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New Zealand Debt Management Office[41]

New Zealand Debt Management Office
Figure   .


NZDMO is responsible for managing the Crown's borrowing requirements and debt portfolio, overall net cash flows and a portion of its financial assets within an appropriate risk framework.

Figure 4.83 - Debt portfolio composition
Figure 4.83 - Debt portfolio composition  .
Source:  The Treasury

The Crown debt portfolio is almost entirely composed of NZD denominated debt.[43] NZDMO regularly issues short term (less than one year to maturity) Treasury bills, longer term nominal (fixed rate) Government bonds and long-term inflation-indexed bonds. There has been a move towards longer term debt instruments over the past five years. This, among other things, reduces funding risk, helps attract new investors, and provides better risk and return characteristics.

Figure 4.84 - Bond maturity profile
Figure   .
Source:  The Treasury

In the near term, debt is forecast to increase modestly before falling back towards the Government's stated target of net core Crown debt being no higher than 20% of GDP by 2020.

NZDMO holds assets to manage Crown liquidity, and does so via a combination of cash, liquid assets and by maintaining access to a diversified pool of funding markets.


NZDMO's goal is to minimise the Crown's cost of debt, within an appropriate risk framework.

The cost of debt is dependent on the economy and the general interest rate environment that the Crown is operating in. This is highlighted by the close relationship between the Crown's cost of borrowing and market interest rates (the five year swap rate in Figure 4.85).

Figure 4.85 - Average cost of debt
Figure 4.85 - Average cost of debt  .
Source:  The Treasury

Opportunities and challenges

In recent times, the challenge for NZDMO has been to manage the Crown's increased borrowing requirement in a cost-effective manner. This has been made easier by the Crown's low absolute sovereign debt levels and successive governments' commitment to prudent fiscal management.

The increase in borrowing has also required a significant increase in size of the New Zealand Government Bond market. NZDMO has managed this by maintaining a transparent, even-handed and predictable approach to debt management which in turn has given confidence to investors and intermediaries to invest in Government bonds. NZDMO has also extended the length and range of products available in the market to attract a wider investor base. This is best reflected by NZDMO's reintroduction of the inflation-indexed bond market.

Looking forward, a key area of opportunity is in structuring the debt portfolio so that its risk characteristics interact in the best possible way with the wider Crown balance sheet. The aim of this work is to minimise variability in Crown net worth by improving the interrelationship between debt servicing costs and the fiscal position ie, making debt servicing cost more pro-cyclical. The reintroduction of inflation-indexed bonds was in part driven by this goal.


  • [41]NZDMO is an operating unit of the Treasury and has no separate legal identity.
  • [42]Note that NZDMO assets and liabilities to other Crown agencies are eliminated on consolidation.
  • [43]The Crown debt portfolio is free from currency risk to reduce susceptibility from currency shocks.
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