The national debt problem

During this time of economic hardship the issue of both public and personal finance has become a hot topic - a constant headliner in newspapers and current affairs programs. Huge government deficits and national unemployment statistics are widely reported upon, while on a personal level it seems there has never been so much information on money issues such as saving, budgeting and loan repayments. Blogs, independent organisations and government bodies are all striving to make this information readily accessible for people in need. But as a nation, is New Zealand listening?

In the National Budget Speech of May 2009, Finance Minister Bill English reported that: "New Zealand continues to spend more than it earns and finance the difference by excessive borrowing... Household debt has increased 51 per cent since 2004", indicating that the problem of debt exists on both a national and a personal level. In relation to national debt, English states that the amount "equates to just over $45,000 for every New Zealander... it would represent $180,000 of government debt for every family of four."

This sobering statistic is only further highlighted by the OECD's April 2009 Policy Brief, which states that New Zealand is currently one of the most indebted economies in the OECD.

While the causes and effects of national debt are significantly different from those of personal debt, the continued escalation in public debt could eventually see vital services in areas such as health and education jeopardised due to lack of funding - an implication which would affect every New Zealander.

In addition, the culture of spending and rampant consumerism which has become such a norm cannot simply be attributed to the influence of the media, or to personal weakness. Rather the governing forces which promote and sustain such a culture must take responsibility for the prevalent attitudes towards debt in society.

It is the rise of such a culture which has seen a subsequent rise in personal debt. Estimated at $71 billion, New Zealand's total personal debt is largely owed to financial institutions and banks, with the Reserve Bank estimating that credit card debt alone amounts to $5.175 billion.

Even more worryingly, debt seems to be on a trajectory, with the NZ Herald recently reporting a 49 per cent increase in personal debt since 2006 and Baycorp debt collection agency has seen a 49 per cent increase in referred debt since 2006. Meanwhile, it is not just the amount of debt owed which continues to climb, but also the number of people now seeking help.

The Federation of Family Budgeting Service has reported a 25 per cent increase in the number of debt clients since the beginning of the recession in 2008. As a nation, it doesn't look as if New Zealand is listening to the advice.