WEBVTT - NZ debt nears $1 trillion — Is it too late to pay off?

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<v Speaker 1>Kyora. I'm Chelsea Daniels and this is the Front Page,

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<v Speaker 1>a daily podcast presented by the New Zealand Herald. New

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<v Speaker 1>Zealanders are well on their way to a collective one

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<v Speaker 1>trillion dollars in debt. At the current rate of growth,

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<v Speaker 1>we'll hit that landmark inside the next three years. Current

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<v Speaker 1>gross debt sits at more than eight hundred and seventy

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<v Speaker 1>billion dollars for the year to May. At the same time,

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<v Speaker 1>five years after COVID hit, and the government is still

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<v Speaker 1>paying the price. Core Crown borrowings rows eleven percent in

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<v Speaker 1>a year, hitting two hundred and thirty nine billion dollars.

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<v Speaker 1>That's one hundred and fifty six percent higher than in

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<v Speaker 1>May twenty nineteen. Today on the front page ends at Herald,

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<v Speaker 1>Business Editor at Large Liam Dan joins us to delve

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<v Speaker 1>deeper into our nation of debt. Liam, what are the

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<v Speaker 1>main factors contributing to this ongoing growth in debt?

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<v Speaker 2>Yeah, New Zealand's got two big drivers of that really big,

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<v Speaker 2>ugly debt. Number one of them. Well, the biggest one

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<v Speaker 2>really is our housing market and the mortgages. So the

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<v Speaker 2>mortgage debt is the largest chunk of our debt. It's

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<v Speaker 2>up around three hundred and seventy seven three hundred and

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<v Speaker 2>seventy eight billion dollars. And when we have a housing boom,

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<v Speaker 2>it really saws, it goes up, you know, ten percent

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<v Speaker 2>a year or something. At the moment, it's only rising

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<v Speaker 2>sort of about four or five percent a year, which

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<v Speaker 2>is relatively subdued, and that's because, as we know, the

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<v Speaker 2>housing market has not been booming as much. But it's

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<v Speaker 2>such a big number that it's still even a small

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<v Speaker 2>percentage rise, it's it's pretty huge, and it's not one

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<v Speaker 2>that where we look like we're paying down exactly anytime soon.

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<v Speaker 2>And the other one, of course is government debt, which

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<v Speaker 2>is you know, really highly political, has been in a

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<v Speaker 2>lot of debate about that. That is somewhere around two

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<v Speaker 2>hundred and thirty nine billion dollars using the measure that

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<v Speaker 2>we do cork around borrowing for this nation of debt series,

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<v Speaker 2>and that's up eleven percent, so and obviously even bigger

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<v Speaker 2>rises during COVID, like it basically is almost doubled since

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<v Speaker 2>So it was doubled since COVID. And even though the

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<v Speaker 2>government is currently talking about paying down debt and you know,

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<v Speaker 2>cutting back on spending and being fiscally responsible in things.

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<v Speaker 2>It's still in a situation where that total debt is

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<v Speaker 2>actually growing. They're having to sort of refinance the debt

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<v Speaker 2>and borrow more to do some of the things they

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<v Speaker 2>want to do. I guess what they're doing is reducing

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<v Speaker 2>the rate which is increasing and hoping that they can

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<v Speaker 2>sort of get it back on a downward track, maybe

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<v Speaker 2>by around twenty twenty eight.

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<v Speaker 1>So it's no surprise that the nation's mortgage that accounts

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<v Speaker 1>for the bulk of what we owe. Does that just

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<v Speaker 1>show how we're far too reliant on housing being our

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<v Speaker 1>main investment or is this always going to inevitably be

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<v Speaker 1>the biggest one?

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<v Speaker 2>Well, I mean kiwis like to own their own homes,

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<v Speaker 2>so it's not just investment the investment side. But yeah,

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<v Speaker 2>I mean when you look at sort of the product

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<v Speaker 2>productivity of countries around the world, you look at a

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<v Speaker 2>country like Germany, they've got much lower rates of home ownership,

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<v Speaker 2>only about fifty percent of people. People just rent long

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<v Speaker 2>term there and so the money you know that they

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<v Speaker 2>save money and they for the retirement and all the rest,

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<v Speaker 2>and that goes means more money is going into funds

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<v Speaker 2>which promote business growth and you know, economic productivity. So

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<v Speaker 2>New Zealand does have that problem. There are times when

