Friday, February 5, 2021

Mike Hosking: Good economic news is masking a mountain of debt

You know how there is a lot of good news about? You know how there is no shortage of stories about our economic bounce back?

Well. That’s because it’s partly true - not totally - but partly.

But one of the biggest reasons is because the bill is not being talked about.

The government debt is now $100 billion -that’s the bill for this. That was at the end of November last year, so it’ll be higher now.

Net core crown debt, which started at 19 percent, was over 27 percent by last June and is now over 31 percent and climbing.

We owe a fortune and too many people seem to have forgotten that.

In the simplest of terms, we still have huge gaps in our economy.

The job numbers out, although good yesterday, are not what they were.

 They’re partly being masked by the claim that “things aren’t as bad as they could have been”, but the forecasts that predicted things to be as bad as they could be were guesses, and like most guesses they were spectacularly wrong.

So no, the house didn’t burn down, but a lot of it on fire.

And the government has been borrowing like never before to cushion the blow.

Not that that’s what they should be doing, because governments need to do that in a crisis.

But the impression we are getting is  shops are open we are spending, everyone has a new car and a jet ski, if not a camper van, houses are being  flipped, jobs advertised and we are all wandering around saying Covid - what Covid?

The gap in tourism alone between what it was and what it is is at least $6 billion.

An economy our size cant suck that up without tangible fall out. The fall out is being paid for by the government, or more realistically you and me, because someone is paying it back sooner or later, most likely our kids and grandkids.

The reserve banks QE programme although working is still buying 10 of millions of dollars in debt a week.

See, anyone can paint the house, hold a house warming party, show off the new curtains and renovated kitchen. It all looks flash nut that’s the window dressing

Who paid for it? If it was you, you’re quids in. If it was the bank, you’re in debt. This country is the latter.

The good thing about debt is it can mask a lot of stuff and buy you time. But it never stops being debt and it never stops needing to be paid back. And $100 billion and counting is a lot to pay back.

Mike Hosking is a New Zealand television and radio broadcaster. He currently hosts The Mike Hosking Breakfast show on NewstalkZB on weekday mornings.

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