Then Prime Minister Bill English and Finance Minister Stephen Joyce head to Parliament's Debating Chamber for the 2017 Budget to forecast a net debt to GDP ratio of 23.2 per cent.

If Grant Robertson doesn’t watch out; he will fall into exactly the same trap that Bill English and Stephen Joyce fell into in 2017.

Then they boasted about National’s fiscal management skills, about maintaining a budgetary surplus and keeping debt to 20 per cent of GDP.

But the electorate doesn’t vote based on economic indicators.

Instead, National faced an onslaught from Labour over its austerity politics and issues like the lack of mental health facilities and not enough police.

Even Health Minister Jonathan Coleman had asked Joyce for a $200 plus increase in the Health budget in 2017 but got turned away.

Instead Joyce pointed to his overall economic indicators.

However if English and Joyce were penalised for being too tight fiscally, the reverse is true for Robertson.

Faced with the Reserve Bank raising interest rates yesterday and the inevitable flow-on to mortgages, Robertson talked about his debt to GDP ratio. (Which at 17.2 per cent was lower than Joyce’s 2017 ratio of 23.2 per cent)

However National Finance spokesperson Nicola Willis argues he is spending too much, which is driving those interest rises that saw the Reserve Bank yesterday add another half a per cent to the official cash rate.

The Government accounts announced yesterday by Robertson for the year ended June 30 are good. Very few OECD countries can come in with the indicators at the level ours are, and they show every sign of continuing to point in the right direction.


But within hours of Robertson unveiling his figures at a Treasury briefing, across the road at the Reserve Bank, its Governor Adrian Orr was sending out a press release confirming that the Bank was going to raise its Official Cash Rate by half a per cent to 3.5 per cent

The implications of that are dire.

Kiwibank economist Jarrod Kerr said he was becoming increasingly wary of the consequences such tightening would bring.

“Most outstanding mortgages roll onto much higher rates in the next six months – over spring and summer –  the busy period for housing activity.

“The cost of home ownership is increasing fast.

“Mortgage interest rates were around 2-2.5% early last year.

“Mortgage rates are now around 5.5-6%.

“They have more than doubled. For example, the extra 3% on a mortgage of $800,000 equates to an increase in interest repayments of $24,000 per year.

“So total interest repayments in this example have gone from $20,000 per year to $44,000.

“There will be a profound impact on discretionary spending – by RBNZ design.”

The interest rate increases are already affecting house prices.

CoreLogic NZ Head of Research, Nick Goodall, said the 4.1 per cent quarterly fall in the CoreLogic HousePrice Index from July to the end of September ranked as one of the worst periods for national value falls on record, only marginally better than the three months to the end of August 2008  in the wake of the Global Financial Crisis.

“As interest rates have increased, and credit is harder to attain, the housing market is firmly in retreat,” he said.

“It’s probably too early to suggest the housing market has moved through the worst of the downturn.”

The Opposition’s Finance spokesperson Nicola Willis has chosen to focus on the Reserve Bank’s raising of interest rates.

“The Government’s cavalier approach to its own spending has put fuel on the inflation fire, stoking the cost of living crisis and forcing the Reserve Bank to pull ever harder on the interest rate hand brake to try and control it,” she said.

“The Government has completely failed to curb its spending in the wake of its Covid spend-up.”

But yesterday, Robertson was able to revel in the final spending and revenue figures for the 2021 – 22 fiscal year.

He recorded a deficit that was $9.2 billion less than was forecast as recently as the Budget in May.

But the political danger he now faces is the same as that which contributed to the defeat of English and Joyce; good economic indicators are easily trumped by the reality of day-to-day life.

The impact of the mortgage rate increases will be profound and will overshadow Robertson’s books, no matter how impressive they are.

However, whether the Bank’s move is entirely his fault is open to debate.

The Bank’s statement announcing the rate increase pointed to a balance of local and international forces driving inflation.

On the domestic front, it pointed to employment being beyond its maximum sustainable level and the impact that could have on wages.

“The (Monetary Policy) Committee agreed that the labour market remains very tight,” the Bank’s statement said.

“Net migration remains negative and is yet to provide any sustained recovery in external labour supply.

“Members discussed the likelihood of further upside wage pressure given lags in the wage setting process.

“Some members noted that there may be changes in wage setting behaviour in an environment of higher headline inflation.”

Internationally, the Committee noted rising interest rates.

“Higher global interest rates and increased risk aversion in global markets have placed downward pressure on the New Zealand dollar,” the statement said.

“Members believed that this would contribute toward a rebalancing of New Zealand’s current account over the long-term.

“However, a lower New Zealand dollar, if sustained, poses a further upside risk to inflation over the forecast horizon.”

Robertson yesterday said that we had now approached the end of emergency Covid responses.

Willis argues that the Government, however, is continuing to spend at the same rate it did during Covid, saying that this year Robertson will spend one billion dollars a week more than was being spent when it came to office in 2017.

(That may, of course, be something of an artificial low because English and Joyce prioritised holding spending over what even their own Cabinet Ministers argued were necessary increases in areas like health.)

But even so, Robertson is planning to spend $127.1 billion this year on core crown expenses, slightly more than the $125.6 billion recorded in the June 30 year announced yesterday.

The Government accounts released yesterday showed that there was at least $12 billion of Covid expenditure, including the wage subsidy, business resurgence payments, the vaccination and testing programmes and MIQ. Most of that will not need to be repeated this year which effectively means Robertson has that money to spend elsewhere.

That is what Willis is arguing about.

But Robertson himself was pointing to the overall fiscal position.

“The accounts for the year to June 30 show the operating balance before gains and losses (OBEGAL) recorded a deficit of $9.7 billion, roughly half of what was forecast at Budget 2022,” he said.

“This was due to stronger economic conditions and lower spending than forecast.

“Core Crown revenue was 4.1 per cent ahead of forecast, as our economic settings provided for strong business results and more people in work in the economy than ever before, contributing to higher tax revenue.”

All of this makes his economic indicators look good.

Net debt ended the year at 17.2 per cent of GDP, in line with Budget 2022 forecasts.

“This is one of the lowest levels in the OECD and well below the Government’s debt ceiling of 30 per cent, ensuring we are well positioned to weather further economic shocks,” he said.

“On a comparative measure produced by the IMF, our debt position as a percentage of GDP is roughly half the level of Australia, a quarter of the UK, and a fifth of the US.”

But unless the Reserve Bank can lower interest rates, it might pay Robertson to remember 2017 and what happened to Stephen Joyce even though he could present admirable economic indicator numbers.