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<v Speaker 2>it gets it looks precarious where the Reserve Bank is

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<v Speaker 2>very worried about the state of our mortgage debt. The issue,

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<v Speaker 2>of course is that you know, like we always feel

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<v Speaker 2>safe around mortgage debt because we've got this house. But

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<v Speaker 2>if property prices really fall back, which they actually have

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<v Speaker 2>quite a bit in Auckland and Wellington in the past

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<v Speaker 2>couple of years, then people have negative equity. They don't

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<v Speaker 2>you know, the debt can be bigger than the value

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<v Speaker 2>of the home. And if if there was a really

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<v Speaker 2>big crunch, if that happened right across the nation, we'd

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<v Speaker 2>still owe all that money to the Australian banks. But

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<v Speaker 2>housing stock isn't isn't worth what we thought, So yeah,

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<v Speaker 2>there's there's some there's some sort of risks around how

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<v Speaker 2>you know intensely we sort of invest in housing and

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<v Speaker 2>I think, look, you know, it's it's it's a real

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<v Speaker 2>bummer that for a lot of people right now that

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<v Speaker 2>the housing market has come off so much, especially if

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<v Speaker 2>you've bought around the peak. But it maybe is quite

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<v Speaker 2>positive in the sense that it might be shifting the

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<v Speaker 2>culture a little bit. People are looking at other investments

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<v Speaker 2>and you know, moving away from housing being such a

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<v Speaker 2>dominant thing. So perhaps we'll see some rebalancing in the

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<v Speaker 2>in the debt debt numbers over the next few years.

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<v Speaker 1>So the rate of debt growth has moderated recently with

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<v Speaker 1>both government borrowing and the housing market. Calling what events

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<v Speaker 1>or policies have influenced this moderation, do you think.

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<v Speaker 2>Yeah, well, the government has you know, it's still it

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<v Speaker 2>hasn't been able to sort of suddenly slash the debt,

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<v Speaker 2>but the government has tightened up fiscally and is trying

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<v Speaker 2>to spend trying to lower the rate at which spending increases,

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<v Speaker 2>and then ultimately trying to spend less. It hasn't really

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<v Speaker 2>been helped by the tax take coming down, so the

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<v Speaker 2>economy hasn't been booming, so that means it's lower levels

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<v Speaker 2>of tax coming in for the government. So that makes

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<v Speaker 2>it harder to keep doing what they want to do

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<v Speaker 2>without continuing to borrow. So that's difficult, but that has

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<v Speaker 2>been a government policy and it's something that they're trying

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<v Speaker 2>to achieve. And then the other one, of course, we've

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<v Speaker 2>talked about a bit just that housing market coming off

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<v Speaker 2>is a really big factor, and people talk about investors

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<v Speaker 2>coming out of the market too. So in fact, in

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<v Speaker 2>the last sort of the last six months to a yeah,

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<v Speaker 2>there's been a slight increase in the amount of borrowing

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<v Speaker 2>for mortgages. Not it's still at moderate levels, but people

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<v Speaker 2>are talking about investors coming out of the market and

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<v Speaker 2>the positive being more first home buyers going in. But

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<v Speaker 2>of course first home buyers have to borrow more from

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<v Speaker 2>the bank. Either the investors will have another property or

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<v Speaker 2>two they can use for equity. So probably more first

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<v Speaker 2>home buyers means that you're just going to see bigger numbers,

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<v Speaker 2>you know, in terms of what has to be borrowed

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<v Speaker 2>from the bank. Yeah, those are the two big ones.

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<v Speaker 2>But we're also seeing really subdued borrowing in the business

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<v Speaker 2>sector because the business sector is really struggling with the

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<v Speaker 2>slow economy, so they're not feeling like investing to expand

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<v Speaker 2>their businesses at the moment, so they're not borrowing from

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<v Speaker 2>the banks to do that at any particularly high rate.

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<v Speaker 2>And the one, you know, the bright spot in the

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<v Speaker 2>economy is the farmers and the agricultural money coming in.

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<v Speaker 2>The export money is coming in for farmers, but they

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<v Speaker 2>seem to be at this stage paying down debt. So

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<v Speaker 2>we've seen agricultural debt fall and that's probably a positive

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<v Speaker 2>thing because a few years ago the Reserve Bank used

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<v Speaker 2>to worry a lot about how heavily leveraged our dairy

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<v Speaker 2>farmers were. But they're having a couple of good, good

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<v Speaker 2>seasons in a row.

