance with a sovereign wealth approach — creating credit but investing it in productive, revenue-generating infrastructure, and having ACC/KiwiSaver co-invest.
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That way, the projects themselves generate returns to repay the credit, limiting inflation risks.
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None of what I am suggesting is new, Mickey Savage used it to build NZ and Postive Money has been making these points for a long time:
Positive Money NZ is the New Zealand branch of the international Positive Moneymovement (originally UK-based). Their core aim is to change who creates money in the economy.
At present:
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About 97% of money in NZ is created by commercial banks when they issue loans (especially mortgages).
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Only ~3% is physical cash issued by the Reserve Bank.
Positive Money argues this system:
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Drives house price inflation (since most new money goes into property lending).
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Makes the economy unstable (credit booms and busts).
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Privatises the benefits of money creation (banks profit, not the public).
Labour, Greens and te Parti Maori need radical solutions to the many problems we have, investigating Sovereign Credit to build our infrastructure and climate adaptation is one of those radical solutions.
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Oh, you think it is possible for the modern Labour Party machine to ever separate itself from the bankster capitalism and exploitation of the Utopes? Thats cute.
Labours only virtue is it is not National. Collectively they are both responsible for our demise. They will not touch the system that impoverishes us for the benefit of thoe fearful of losing their Utopia beyond the diamond ceiling.
It’s all hopeless everyone so says Paul.
Yes bankster capatalism will want to stop this plan – and yes they would do it easiy at the moment. However if we build a popular movement then we would create a powerbase to counter the banksters. Anyone who knows Labour Party history knows this is how they did it the first time. Unfortunately not many people know this history and so we’re busy having pointless arguments instead.
Solidarity is an old fashioned word but it might be time for it to come back.
Remember, everytime we have a pointless argument spomewhere a billionaire gets richer.
YES! but don’t fritter away in criminal salaries and airy fairy results. We want concrete results. Plus tax with CGT and a WEalth tax. NZ has to change course. Otherwise : LINO are not up to this. Chippy is too comfortable.
Oh no Chippie and Labour cry – Not the comfy chair. They probably don’t want to be reelected as they are faced then with clearing up their own mess of doggy do. Ugh!
Might as well laugh ourselves silly. Comfy chair 1.17 https://www.youtube.com/watch?v=T2ncJ6ciGyM
Longer 9.33 The Spanish Inquisition https://www.youtube.com/watch?v=D5Df191WJ3o
Can’t be done, Chile was given a strict lesson on what to not do, and Marshall Islands shows what can happen when a small helpless country is chosen for a testing ground. We are one for testing how zombie middle class educated people can be led by the nose in the tech maze. Harry Potter needed to lead us out – but Where’s Harry – he can work through walls at Site 9-3/4. Have to be smart and magical, realistically magical, and it can be done by people with practical imaginations and noble visions; needed a sense of humour and the ridiculous, and a modicum of humility and humanity..
The unfortunate reality of 40 years of neo liberal hegemony is it is embedded just about anywhere you look, including Govt and financial institutions, after each election the Reserve Bank and State Sector Acts just roll over no matter who wins.
Many people’s thinking is limited to the consumer paradigm of me me me. Others are hapless victims of macroeconomic events beyond their control. Progressive people hampered by the size of the task we face-there are wins of course and stopping the right totally getting their way.
The Savage approach and all the great lists we come up with at TDB will not be implemented enmass until the NZ Labour Party hardcore rump of Rogernomes are defeated. Green and TPM would dump neoliberalism yesterday but for the bloody Labour tops and class collaborators.
So we had a financing system that provided well for the majority of people.
Then we discard it. Why?
Could it be because a minority group of property speculators, landlords, share market players, financiers cannot make huge amounts of money from it?
Quick history lesson: When the first Labour government did this it was faced with stern opposition from overseas British banks who basically tried to frighten Wally Nash into submission.
Like most social reforms at the time it passed because the Labour leadership were forced into it by Labour Party members like John A Lee and other ‘Credit Reformers’.
RESTORE STATE SOCIALISM IN AOTEAROA! DESTROY CAPITALISM!
