Wednesday 14th February 2018
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Finance Minister Grant Robertson says he's not immediately concerned interest rates will impact peoples' abilities to pay their mortgages, but the government is "keeping an eye" on global market directions.
At the finance and expenditure select committee this afternoon, Robertson appeared to speak to the Crown accounts for the year to June 30, 2017, although those accounts were the work of the previous National-led government.
Robertson said that while private sector debt is high, with household debt-to-disposable income at 167 percent, due largely to house price growth, most forecasters don't predict an increase in New Zealand's interest rates this year and perhaps not next year either.
"While we will always advise people to be cautious about the level of debt they take on, I'm confident interest rates will remain relatively stable in the near term," Robertson said. "At the margins, some people will face some pressure if interest rates go up, but none of the forecasts I've seen see that happening in the near future."
The finance minister said recent falls on the US stock market had been anticipated for some time and acknowledged that a global correction could see investor interest in New Zealand asset classes shift, but wouldn't comment on whether he foresaw further drops.
"There will be potentially a transfer of the kinds of asset classes that people choose to invest in, and New Zealand needs to look out to the rest of the world and see if global growth is still strong," he said. "We're not talking about a GFC-style situation where there was concern about the integrity of banks or anything like that. We're talking about a situation where the relative value of where you invest your money might change. We have to keep our eye on that, but I'm confident that our economy is strong enough to withstand those changes."
Robertson was also pushed by National MPs Steven Joyce and Andrew Bayly on conflicting comments on the country's debt track when Robertson was the opposition finance spokesman, when he criticised the country's level of debt, compared to recent comments he has made as finance minister, where he has said the low level of public debt was helpful for the country's economic strength.
Robertson said he was talking about debt as a percentage of GDP, not nominal net debt.
"The question was around New Zealand's relative position, my answer was around New Zealand relative to the world, and it's absolutely true that our net debt is relatively low," Robertson said. "The period of time we're talking about [when Robertson was opposition spokesperson] in 2016, the level of core crown debt had reached 27.5 percent, and at that time I did make the comment that we were running the risk of putting ourselves in a position where, should there be another earthquake, we would find ourselves in some difficulty."
Bayly said that in February 2016, when discussing the net debt for the December 2015 quarter, Robertson had made a specific comment about net debt growing to $60 billion, and he couldn't see how the finance minister reconciled that with his recent statements.
"In communicating that issue, I might well have used the nominal number, but the point I was making stands - if that was the direction we were going in, we ran some risks," Robertson said.
Joyce pressed Robertson to say on the record that nominal debt would rise, to which Robertson responded that he should check the HYEFU figures. HYEFU shows that nominal debt is set to increase in the short term and peak in nominal terms at $69.4 billion in 2019/20 before reducing to $66.8 billion in 2021/22. It was at around $59 billion in the 2017 year.
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