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<v Speaker 1>Here.

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<v Speaker 2>It's a chance for them to pay down the debt

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<v Speaker 2>and get there, get the balance sheets in order, and

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<v Speaker 2>then hopefully go spend some money and help the economy

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<v Speaker 2>take off a bit.

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<v Speaker 1>Well, aren't they in for a rebate of sorts with

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<v Speaker 1>a government policy if they were to buy say like

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<v Speaker 1>a massive tractor or something.

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<v Speaker 2>Yeah, not just the farmers, all business, so that we

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<v Speaker 2>could see that come through in the in the borrow,

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<v Speaker 2>you know that that's sort of an incentive to maybe

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<v Speaker 2>borrow a bit more because it's not going to cost

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<v Speaker 2>you as much. And it's not just the ute or

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<v Speaker 2>the tractor. It's you know, ideally it's a manufacturing firm,

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<v Speaker 2>you know, thinking that they can see opportunity to increase

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<v Speaker 2>their production and buying another another plant or another machine

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<v Speaker 2>or something like that to improve their productivity. So hopefully

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<v Speaker 2>that will actually lift it. So business business borrowing is

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<v Speaker 2>one of those ones where you kind of want to

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<v Speaker 2>see it. You know, with the household borrowing, you don't

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<v Speaker 2>want to see too much debt, but with businesses, you

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<v Speaker 2>want to see enough confidence that they are borrowing to

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<v Speaker 2>invest because businesses are typically borrowing to invest in things

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<v Speaker 2>that will make more money. And if business borrowing is

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<v Speaker 2>down and out, that usually is a sign that business

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<v Speaker 2>is a bit down and out.

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<v Speaker 1>So this morning, Wellington Business editor Jane tib Schrainey wrote

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<v Speaker 1>and she described the government's finances as suffering from long COVID.

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<v Speaker 1>What fiscal legacies from the pandemic do you see is

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<v Speaker 1>the most persistent or concerning.

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<v Speaker 2>Yeah, there's just been a step change in the size

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<v Speaker 2>of the debt and you know, people are still debating

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<v Speaker 2>how much of that was required, whether the government should

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<v Speaker 2>have pulled the pin on the stimulus earlier. You know,

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<v Speaker 2>there was a lot of things going on and people

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<v Speaker 2>have their own views on the level of the health

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<v Speaker 2>crisis and the lockdowns. But while we were locked down,

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<v Speaker 2>the government had to keep things running. Yeah, it's just

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<v Speaker 2>it's it's a really large increase in the overall level

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<v Speaker 2>of debt and that. But by New Zealand standards, I

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<v Speaker 2>should say, so we have something like debt of around

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<v Speaker 2>forty two percent of GDP. So you know, our GDP's

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<v Speaker 2>four hundred and something and you've got what's at the

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<v Speaker 2>debt two hundred and thirty nine billion that's expected to

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<v Speaker 2>rise and peak at about forty six percent of GDP.

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<v Speaker 2>Pre COVID, we were down at twenty percent of GDP.

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<v Speaker 2>We were we'd really gone through a phase of paying

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<v Speaker 2>down debt which we'd sort of actually built up through

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<v Speaker 2>the GFC the last big crisis, and that had been

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<v Speaker 2>paid down, and that meant there was scope to do

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<v Speaker 2>more borrowing and COVID, and that's a good thing. But

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<v Speaker 2>then you know, now you think, well, if there was

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<v Speaker 2>another crisis and the government really had to bail out

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<v Speaker 2>the country, it would be struggling a bit. There's always

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<v Speaker 2>a lot of controversy about how much debt a government

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<v Speaker 2>can take on because in international terms, when you look

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<v Speaker 2>at some of the other countries in the world, the UK, Japan,

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<v Speaker 2>they have debt level, public debt levels up near one

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<v Speaker 2>hundred percent or in Japan's case, well over you know,

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<v Speaker 2>one hundred percent of their GDP so they actually borrow

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<v Speaker 2>a lot more, and you'll hear the argument that, hey,

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<v Speaker 2>our government could relax and could borrow more and build

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<v Speaker 2>all the infrastructure. The sort of counter argument to that

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<v Speaker 2>comes from Treasury and plenty of other voices I suppose

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<v Speaker 2>as well, but they would argue that, you know, in

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<v Speaker 2>New Zealand, we have that really high level of housing debt,

