Reckless labour, Prudent national.

In response to a Facebook discussion on "who was to blame" dir various economic factors in new Zealand, I decided to consult some data, with respect to the common idea that labour governments have irresponsibly borrowed, exacerbating the financial crisis for kiwis. 

I've graphed borrowing data, with blue and red highlights to indicate which party had formed the government at that time for about the last 15 years.
See the graph image below. Yellow line is government debt. Blue line is corporate debt.

The data inducates:
Government debt under Labour has been consistently lower (and more stable) than under national led governments.

Corporate borrowing has been consistently more accelerated under Labour governments and has generally been static under national governments.

Why the above trends? Does the political regime explain the corporate borrowing trends? Unlikely, for two reasons: 1. The corporate borrowing jump began in 1997, prior to the change of governments. It was likely a wider global market trend, rather than a NZ specific event. 2. The increase in corporate borrowing continued until mid 2008 – the global financial crisis. It seems corporate borrowing rates are more influenced by global market conditions, rather than local NZ politics.

OK, so let’s turn to government debt. The period 2000-2008 seems remarkable for low government borrowing. Whilst GDP was on the rise the whole time AND the private sector (corporate) was borrowing heavily, it seems the government was able to continue operating on static levels of debt, even lower levels that the previous conservative governments. Since the financial crisis, government borrowing has expanded to levels (in $) well above any period during the labour led governments. However, it must be noted that the cost of borrowing (interest) is likely to be lower now, so actual cash-flow impacts might be similar.

However the above data very strongly suggests that the myth of Labour led government borrowing, and National led government fiscal prudence might be just that - a myth.

Data source: New Zealand Reserve Bank http://rbnz.govt.nz/statistics/extfin/e3/he3.xls