At
the current rate of growth, we’ll hit that landmark inside the next three years.
The rate of growth has moderated in the past two years as the Government has sought to curb borrowing, and the housing market, which accounts for the largest chunk of our debt, has been flat.
Businesses have also been hunkering down, afraid to invest and expand, and farmers are getting good returns but using them to address high debt levels.
But while the rate at which we’re borrowing has eased, so too has the rate at which we are saving and growing wealth.
The easiest path out of debt is wealth creation, shrinking our net debt and our debt-to-GDP ratio.
So going backwards on that front is a cause for concern.
AdvertisementAdvertise with NZME.
The big, ugly numbers
In the year to May 31, we hit a total of $872.6 billion in gross debt.
That figure is up from $827.3b last year, a rise of 5.4%.
It represents an average of $163,717 in raw debt for every Kiwi in the country.
The rate of growth is relatively subdued by the standards of previous years.
In the first New Zealand Herald Nation of Debt feature, in 2016, the total gross debt figure was $492.5b. We have seen total debt rise 77% since then.
That represents an average annual increase of 6.65%.
Given we are still coming down from a period of high interest rates, it was not surprising that borrowing growth was subdued, said Reserve Bank adviser for financial stability assessment and strategy, Charles Lilly.
“We’re still in a relatively contractionary phase,” he said.
“We want to see stability. We don’t want credit debt off the scale and people taking too much risk.”
On the downside, a lack of borrowing growth was more of an issue with the financial system if the banks were not willing to lend, he said.
“I think banks are still willing to lend; it’s mainly from the demand side, they just don’t have customers coming through the door.”
Crown debt also continues to rise, despite the Government’s efforts to curb spending.
Core Crown borrowing (the baseline we’ve used since 2016) was $238.8b in the year to May 31, 2025. That’s up from $215b in the year to May 30, 2024 – an increase of 11%. It follows an increase of 11% for the previous year.
While the coalition Government hasn’t been able to stop Crown debt rising in double digits, it has at least reduced the annual rate of increase.
It was 27% and 17% respectively in the years to May 2022 and May 2023.
Crown debt is always a hot political topic. Wellington business editor Jenée Tibshraeny will take a deep dive into the state of the Government books tomorrow in part two of this series.
The other side of the ledger
Of course, the nominal figures still look scary. So does your mortgage if you don’t weigh it against the value of your house.
It is important to compare the gross debt figure to our saving rates and assets to add more context.
Unfortunately, the latest Stats NZ figures (for the year to March) showed New Zealanders’ household net wealth has fallen.
Household net worth, the value of all assets owned by households less the value of their liabilities, fell $25.4b to $2.42 trillion in the March 2025 quarter.
That is still almost three times the total gross debt figure.
But in the year ended March 2025, household net worth fell $23.1b (0.9%), after a rise of $61.2b (2.5%) in the year ended March 2024.
We’re currently headed in the wrong direction.
Most of that fall will be related to house prices, although some of it can be attributed to lower savings rates.
Stats NZ’s household saving data shows how much households are saving out of their current income (ie current income less current consumption).
The data shows savings fell $392 million to minus $1.6b in the March 2025 quarter.
Sector by sector
Housing
It should come as no surprise that the nation’s mortgage debt accounts for the bulk of what we owe.
Housing debt shot up during the big housing booms in the middle of the last decade and again during the first blush of Covid as stimulus money and low interest rates bolstered property prices.
In the year to May 2016, the annual rate of increase for total housing debt was 9.2%, in 2021 it was 11.5%. If we look back further, it topped 16% in 2004.
So this year’s increase of 4.7% looks modest in comparison.
It represents a slight increase on the even more modest 3.3% rise in the year to May 2024.
That lift in mortgage debt may reflect the slight uptick in prices late last year and early this year (albeit something of a false start for those waiting on a full-blown housing market recovery).
But the level of borrowing has also been lifted by record numbers of first-home buyers coming into the market, and fewer investors, said the RBNZ’s Lilly.
The former typically need to borrow more from the bank than the latter.
If the housing market picks up later this year, as many pundits expect, then we’ll likely see the rate of increase in mortgage borrowing follow, he says.
Mortgage debt, most of which we owe to Australian banks, is a feature of the New Zealand economy that tends to worry international credit agencies more than our Crown debt.
It has been a concern for the Reserve Bank in the past.
“In the current environment, subdued is definitely the theme,” Lilly said.
Business
Business borrowing barely lifted in the past year – and that is not good news for the economy.
At $136.5b in the year to May 31, it was up just 0.6%. Businesses typically borrow to invest in new equipment that will improve productivity or to expand, taking on staff, to grab more market share.
None of that stuff has been a feature of the past year.
In fact, the opposite has been the case. Many businesses are struggling to survive. Those that desperately need cash to stay in business aren’t going to get it from a bank.
The struggle for many retail businesses is also highlighted in the relatively anaemic growth in personal consumer lending. At $14.5b, it is up 1.1% in the year to May 31.
NZ Herald retail reporter Tom Raynel will take a closer look at the consumer borrowing trends later this week as part of the Nation of Debt series.
For larger businesses, issues such as global uncertainty and tariffs would be limiting the appetite to borrow and take risks, Lilly said.
It was also the case that the commercial property sector remained very weak, he said.
Agriculture
Unlike the struggling urban business sector, farmers have been benefiting from strong international export prices in the past year.
Numerous commentators have suggested increased spending in the agricultural sector should buoy the regional economies and eventually flow through to the cities.
The borrowing data for the past year offers some clues as to why that may take longer than many expect.
Total agricultural debt is down 1% for the year to May 31, to $62.8b.
Farmers appeared to be using their increased earnings to pay down debt in the first instance, Lilly said.
This wasn’t a bad thing; it is only a few years ago that the Reserve Bank was highlighting dairy debt as a significant risk to New Zealand’s financial stability, he said.
By the numbers
That big, ugly number in our graphic is New Zealand’s total gross debt. It combines the latest Reserve Bank figures for private debt with Treasury numbers for Crown debt and Local Government Funding Agency data on council debt, and IRD’s data on student loans.
The Reserve Bank figures include housing debt, consumer debt, business debt and agricultural debt to June 30. These are updated monthly by the central bank as part of its brief to monitor and maintain financial stability.
The Crown debt figure is taken from the Treasury’s Interim Financial Statements (11 months to May 31) and is the figure for core Crown borrowings.
This is different from the net core Crown debt figure often used by politicians when discussing debt-to-GDP ratios.
We use this (on Treasury’s advice) as it is a gross debt figure but excludes debt held by state-owned enterprises, which would have been covered in the Reserve Bank statistics.
The debt figure supplied by the Local Government Funding Agency is gross debt for the year to June 30, 2024. It captures all core council activities (Watercare, Auckland Transport, etc) but excludes some commercial activities (eg Christchurch City Council’s Orion lines company, Port of Lyttelton, Christchurch Airport) as these would also be included in RBNZ data.
Student loan debt is from the IRD statistics to March 2025.
COMING UP IN THIS SERIES
Tomorrow: Gov’t debt: Are higher taxes inevitable?
Wednesday: Consumer debt: What are Kiwis borrowing for?
Thursday: Student debt: How big? How bad?
Liam Dann is Business Editor at Large for the New Zealand Herald. He is a senior writer and columnist, as well as presenting and producing videos and podcasts. He joined the Herald in 2003.