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<v Speaker 2>so much of our debt is financed internationally because we

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<v Speaker 2>don't save as much. So in Japan some we like Japan,

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<v Speaker 2>the public are incredible savers and they've got all these savings,

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<v Speaker 2>and those savings fund the public debt. So the private debt,

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<v Speaker 2>private investment of the people for their retirement funds is

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<v Speaker 2>enough to actually fund a large chunk of the government's borrowing,

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<v Speaker 2>which means they're not exposed to sort of big international

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<v Speaker 2>banks deciding they don't like the look of us anymore,

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<v Speaker 2>which is always a risk for New Zealand because we're

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<v Speaker 2>so exposed internationally.

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<v Speaker 1>On our debt, we're mirroring a trillion dollars.

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<v Speaker 3>Just sounds like so much bloody money, doesn't it, Sarah.

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<v Speaker 3>It's one of those numbers that you can't even comprehend, right,

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<v Speaker 3>You just keep adding a Z onto it or another

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<v Speaker 3>O and because it just doesn't seem kind of kind

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<v Speaker 3>of real. But the thing is, it's like when you borrow,

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<v Speaker 3>you want progress or you want an outcome from that.

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<v Speaker 3>And I feel like that's the part that we're not

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<v Speaker 3>around whole day. The bang for the buck that's coming

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<v Speaker 3>from that massive debt just doesn't seem to kind of

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<v Speaker 3>be there. We're just treading water. And I think that's

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<v Speaker 3>the kind of concerning thing.

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<v Speaker 1>Well, Treasury warns that New Zealand's finances are in structural deficit.

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<v Speaker 1>What does that mean?

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<v Speaker 2>It means turning it around so that we actually see

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<v Speaker 2>debt going down so that we earn more than we

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<v Speaker 2>bend is very very difficult. It's a structural problem. And

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<v Speaker 2>that's because I mean, you know, in simple terms, with

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<v Speaker 2>the population aging, more people going to be needing, the superannuation,

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<v Speaker 2>all that sort of stuff, you get to a point

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<v Speaker 2>where the numbers just don't add up. You're either going

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<v Speaker 2>to have to tax a lot more or you're going

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<v Speaker 2>to have to cut spending a lot. New Zealanders don't

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<v Speaker 2>want to do that. They want to keep up as

0:12:22.559 --> 0:12:24.880
<v Speaker 2>sort of a we want the first world services. But

0:12:25.360 --> 0:12:29.160
<v Speaker 2>we're not prepared to do the things to get there. So, yeah,

0:12:29.440 --> 0:12:32.760
<v Speaker 2>it's a difficult one and the one that most politicians

0:12:32.760 --> 0:12:34.920
<v Speaker 2>will fall back on as well. We're going to bring

0:12:34.960 --> 0:12:38.079
<v Speaker 2>in policies to make the economy boom, because you can

0:12:38.679 --> 0:12:40.880
<v Speaker 2>grow your way out of debt if you have a

0:12:40.960 --> 0:12:46.760
<v Speaker 2>strong enough you know, GDP, you can make lots of money.

0:12:46.760 --> 0:12:48.680
<v Speaker 2>The government will get a lot more tax because the

0:12:48.679 --> 0:12:51.440
<v Speaker 2>economy's humming, and also the numbers will get bigger, and

0:12:51.440 --> 0:12:53.959
<v Speaker 2>that the debt doesn't look so bad relative to the

0:12:54.000 --> 0:12:57.920
<v Speaker 2>size of the economy. But you know, so far we're

0:12:58.040 --> 0:13:00.440
<v Speaker 2>a year and a half into this government's term. That's

0:13:00.480 --> 0:13:02.040
<v Speaker 2>not happening yet unfortunately.

0:13:02.880 --> 0:13:08.160
<v Speaker 1>So we're edging towards one trillion dollars in combined debt.

0:13:08.640 --> 0:13:12.160
<v Speaker 1>Is there a breaking point? So, is there some number

0:13:12.520 --> 0:13:15.400
<v Speaker 1>or you know, percentage of GDP that we look at

0:13:15.400 --> 0:13:19.080
<v Speaker 1>and we say we cannot go past that point without

0:13:19.080 --> 0:13:20.880
<v Speaker 1>completely collapsing the economy?

