Wellbeing Budget 2022

A Secure Future

Introducing a new headline net debt indicator

As was signalled in the Treasury's 2022 Investment Statement[15], the Treasury has reviewed the appropriateness of the current suite of fiscal indicators. The review was driven by a recognition that the indicators' usefulness has been affected by four changes in the macroeconomic environment and the Government's balance sheet:

  • an increased use of alternative monetary policy tools.
  • an increase in borrowings by Crown entities.
  • low interest rates.
  • growth in financial assets held on the Government's balance sheet.

As was discussed in the Investment Statement, the Treasury's review identified advantages in including a broader set of liabilities and assets in the net debt indicator.

In this Budget Update, we are adopting a new net debt measure that includes a broader set of government liabilities and assets

We consider that the new, broader net debt indicator is a better measure of New Zealand's fiscal sustainability for use in fiscal management, while being more closely aligned with the net debt measures used internationally. The old net debt indicator was ‘net core Crown debt'. This was calculated as core Crown borrowings, net of core Crown financial assets (but did not include advances and NZSF financial assets).

Consistent with the Treasury's findings, we have adopted a new net debt indicator that includes all the liabilities and assets in the old net debt indicator, and broadens it to include three more:

  • Crown entity borrowings (mainly Kāinga Ora and Waka Kotahi borrowings)
  • advances (mainly Reserve Bank Funding for Lending loans and student loans), which will now be netted off
  • the NZSF, which will also now be netted off.

There have been big changes in the composition of the Government's balance sheet since the old net debt indicator was adopted in 2009. Following changes by the previous Government, Crown entity borrowings have increased. The Reserve Bank's COVID-19 response has meant advances have grown significantly through the Bank's Funding for Lending Programme. The size of the NZSF is also a lot larger as the current Government restarted contributions and global stock markets continued to grow over time.

The new net debt indicator better captures the borrowings under the control of the Government, and the assets that provide offsets to those borrowings. The indicator recognises the impact that Crown entity borrowings have on fiscal sustainability. Likewise, it recognises that advances and the NZSF both provide offsets to debt as they are financial assets that are reasonably liquid and/or can be reliably recovered over time.

Including these additional liabilities and assets means that the new net debt measure creates better incentives for fiscal management. The impact of alternative monetary policy tools on government debt is better captured in the new net debt measure, supporting the coordination of monetary and fiscal policy. The new net debt indicator treats paying down debt and saving through contributing to the NZSF more equally, as both would reduce net debt. Finally, it is more closely aligned with the measures used by Australia and the IMF, and will therefore improve our ability to compare New Zealand's debt levels with those of other jurisdictions.


  1. [15] See He Puna Hao Pātiki: 2022 Investment Statement - Section 3.3 Fiscal indicators (pages 60-64). https://www.treasury.govt.nz/publications/investment-statement/he-puna-hao-patiki-2022-investment-statement
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