Michael Joseph Savage was way ahead of his time and a huge bright light in our political past, bringing in economic recovery policies and social welfare programmes. Since that time, Labour and its intellectual base, has brought in KiwiSaver, job creation and generous education policies, while the National party, with its egotistical base, has only catered for the greedy! So why not try and tweak policies that worked for everyone? If the Left don’t come up with the funds to FIX the EXTREME DAMAGE that this CoC has inflicted on our people and country, the entire next election will be a futile waste of time and energy. Sovereign Credit is worth considering but must fit snugly, be well researched, and feedback considered, which this current CoC is incapable of doing!
C.H. Douglas continues to be right a hundred years later.
CH Douglas I connect with Social Credit (background links are so helpful! We need to remember that there are too many bits of knowledge around for us to know them all obviously.
But it is surprising to an older person like myself how things common to me are unknown to the next generation, and then I have found that I know very little except lip service, to the fine thoughts and doings, knowledge from 1,000 years ago that are still totally relevant to now. So don’t assume that people will understand stuff when you mention names and dates – and initials for government and community services, – OT could mean Often Terrible – also company and corpse names.)
https://en.wikipedia.org/wiki/C._H._Douglas#Social_credit
Social credit
While he was reorganising the work of the Royal Aircraft Establishment during World War I, Douglas noticed that the weekly total costs of goods produced was greater than the sums paid to workers for wages, salaries and dividends. This seemed to contradict the theory of classic Ricardian economics, saying that all costs are distributed simultaneously as purchasing power.
Troubled by the seeming difference between the way money flowed and the objectives of industry (“delivery of goods and services”, in his view), Douglas set out to apply engineering methods to the economic system.
Douglas collected data from more than 100 large British businesses and found that all except those becoming bankrupt, spent less in salaries, wages and dividends than the value of goods and services produced each week: the workers were not paid enough to buy back what they had made. He published his observations and conclusions in an article in the magazine English Review where he suggested: “That we are living under a system of accountancy which renders the delivery of the nation’s goods and services to itself a technical impossibility.”[5] The reason, Douglas concluded, was that the economic system was organized to maximize profits for those with economic power by creating unnecessary scarcity…
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https://en.wikipedia.org/wiki/C._H._Douglas
Major Clifford Hugh Douglas, MIMechE, MIEE (20 January 1879 – 29 September 1952),[1] was a British engineer, economist and pioneer of the social credit economic reform movement.
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The philosophy and analysis of C.H. Douglas
Economic Reform Australia
https://era.org.au › Macroeconomics
His personal philosophy was strongly individualistic. “Organisations exist to serve people” not the reverse. He promoted the idea of “increment of association”; …
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(Notice the ‘individualistic’ word. It underlines how individualism can have many inflexions so pays to understand the meaning placed on it by the individual person? corpse? using it. A bit like the word Liberal – which sometimes ends up meaning illiberal somehow.)
It’s correct to say that the reason the government can’t do socially necessary things is not because there is “no money”. Money can be found or created.
However, the real constraint on the government doing stuff is the availability of the skilled resources (people) needed to actually deliver them. And these are not just technical skills, we need good managers and accountants and administrators too. Are such people already in the dole queue? Or have they gone to Australia? Are they coming through our education system because we make it easy for them (i.e. free) to get training? Or would we have to free up in these resources by destroying jobs in socially useless economic activity like finance, or property management, or new oil and gas exploration? Because if there are no idle resources of this sort, then some of the new money created will be spent on bidding up the wages of workers to lure them away from existing jobs – it will be inflationary. This is where tax potentially has a role as a policy instrument to wind back socially useless sectors of the economy to free up the resources needed for socially useful activity. The whole approach revives the notion of ‘planning’ – that planning is necessary and that markets if left to their own will take us down perverse routes to failure.
e need good managers and accountants and administrators too.
Oh boy. You are wrong. We do not need anything, much less these 3. No one is doing a particularly special job. The best and brightest do not lead our country, much less in management. 90% of people re entirely average and failure is normal and everywhere.
We do not need the vast majority of jobs to sustain society, except to sustain an overly convoluted system designed to keep u consuming things we do not need, that is the problem. This fear of is just one of the fairytales used to keep the mass of us check.
You are dreaming. I believe that good workers are essential for any enterprise to succeed, and that is from management to those providing the goods or services. Most businesses have inept, overpaid management who deserve your contempt, but having decent people in charge is a big step on the way to success.