0:13:20.920 --> 0:13:24.040
<v Speaker 2>Say, when there probably are numbers, the trillion doesn't necessarily

0:13:24.080 --> 0:13:25.800
<v Speaker 2>mean that much other than it's sort of a big

0:13:25.840 --> 0:13:29.200
<v Speaker 2>scary number. Yeah, And of course what we're doing to

0:13:29.240 --> 0:13:31.320
<v Speaker 2>get up to that near that trillion, that that's eight

0:13:31.440 --> 0:13:34.079
<v Speaker 2>hundred and seventy two billion dollars. That's that's the gross debt.

0:13:34.800 --> 0:13:37.040
<v Speaker 2>So that's us adding up all the government debt, all

0:13:37.040 --> 0:13:39.880
<v Speaker 2>the private debt and you know from including local government,

0:13:39.880 --> 0:13:43.520
<v Speaker 2>student loans, housing, business and agriculture, and you know, with

0:13:43.640 --> 0:13:46.400
<v Speaker 2>debt you also have to look at that balanced against

0:13:46.440 --> 0:13:48.160
<v Speaker 2>the wealth and the nation. It's a bit like you know,

0:13:48.200 --> 0:13:50.599
<v Speaker 2>you have a you might have a big mortgage, but

0:13:50.640 --> 0:13:52.600
<v Speaker 2>your house might be worth a million and a half dollars,

0:13:52.600 --> 0:13:54.880
<v Speaker 2>and so you do have to look at you know,

0:13:55.000 --> 0:14:00.240
<v Speaker 2>New Zealand savings and kind of New Zealand's overall wealth,

0:14:00.520 --> 0:14:04.240
<v Speaker 2>you know, to balance it out. But unfortunately that's also

0:14:04.280 --> 0:14:06.440
<v Speaker 2>sort of been going backwards in the past year or so,

0:14:06.440 --> 0:14:11.400
<v Speaker 2>so savings rates have been coming down, and the stats

0:14:11.440 --> 0:14:13.839
<v Speaker 2>ENZ does a household net worth survey where it looks

0:14:13.880 --> 0:14:17.240
<v Speaker 2>at all the assets owned by households and that's fallen

0:14:17.240 --> 0:14:19.560
<v Speaker 2>away a bit as well. So that makes our equation

0:14:19.680 --> 0:14:23.160
<v Speaker 2>look worse. Yeah, the reality is we are reliant on

0:14:23.640 --> 0:14:25.920
<v Speaker 2>big ratings agencies like S and P, and they have

0:14:26.000 --> 0:14:29.240
<v Speaker 2>a number that they don't like. They don't like our

0:14:29.280 --> 0:14:34.160
<v Speaker 2>current account deficit getting above ten percent of GDP. I'm

0:14:34.160 --> 0:14:37.440
<v Speaker 2>not quite sure what their government number would be. They

0:14:37.480 --> 0:14:40.520
<v Speaker 2>will sometimes warn about housing debt, but there is a

0:14:40.520 --> 0:14:44.720
<v Speaker 2>point and if our debt started to look precarious, like

0:14:45.040 --> 0:14:46.920
<v Speaker 2>it's all about our ability to service it, if we

0:14:46.920 --> 0:14:49.560
<v Speaker 2>can keep paying it, mostly the international banks don't care.

0:14:49.720 --> 0:14:52.200
<v Speaker 2>But if it starts to look like something that we

0:14:52.240 --> 0:14:54.920
<v Speaker 2>would struggle to pay off, if we had another crisis,

0:14:54.920 --> 0:14:58.880
<v Speaker 2>for example, that we couldn't you know, hit those targets,

0:14:58.920 --> 0:15:01.320
<v Speaker 2>then they would re raate us, so they would downgrade

0:15:01.360 --> 0:15:04.240
<v Speaker 2>our credit rating, and we would see that in the

0:15:04.280 --> 0:15:06.640
<v Speaker 2>cost of borrowing, our interest rates would go up, our

0:15:06.680 --> 0:15:09.040
<v Speaker 2>dollar would fall. And so that's why we're at the

0:15:09.080 --> 0:15:12.880
<v Speaker 2>mercy of those rating agencies, and why it's important to

0:15:12.960 --> 0:15:18.560
<v Speaker 2>keep debt within sort of boundaries that basically the economists

0:15:18.040 --> 0:15:23.760
<v Speaker 2>and the banks are comfortable with, because whether we like

0:15:23.800 --> 0:15:27.760
<v Speaker 2>it or not, the decisions that those international organizations make

0:15:28.000 --> 0:15:31.800
<v Speaker 2>will ultimately determine, you know, how good or bad the

0:15:31.840 --> 0:15:32.440
<v Speaker 2>economy is.

