4.6 Projections of government debt
We now turn to the implications of these projections of the operating balance for projections of government debt. Figure 8 shows projections of the government's gross debt, net debt and net worth as a percentage of GDP under the cost pressure scenario. Gross debt peaked at 39% of GDP in 2013/14 before reaching a trough of about 35% of GDP in the mid-2010s and generally increasing thereafter.
Net debt is government gross issued debt less government financial assets. This excludes advances and assets held in the New Zealand Superannuation Fund, which are held for a specific policy purpose (prefunding part of future NZS costs).[23] Net debt is projected to steadily increase over the projection period. Both gross debt and net debt reach similar levels by 2060 because financial assets (which exclude advances and NZ Superannuation Fund assets) are projected to be close to zero by 2060. Net worth reflects the assets and liabilities of the government. Assets and non-debt liabilities of the government are assumed to grow in line with either nominal GDP, CPI-measured inflation or from generated tracks produced by satellite models eg, the Government Superannuation Fund (GSF) Model. Net worth is projected to fall to just under 10% of GDP in 2013/14 before reaching a peak of just under 14% of GDP in the early 2020s and decreasing thereafter. We should stress that these projections out until 2060 for public debt and net worth are presented to illustrate the implications of government's meeting bottom up expenditures pressures where there is no policy adjustment. History suggests however that either government makes adjustments to policies before government debt reaches these levels, or financial markets react in a way to force policy change.
- Figure 8: Gross debt, net debt and net worth as a percentage of GDP, 2006/07-2059/60
Notes: (1) Gross debt is Core Crown Gross Sovereign Issued Debt excluding RBNZ settlement cash; (2) Net debt is Core Crown Net Debt excluding New Zealand Superannuation Fund and advances; (3) Net worth is Core Crown Net Worth; (4) the projections are based on Budget 2013 forecasts
Notes
- [23]NZ Superannuation Fund financial assets are projected to reach approximately 30% of GDP by 2060, so if NZSF financial assets were included in the net debt measure then net government debt would reach approximately 170% of GDP by 2059/60 rather than 200% of GDP.
