Wellbeing Budget 2022

A Secure Future

Setting the net debt ceiling

Net debt levels remain low relative to those of our peers (refer to Figure 15 which shows a comparison of New Zealand's debt with other countries, using the IMF's general government net debt measure) and are unlikely to limit our ability to borrow further if required. In part this is due to favourable debt dynamics, where interest rates are lower than the economic growth rate (Figure 14).

Figure 14 - Real interest rate and growth rate differential (r minus g)

Figure 14 - Real interest rate and growth rate differential (r minus g)

Sources: Stats NZ, The Treasury

The Treasury recommended setting the net debt ceiling at 50 percent of GDP based on the ‘old' net debt measure of core Crown net debt.

Under the old measure of net debt, the Treasury has recommended the ceiling be 50 percent of GDP. When we translate that to the new measure the cap is 30 percent of GDP. The Treasury considers that this is a prudent level of debt, particularly when combined with the OBEGAL surplus rule. In developing its advice, the Treasury has followed an approach set out by the IMF on sustainable debt levels and used conservative assumptions about future interest rates and growth rate differentials. See the note published by the Treasury for detailed analysis.[16]

Setting a debt ceiling at this level ensures debt will remain sustainable, even in the face of multiple major shocks. By reducing the debt ceiling from 50 percent to 30 percent when moving to the new debt measure, we avoid the risk of borrowing against the NZSF.


  1. [16] See the Treasury's analysis and recommendations for fiscal rules - May 2022. (https://www.treasury.govt.nz/sites/default/files/2022-05/guide-analysis-recommendations-fiscal-rules.pdf)
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