Crash course to debt doom

MICHELLE COOKE
Last updated 15:43 13/04/2012

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New analysis confirms what most of us already fear - the New Zealand economy is on a crash course with doom if big changes aren't made soon.

Projections by The Economist show that by 2050 New Zealand would have the second highest debt as a percentage of our GDP.

If changes aren't made soon then the country's economy would be in a crisis and government funding would be heavily restricted.

Japan would have the highest debt, but countries which are currently in a dire economic state - such as Spain, Greece and Portugal, would fare better than New Zealand, the United States and Britain, according to The Economist.

The data analysed what countries are doing to adjust spending and revenue with the aim of bringing public debt down to safe levels by 2050.

Big changes need to be made in New Zealand now, not in 10 or 20 years time, if we want to avoid being crippled with debt, New Zealand Institute of Economic Research principal economist Shamubeel Eaqub said.

Eaqub said New Zealand's debt was comparative to that of other countries "but when we look out to 20 years we've got a problem in the pipeline".

"To be sustainable we need to change something and those changes need to be around reducing debt and operating balance. We're going to have a massive problem if we don't change."

The ageing population plays a big part in why Japan, New Zealand and the United States are predicted to be in the worst positions in regards to debt come 2050, Eaqub said.

"It reinforces the view that ageing is a real big problem in New Zealand and we need to have a clear discussion about it and that doesn't seem to be happening in the political scene."

Changes need to be made to superannuation, the retirement age and to health care, Eaqub said.

While it was a nice ideal to have free healthcare, the reality was that it was untenable.

Baby boomers were starting to reach retirement age which meant that decisions needed to be made now, before the country's debt reaches "crisis point".

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- © Fairfax NZ News

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