12 Jul 2011

Government faces biggest debt repayment

9:17 pm on 12 July 2011

Finance Minister Bill English is confident the Government will be able to cover its biggest ever debt repayment when it comes up for payment in November.

Treasury papers obtained under the Official Information Act reveal the Government will have to repay $7.6 billion to those who hold bonds which mature on 15 November.

The Treasury says this is the largest ever repayment of debt and naturally carries a heightened degree of risk.

However, the papers also show the Debt Management Office has been borrowing heavily to ensure it has enough cash to repay the debt.

Mr English says the Debt Management Office has the responsiblity for matching up repayments with the debt raising and as far as he is aware the Government will have no difficulty meeting its obligations.

Labour Party leader Phil Goff says the Government is scheduled to spend more than $16 billion above what it earns this financial year and should have a way of dealing with that rather than simply borrowing to pay for the debt.

Labour is questioning whether public debt is being managed as well as it could.

Finance spokesperson David Cunliffe says he is sure the money will be repaid, but having to pay such large amounts would help put pressure on interest rates, as well as requiring officials to keep a very close eye on the Government's volatile cash position.

Labour announces its tax policy on Thursday, which will also include details of its proposed capital gains tax.

Council of Trade Unions economist Bill Rosenberg says the Government always knew the repayments would be made this year and similarly in the following year.

"To describe borrowing needs as huge in the previous year when they were simply preparing for this coming year really was more a political tactic than anything about the particular state of the Government's borrowing needs."