Living Beyond Our Income: Pita Alexander on New Zealand's Debt and Household Pressure
Pita’s perspective…
The New Zealand government, and perhaps 35% of New Zealanders, are living beyond their income at the moment. How did we get here, and what does it mean for households, farming families and the wider economy? Pita Alexander works through the numbers, from government debt to KiwiSaver hardship withdrawals, and gives his frank view of what needs to change. Read on for the figures and what they may mean for you.
How much debt is New Zealand carrying?
Government debt: 50 years of growth
1976: gross government debt was $2.160 billion.
2026: gross government debt is an estimated $223.781 billion.
Over those 50 years, that represents:
an average increase of $4.432 billion a year
a compound annual increase of 9.72% each year
debt that doubles every 7.4 years if the increase continues at the same level
Debt beyond the government
There is a lot of debt over and above the government's. Here is the picture as at July 2026:
Personal consumer debt: $14.425 billion (1.67%)
New Zealand student debt: $16.800 billion (1.94%)
Agricultural debt: $65.238 billion (7.54%)
Business debt: $142.861 billion (16.51%)
Residential debt: $401.944 billion (46.47%)
New Zealand government debt: $223.781 billion (25.87%)
Estimated total: $865.049 billion (100.00%)
With the population at June 2026 at approximately 5,357,300, that works out at an overall debt of $161,471 for every New Zealander.
It is interesting that residential debt is almost twice as much as government debt.
Surpluses and deficits since 2000
From 2000 to 2030, the New Zealand government has had:
Surpluses: 14 (13 actual, 1 estimated), or 46.7%
Deficits: 16 (13 actual, 3 estimated), or 53.3%
Total: 30 years
That is not good enough, particularly as the value of the deficits far exceeds the value of the surpluses.
Why many households are under pressure
Renting, retirement and housing supply
Around 690,100 New Zealand households rent, approximately ⅓ of all households. Unless this group has an enormous financial nest egg, many of them will face a monumental problem in retirement, even at 70 years of age. Very few households could survive on National Superannuation alone, perhaps 5% to 10%.
With the average New Zealander's age at 38, this issue will be upon us within 25 to 30 years.
New Zealand needs cheaper social housing, but builders can't afford to build it in significant numbers because it simply isn't profitable. Only the government can afford to get deeply involved. For context, applications on the Main Housing Register were:
30 June 2026: 19,002
30 June 2025: 20,142
Living payday to payday
There is no official benchmark, but various surveys show that at least ⅓ of New Zealand households (680,000) are living and working on a payday-to-payday basis. In the USA the figure is 55% to 60%.
Unemployment
The present unemployment figure is 171,000, an unemployment rate of 5.6%. That is the equivalent of 85,500 households, or almost the whole population of Dunedin and Invercargill combined.
Home ownership after 65
138,000 New Zealanders over 65 do not own a house.
12% of New Zealanders who own a house at 65 still have part of the mortgage owing.
KiwiSaver and financial hardship
Total KiwiSaver funds at 31 March 2026: $138.8 billion
Average balance at 31 March 2026: $41,286
Average balance for the 60 to 65 age group: $77,497
Hardship withdrawal applications in the 2026 year: over 60,000
2025 year: an average withdrawal of $8,806 across 58,460 applications, totalling $514.8 million
This is unsound, but the background is understandable. It is a sure sign of financial hardship in many New Zealand households.
Interest rates
The recent increase in the OCR to 2.75% is understandable from an inflation-control point of view. But it is going absolutely the wrong way for many households already under financial pressure.
Is rental property a goldmine?
Not necessarily. Unless the underlying inflation risk is at least 2% to 3%, the financial return on owning a house and renting it out is nothing wonderful. Rates, insurance, repairs and maintenance, interest and management can eat up 80% to 90% of the gross rent.