Aaahhh….! So MJ Savage has been found alive and well and is now a farmer. Gosh. Gee. Frick.
Right on the money this time MK
Where does the graph come from? See this link https://www.bis.org/review/r120816c.pdf and also this one, https://x.com/MusicalChairs14/status/1880360837027905937 both of which suggest that government debt in much of our colonial (1840-1907) and Dominion (1907-1947) era, surely most of it raised in London, was around 200% of GDP. As local GDP and population were rapidly rising, all this debt, raised to build railways etc, was swiftly paid down and more incurred. This is not to deny that when we got our own currency in the 1930s, we were then able to raise sovereign debt to pay for state housing, etc, using local materials and labour (a bit like the ‘green dollars’ and ‘local currencies’ that Greens used to emphasise in the 1990s, though they don’t seem to do so as much anymore). It was really at that point that huge overseas debts started to melt away, but your graph does not seem to recognise the scale of the former debts.
Hi Chris, data and sources here. I’ve just spent three days updating the graph for you. https://drive.google.com/file/d/1XNtW05EwmeVfcN0jJ_27kfVNkMux__nQ/view?usp=drivesdk
Sources :
Sources forPanel 3.4 (“Sovereignty & Debt”)
Here is the full list of data and document sources used (or referenced) in producing
Panel3_4_SovDebt_FinalClean_READABLE.png:
RBNZ
Registered banks and non-bank lending institutions – sector lending (RBNZ Table C5))
1970 → present
External & private-credit series (anchor for red line).
RBNZ
Monetary policy tools and the RBNZ balance sheet (research paper, 2020)
2020 → 2025
LSAP + FLP scale and composition (brown/red/green overlay for COVID period).
NZ Treasury
Fiscal Time Series 1972–2024 (YE 24 v3) (/mnt/data/fiscaltimeseries1972-2024-year-end24-v3.xlsx)
1972 → 2024
Nominal GDP scaling and Crown debt anchors.
NZ Treasury
Budget Economic & Fiscal Update 2025 (treasury.govt.nz/publications/efu/budget-economic-and-fiscal-update-2025)
2025 forecast
Latest Crown debt ratios and GDP benchmarks.
RBNZ Archive
Six-Monthly Review of the New Zealand Economy (Vol 44 No 10, Nov 1981)
1960 → 1981
Historical sovereign vs external credit ratios (pre-PFA baseline).
NZ Treasury / War Economy Committee
The New Zealand War Economy (Official History Series, 1965)
1939 → 1950
Sovereign-credit spike ≈ 50 % of GDP (green peak during WWII).
Muldoon, R. (1962 / 1971 / 1974 1984)
The New Zealand Economy1985
1860 → 1980
Public-works borrowing and debt context (Vogel, post-war, energy build-out).
Stats NZ
Long-term external debt & liabilities (IIP/BOP series)
1860 → present (back-cast via Treasury)
External-debt track (red series baseline validation).
Interpretive / Policy Sources
Public Finance Act 1989 and Fiscal Responsibility Act 1994 (legislative milestones — brown transition marker).
RBNZ LSAP Review and Balance-Sheet Expansion (2021–22) — scale and structure of bond purchases.
Michael Hudson (2015) Killing the Host — conceptual framework for sovereign vs parasitic credit.
Jim Bolger interview (2017, RNZ Espiner) — qualitative validation of neoliberal failure frame.
Appreciate your holding me to account. My first graph was sufficient for my needs, I hope this one is sufficient for yours 🙂
Tadhg
https://www.facebook.com/groups/mmt75
https://www.facebook.com/modern.money.theory.aotearoa.new.zealand
More on the modern money theory both groups worth the read and watch.
NEO LIBERALISM MUST GO.
Ahh the good ole days and here’s a reminder why we need this…
https://www.stuff.co.nz/politics/360858957/palestine-not-students-was-top-unions-agenda-strike-meeting-government-collins-says
Unions were created to provide fairness, fairness to stop the spewing of lies from the likes of Collins and her right wing cronies. The right wing dogma of a low wage economy continues to this day. Is it any surprise our best and brightest leave for overseas shore’s who are prepared to pay public servants fairly.
