"We cannot go on like this," says your partner. "Interest payments are already taking up 7% of our income and are likely to increase by 26% over the next four years if we do not do something."
Many households are facing the tough choices that scenarios like this require. Clear heads and decisive action are needed to increase income, cut spending, and/or sell assets.
Finance Minister Nicola Willis must bring similar clarity and decisiveness to next month's Budget Policy Statement.
Budget 2024's ambitious goals aimed to turn debt-increasing deficits into a surplus by 2027/28.
This goal now looks out of reach on current policies, following Treasury lowering its income and revenue growth projections.
Budget 2024 proposed a limit of 13% on spending increases to 2027/28 while banking on revenue rising by 22%. The limit on spending looks implausible on current policies, and the projected revenue increase now looks unattainable. Debt will build up more.
The Budget Policy Statement to be published next month needs to show more decisive action. Much current spending is unnecessary, and the government owns many assets that it manages badly.
While households might have few assets they can sell to reduce debt, the government has $187 billion invested in state-owned enterprises and Crown entities. That is roughly $90,000 per household. It also owns three million hectares of "stewardship" land with no clear purpose.
The fact that the returns on risky assets should exceed borrowing costs does not justify continuing Crown ownership. Experts in managing those assets will do better, on average, with their own money.
The evidence that governments manage their assets poorly is inescapable. Just look at the infrastructure deficits and maintenance issues in state housing, schools and hospitals.
Why does government not sell assets it does not need to own? The proceeds could be used to reduce debt and stem the rising tide of interest payments.
Householders know that indecision only compounds problems. The next Budget Policy Statement needs to provide a more convincing fiscal outlook.
Dr Bryce Wilkinson is a Senior Fellow at The New Zealand Initiative, Director of Capital Economics, and former Director of the New Zealand Treasury. His articles can be seen HERE. - where this article was sourced.
Finance Minister Nicola Willis must bring similar clarity and decisiveness to next month's Budget Policy Statement.
Budget 2024's ambitious goals aimed to turn debt-increasing deficits into a surplus by 2027/28.
This goal now looks out of reach on current policies, following Treasury lowering its income and revenue growth projections.
Budget 2024 proposed a limit of 13% on spending increases to 2027/28 while banking on revenue rising by 22%. The limit on spending looks implausible on current policies, and the projected revenue increase now looks unattainable. Debt will build up more.
The Budget Policy Statement to be published next month needs to show more decisive action. Much current spending is unnecessary, and the government owns many assets that it manages badly.
While households might have few assets they can sell to reduce debt, the government has $187 billion invested in state-owned enterprises and Crown entities. That is roughly $90,000 per household. It also owns three million hectares of "stewardship" land with no clear purpose.
The fact that the returns on risky assets should exceed borrowing costs does not justify continuing Crown ownership. Experts in managing those assets will do better, on average, with their own money.
The evidence that governments manage their assets poorly is inescapable. Just look at the infrastructure deficits and maintenance issues in state housing, schools and hospitals.
Why does government not sell assets it does not need to own? The proceeds could be used to reduce debt and stem the rising tide of interest payments.
Householders know that indecision only compounds problems. The next Budget Policy Statement needs to provide a more convincing fiscal outlook.
Dr Bryce Wilkinson is a Senior Fellow at The New Zealand Initiative, Director of Capital Economics, and former Director of the New Zealand Treasury. His articles can be seen HERE. - where this article was sourced.
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