0:15:33.240 --> 0:15:36.400
<v Speaker 1>And I saw that Treasury also insists that we need

0:15:36.600 --> 0:15:43.000
<v Speaker 1>extra large buffers due to our reliance on trade, exposure, exposure,

0:15:43.160 --> 0:15:48.200
<v Speaker 1>exposure to natural disasters, and offshore debt. How do we

0:15:48.280 --> 0:15:52.040
<v Speaker 1>create that kind of rainy day fund if we are

0:15:52.320 --> 0:15:54.320
<v Speaker 1>continuing to grow debt at the same time.

0:15:54.680 --> 0:15:57.120
<v Speaker 2>Yeah, well that's that. That's why I guess the government

0:15:57.120 --> 0:16:00.160
<v Speaker 2>would argue that it's had to be fiscally tighter in

0:16:00.200 --> 0:16:02.080
<v Speaker 2>the last year or so. There are plenty of people

0:16:02.120 --> 0:16:04.480
<v Speaker 2>saying that they haven't gone far enough. Actually, although you know,

0:16:04.520 --> 0:16:08.280
<v Speaker 2>that's a debatable point. But under Bill English, we really

0:16:08.320 --> 0:16:10.960
<v Speaker 2>paid down debt, you know, getting down to that twenty percent.

0:16:11.040 --> 0:16:13.520
<v Speaker 2>That really did give us a buffer and we were

0:16:13.520 --> 0:16:16.320
<v Speaker 2>able to spend in COVID. I mean, well, I sort

0:16:16.360 --> 0:16:17.680
<v Speaker 2>of said it was the GFC, but it was the

0:16:17.760 --> 0:16:21.120
<v Speaker 2>christ At earthquake and combination with the GFC that blew

0:16:21.120 --> 0:16:23.520
<v Speaker 2>out our debt. And Bill English being the kind of

0:16:23.520 --> 0:16:27.080
<v Speaker 2>finance ministry was, he was very focused at paying that

0:16:27.160 --> 0:16:30.440
<v Speaker 2>down over several years. So it wasn't a complete shock,

0:16:30.480 --> 0:16:35.680
<v Speaker 2>it wasn't a complete austerity type scenario, and so we

0:16:35.760 --> 0:16:38.040
<v Speaker 2>could do that. Hopefully we can do that gently over

0:16:38.120 --> 0:16:40.240
<v Speaker 2>a number of years. But I guess the risk is that,

0:16:40.760 --> 0:16:43.640
<v Speaker 2>as the Treasury points out, we are vulnerable to another

0:16:43.640 --> 0:16:50.000
<v Speaker 2>big earthquake. Flooding risk seems really high, or if at

0:16:50.040 --> 0:16:52.800
<v Speaker 2>the moment the commodity prices are booming, but if they collapsed,

0:16:52.840 --> 0:16:56.000
<v Speaker 2>or if you know, something crazy happened in the world,

0:16:56.120 --> 0:17:00.600
<v Speaker 2>like geopolitical, something like Taiwan becoming a flashpoint for conflict

0:17:00.600 --> 0:17:03.320
<v Speaker 2>with China and America saying no one's allowed to trade

0:17:03.360 --> 0:17:05.280
<v Speaker 2>trade with China, that kind of thing. If we had to,

0:17:06.119 --> 0:17:08.960
<v Speaker 2>you know, if we had a real disruption to our trade,

0:17:09.640 --> 0:17:13.800
<v Speaker 2>we would be stuck. And at the moment we're slightly

0:17:13.880 --> 0:17:15.840
<v Speaker 2>up near the upper end of what we can afford

0:17:15.880 --> 0:17:18.440
<v Speaker 2>to do, so it would limit the government's ability to

0:17:18.480 --> 0:17:19.320
<v Speaker 2>bail us out.

0:17:19.640 --> 0:17:22.080
<v Speaker 1>Is there any point of getting down to zero percent

0:17:22.200 --> 0:17:23.439
<v Speaker 1>dat No.