Here is how poverty economics started in the UK. We have to face up to it, it is endemic and we have to change our circumstances so we can prepare ourselves for our future hard times that climate change and the bloated unbalanced financial systems and mishandling of the inflationary tech boom leads us to.\
We have to think, work intelligently and not just say ‘They should do this’ and we have to be cool with it and try to retain our humanity and recognise how others are losing theirs. Think about watching and enjoying gruesome things on the net for a start. People who want to be good and strong won’t watch, fill their minds with viciousness for instance. Do we ever acknowledge this and the way that we get brutalised, all of us, to what is presented and the behaviours.
https://www.youtube.com/watch?v=5n6DiPh4z3k 15.07
UK Modern Poverty: A Nation that built Wealth and Poverty Side by Side.
And this is how poverty economics starts here…
New inflation data from Stats NZ shows the cost of living is increasing faster than incomes, leaving workers falling behind, the New Zealand Council of Trade Unions Te Kauae Kaimahi says.
“Wages are rising by less than inflation, meaning all workers, regardless of sector, are now falling behind average living costs. The Government need to go to Specsavers for its laser-like focus on the cost of living,” said NZCTU economist Craig Renney.
“The prices of things that New Zealanders can’t avoid are rising quickly, putting more stress on already overstretched household budgets.
“Electricity prices are up 11.3%. Gas prices are up 15%. Fruit and veg prices are up 7.5%. Contents insurance is up 9.3%. Going to the GP costs 10.3% more than last year. Rents are still rising faster than wages (2.6% vs 2.4%) – which is often the biggest cost working families face,” Renney said.
“This data shows the pressures that working families are facing when they in their day-to-day spending. Cuts to government investment – particularly water infrastructure – have helped drive higher local authority rates bills.
“The Government’s failure to regulate the electricity market is leading to the highest annual cost rises since the late 1980’s according to Stats NZ,” he said.
“At a time when the Government is taking away jobseeker benefits from 18- & 19-year-olds, Stats NZ recorded a 22.6% increase in the cost of tertiary education. We know that the Government has already halved its support for apprentices, yet we have a huge youth employment problem. It is another symbol of a government that is out of touch with the public and what New Zealanders and the economy really need.
“There is an urgent need to make sure that working people and their families don’t continue to bear the brunt of the Government’s failed attempt to manage the cost of living.
“Workers pay is now actively going backwards, and pay deals proposed by the Government would almost certainly make that worse. It’s time for a different approach so that workers don’t see living standards falling even further in the future,” said Renney.
This vid is interesting and obviously scary but you can handle scary stuff eh – we have it all the time. Turn on the CC at the bottom so the subtitles come up and you can really get the message of the ‘lesson’.
The Great Taking: how your assets will be seized without you knowing.
14 mins https://www.youtube.com/watch?v=WxJNUeKzaL8
And don’t dismiss it, some banks in NZAO have the right to withdraw money from your account for their own use if there is a ‘run’ on the bank which may collapse and create financial instability. I recall USA loan and savings run last century.
https://en.wikipedia.org/wiki/Savings_and_loan_crisis#Consequences ** and: https://www.researchgate.netpublication/281374261_The_Social_Impact_of_Financial_Crises
(Savings & Loans was in the 1980s but another crisis in 2008-2009 added to stresses that people suffered, The financial system seems not careful to protect people’s efforts to acquire security and accumulate wealth from work and savings.)
As I understand things it is a concern because most of the money that is lent out by banks (finance houses?) is just a loan fund created for you on the bank’s books based on your likelihood of earning enough ‘actual’ money to pay back the book debt. Mostly your borrowing is created money, and if used for some purpose, helps the economy to grow and you to obtain things that you want. It’s a great system, better than barter, but gives false ideas about wealth and pretensions because of the power of having funds which people manage to accumulate. Lovely stuff to have, and good for progress if used wisely under a financial system managed carefully. But the present is not, so take note.
I’d better state uncertainty on the banks having the right to take from your a/cs. I read or heard that they did, and that it wasn’t allowed in Australia but was going to be imposed by the Australian banks here. But then it might have been changed here or there. That was a couple of years ago and I’m not sure any more. So Susan Edmonds might correct or confirm this or a Labour economist, like Peter Conway might have done .