Ryan Bridge: We can't afford a credit downgrade

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You know how New Zealanders love it when foreign countries, or media, or even tourists talk about us?

They're always the most read stories on news sites – it's like a national pastime.

Oh look! Brad Pitt says New Zealand is beautiful! Oh look, Jason Mamoa did a bungee and Queenstown is beautiful!

Well, have I got news for you, New Zealand.

S&P, the global ratings agency, has just done a bungee on our country's finances.

It's mostly good news: low net debt, growth of 2.5% a year, good Government. Safe, sound, stable outlook.

The equivalent of a 4-star Tripadvisor review.

But there's one number that should be making headlines – it's on page 4.

10%.

Our country has been borrowing more money to fund stuff, including everyday spending and election promises.

They issue bonds, or debt, to investors and pay them interest for the pleasure.

Those interest costs are going up because of the bond market sell-off we've been talking about on this show.

S&P says the amount we're paying interest will reach 9% of government revenue (i.e. tax) in 2029.

That means for every million bucks the Government earns in tax, it pays almost $100k just on interest on its debt.

Interest is our fourth most expensive item on the Government's books – more than we spend schooling our kids through primary and secondary.

S&P says interest costs of more than 10% of revenue could result in 'weaker debt metrics'.

That's not a good thing. It means we're stretching ourselves. We could get a credit downgrade.

People start looking at us sideways asking, can those guys pay back what they owe us or are they taking the Mickey?

That's not the sort of reputation this country can afford.

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