Government debt is almost at $100 billion but Finance Minister Grant Robertson is confident that New Zealand is in a stronger fiscal position compared with other developed nations.
Treasury's latest update shows net core Crown debt was $99 billion at the end of November 2020, reflecting the huge cost of COVID-19. But tax revenue was $37.6 billion, $0.7 billion above forecast, showing Kiwis are spending up.
The Government calculates debt by comparing what it owes with what it produces, or its gross domestic product (GDP). Net core Crown debt to GDP was 27.6 percent at June 30 last year, and it now sits at 30.9 percent.
Net core Crown debt is expected to reach $190 billion by 2025.
ACT leader David Seymour said the Government's growing debt pile is a "serious situation", because it equals around $20,000 per person, or $100,000 for a family of five.
"Today's announcement from the Treasury that core crown debt is on the cusp of $100 billion should worry future generations who have seen no steps taken to protect them from a growing and unsustainable debt mountain," he said.
"If the Government was taking steps to trim and save in some areas, to offset the debt they've been taking on to cushion the blow of COVID-19 and attempt to spend their way out of it, that might provide some solace to future generations.
"Instead it's been business as usual plus, as if money was free. These historic debt levels demand serious political leadership, but there is no sign the Government is willing to get on top of its spending."
Robertson said New Zealand's economic recovery is reflected in the Government's books which are in "better shape" than forecast. He pointed out that the latest data is more favourable than forecast in the Half-year Economic and Fiscal Update (HYEFU) in 2020.
"This was partly due to tax revenue coming in $0.7 billion above forecast, with GST revenue $0.4 billion above forecast. This shows New Zealanders have confidence in the economy and are spending domestically," Robertson said.
"The Government's support for New Zealand's businesses and workers through the COVID-19 pandemic has helped the economy get back on its feet quickly."
Seymour said previous debt forecasts have been "horrendous" and that the Government shouldn't be satisfied just because it has done better.
Robertson has often pointed out that New Zealand's debt levels are lower than the countries we compare ourselves to. For example, the UK's debt to GDP is more than 85 percent, while Japan's is more than 200 percent.
Seymour said while Japan is in much higher debt than New Zealand, it's "not clear" if a small country like ours can sustain high debt and if the world loses confidence in our ability to pay it back, it could have major implications.
Robertson said the Government's focus this year will be on "continuing momentum", while also tackling some of the long-term challenges facing New Zealand such as housing, climate change and child poverty.
"The country is in a stronger fiscal position compared with other developed nations, and we will carefully prioritise our spending to maintain the balance between short term needs and long term requirements," he said.
"New Zealanders trusted us to keep them safe last year, and we will continue to make the tough decisions required to do that, while also keeping the economy moving in the right direction."
But it's far from a rosy picture. The latest Ministry of Social Development figures show there are more than 200,000 people on a Jobseeker benefit - that's more than the population of Hamilton.
The unemployment rate, 5.3 percent, is forecast to peak at 6.9 percent by the end of 2021. Once border restrictions are eased and economic activity continues to recover, the unemployment rate is forecast to fall gradually, reaching 4 percent by 2025.
New stats NZ data shows filled job numbers rose nearly 38,000 in December - 2.3 million filled jobs, up 1.7 percent from November.
But when compared with the same time last year, jobs were up by only 0.6 percent. Before the pandemic, New Zealand usually experienced annual increases of between 2 and 4 percent.
On top of that, house prices are spiralling out of control. The latest Real Estate Institute data shows that the number of properties sold around the country for $1 million or more during 2020 increased by 68 percent when compared to 2019.
Robertson is currently considering advice from Treasury and the Reserve Bank on demand-side initiatives to help ease the housing market, which has been heated up by low interest rates and not enough supply.