Labour is claiming that current government debt is worse than it was under Sir Robert Muldoon.
In cash terms, Labour is right.
But to base such a claim on the cash figure is economically and financially illiterate.
Firstly, inflation means the dollar value of the amount concerned – $52 billion – is rather different in 2014 compared to 1984.
But that is not the most important thing.
Anyone with an ounce of financial nous knows debt should never be viewed in isolation. An 18-year old will, typically, be carrying much less debt than a typical 38 year old but the 38-year old is usually better off financially because of assets to offset that debt.
And so it is with government debt. The key figure is debt as a proportion of GDP: here, government debt is forecast to top out at 30% over the next couple of years and then fall.
To put this in context, gross government debt peaked at a little higher than 78% in 1987 and net government debt – the more important measure – peaked at 67% of GDP.
It is currently at 27% of GDP . . .
That peak of 78% for gross debt and 67% of net debt in the mid 80s was under Labour, when several of its current MPs were in power.
That was due in part to Muldoon’s foolish policies but those were very different from the ones National has now.
Debt is higher than it should be, no thanks to Labour’s policies as a result of which it was forecasting a decade of deficits when it went out of power.
The increase in debt in the last five years is also due to a deliberate strategy to take the harder edges off the effects of the Global Financial Crisis and deal with the effects of the Christchurch earthquakes.
Which of the spending National took to cope with those would Labour cut?
How would it do that when it’s fought tooth and nail against every single measure National has instituted to cut back Labour’s public service excesses, reduce costs while maintaining services and get the economy back on track to surplus?
How could it do it when its media releases show its economic and financial illiteracy?
Labour either doesn’t understand the numbers or it’s deliberately misrepresenting them.
Either way it is wrong again.