0:17:23.400 --> 0:17:27.480
<v Speaker 2>Probably not. I don't think modern economies work that way,

0:17:27.600 --> 0:17:30.840
<v Speaker 2>and modern businesses don't work that way. It's important to remember,

0:17:30.920 --> 0:17:34.080
<v Speaker 2>you know, you say, we talk about big, ugly debt figures,

0:17:34.119 --> 0:17:36.679
<v Speaker 2>and debt always seems like the villain, but it's not

0:17:36.800 --> 0:17:41.280
<v Speaker 2>really debt when it's used well and used is a

0:17:41.320 --> 0:17:44.879
<v Speaker 2>way of getting things done that you couldn't get done before.

0:17:44.920 --> 0:17:48.080
<v Speaker 2>It's an amazing invention of the you know, not a

0:17:48.080 --> 0:17:51.399
<v Speaker 2>modern economic invention. It's been around for thousands of years,

0:17:51.440 --> 0:17:55.639
<v Speaker 2>but you know, it enables people to in society to

0:17:55.680 --> 0:17:58.199
<v Speaker 2>achieve things that they couldn't have otherwise. So it transfers

0:17:59.359 --> 0:18:02.080
<v Speaker 2>wealth across a sort of a time band. You know.

0:18:02.560 --> 0:18:04.679
<v Speaker 2>It means that you can say, well, you give me

0:18:04.680 --> 0:18:06.919
<v Speaker 2>the money now, will make something happen. It speeds up

0:18:07.000 --> 0:18:09.800
<v Speaker 2>transactions in the economy and it keeps It can really

0:18:09.880 --> 0:18:13.280
<v Speaker 2>enable a lot of wealth creation. So debt itself is

0:18:13.320 --> 0:18:15.000
<v Speaker 2>sort of you have to look at it sort of

0:18:15.200 --> 0:18:17.199
<v Speaker 2>as a neutral thing. It can be really positive, it

0:18:17.240 --> 0:18:20.600
<v Speaker 2>can be really negative, but it's not inherently bad. It's

0:18:20.720 --> 0:18:23.840
<v Speaker 2>just about the amount that we take on and also

0:18:24.040 --> 0:18:28.280
<v Speaker 2>very importantly what we're using it for. So the trouble

0:18:28.280 --> 0:18:31.320
<v Speaker 2>with the housing thing is that you know, if we

0:18:31.400 --> 0:18:35.520
<v Speaker 2>all borrow to buy houses and we compete against each other,

0:18:35.560 --> 0:18:39.080
<v Speaker 2>we push up the house prices. There's no gain to

0:18:39.160 --> 0:18:41.960
<v Speaker 2>anyone from the house price on because it's just paper money.

0:18:42.760 --> 0:18:44.439
<v Speaker 2>We've all pushed up the house price. We've all had

0:18:44.480 --> 0:18:47.240
<v Speaker 2>to borrow more from the Australian banks. Real money has

0:18:47.280 --> 0:18:50.200
<v Speaker 2>to go out to pay the Australian banks. But the

0:18:50.480 --> 0:18:53.119
<v Speaker 2>bigger numbers on the house prices aren't really helping the

0:18:53.160 --> 0:18:56.520
<v Speaker 2>economy grow. If we were borrowing to invest in you know,

0:18:56.800 --> 0:18:59.000
<v Speaker 2>tech startups or whatever and all that sort of stuff,

0:18:59.680 --> 0:19:02.399
<v Speaker 2>I think that would be a lot more productive for

0:19:02.440 --> 0:19:03.040
<v Speaker 2>the economy.

0:19:03.440 --> 0:19:04.320
<v Speaker 1>Thanks for joining us.

0:19:04.359 --> 0:19:05.719
<v Speaker 2>Liam cheers, no worries.

0:19:09.080 --> 0:19:12.320
<v Speaker 1>That's it for this episode of the Front Page. You

0:19:12.359 --> 0:19:16.240
<v Speaker 1>can read more about today's stories and extensive news coverage

0:19:16.280 --> 0:19:20.359
<v Speaker 1>at enzidherld dot co dot nz. The Front Page is

0:19:20.440 --> 0:19:23.840
<v Speaker 1>produced by Jane Ye and Richard Martin, who is also

0:19:24.040 --> 0:19:28.520
<v Speaker 1>our editor. I'm Chelsea Daniels. Subscribe to the Front Page

0:19:28.560 --> 0:19:32.160
<v Speaker 1>on iHeartRadio or wherever you get your podcasts, and tune

0:19:32.200 --> 0:19:35.240
<v Speaker 1>in tomorrow for another look behind the headlines.