The cost of welfare
For the year ended 31 March 2026, 1,763,800 New Zealanders received some kind of government benefit:
Accommodation Supplement: 379,000
New Zealand Superannuation: 965,700
Sole Parent Support: 81,600
Supported Living Payment: 111,900
Jobseeker Support: 216,300
Emergency Benefit: 6,400
Youth Payment: 1,500
Parent Payment: 1,400
Total: 1,763,800
The overall welfare cost in 2026 is approximately $53 billion.
Who is actually working?
This is the split of New Zealanders as at 30 June 2026:
People in employment: 2,905,000 (54.23%)
Unemployed: 171,000 (3.20%)
Under 18 years (students etc.): 376,700 (7.03%)
National Superannuitants: 965,700 (18.02%)
Children from birth to 14 years: 938,900 (17.52%)
Total: 5,357,300 (100.00%)
Only 54.23% of New Zealanders are working, generating income and paying tax. New Zealand does not have a big enough working population, or enough overall production and profitability, to cope with this welfare cost long term.
What are we worth?
The net assets of the New Zealand government in 2026 are, in broad terms, around $250 billion. The net assets of New Zealand's 2,064,700 households are, in broad terms, perhaps $2.3 trillion.
The data is very broad, but it suggests New Zealanders are worth around 9 times the government in net asset terms. The median household figure is around $550,000, meaning there are just as many households above that figure as below it.
A two-speed economy
The top 25% of households (perhaps 400,000) have around $275 billion on deposit with the New Zealand banking system. The bottom 35% (some 700,000 households) have net assets of perhaps $100,000 to $200,000 per household.
New Zealand is running on a two-speed economy. At the moment the 25% group is, to some degree, subsidising the 35% group, and the USA, France, the UK and Italy are doing something similar.
You can't take money off the better-off every year and give it to the less well-off and feel you have achieved something. All you have done is irritate both parties and guarantee that the nonsense will continue.
Pita's summary: where does this leave us?
The areas above are causing financial stress for many New Zealand households right now, with little or no daylight for them.
How much do households need?
I feel many of these households need another $3,000 a year after tax, and they need it every year.
Who is feeling it most?
This is a matter of opinion, but I feel:
25% are coping well, mainly because of high incomes and better financial management.
40% are coping but not enjoying it.
35% are not coping and are looking for civil unrest, or an increase in their income from somewhere.
Some other countries are in the same boat, with broadly similar percentages.
The government's position
The real worry is that the present government is short of around $10 to $12 billion of fiscal income every year. Some government expenses would be hard to reduce, such as:
Health
Education
Law and order
Interest
I also feel that:
The present coalition is the wrong structure to dig New Zealand out of a financial hole.
Both political parties are just cherry-picking at the fringe on election issues at the moment.
Just borrowing more money is not a solution if those funds are going into a bottomless pit.
The Bond Vigilantes are starting to concern the USA and France. The world needs these vigilantes to take this sort of stand-up attitude.
Population and immigration
We can work out the New Zealand population in 20 years' time based on births and deaths, but potential immigration numbers complicate the picture significantly. I like the idea of limiting permanent immigrants to no more than, say, 20,000 a year.
Facing reality
Sometimes in business and in government, a radical change from the status quo is required to get the direction right again. Many of the world's 195 countries need to face up to this transition sooner rather than later. New Zealand is not at the top of the urgency list, but it is very much in the group that needs to face reality.
What can you do?
Take up all the overtime that is offered to you.
Build an emergency fund. Each of us needs one that will cover, say, 2 to 3 months of day-to-day expenses.
Talk to Alexanders Rural
If these numbers have you thinking about your own position, we're happy to talk. Whether it's your farm business, your financial management or your business planning, the team at Alexanders Rural can help you work out where you stand and what to do next. Get in touch to start the conversation.
DISCLAIMER
Any views or opinions expressed in this article are those of Pita Alexander only and do not reflect the views of any other person or organisation.
The information provided in this article is for informational purposes only and is not intended to be financial advice.
Any errors or omissions are the author’s own.