Josh Hoskin Smart Money [email protected]

New Zealand's debt is spiraling out of control which means our youth should jump ship before it's too late.

New Zealand borrowed $1 billion last week, but the United States is currently averaging weekly borrowings of $28 billion, so perhaps the idea of jumping ship might actually be the equivalent of shifting the deck chairs on the Titanic. To test this theory, let's ask a simple question; would a bank lend NZ or the US this money?

As at June, 30, 2010 the net worth of the NZ government was $95 billion. The value of the liabilities of the government was approximately 54 per cent of the total assets. Applying the same logic as the banks do to personal borrowing on residential property as the liabilities are less than 80 per cent of the assets, the bank should be comfortable. The US government has a net worth of negative $13.6 trillion as at September 30, 2010. So the US is much worse than NZ and the bank should decline the US application. Are you still keen on the water off the Californian coast?

Income is at least as important when lending money, so let's look at these figures. The net financial performance of the NZ government shows an unhealthy negative $4.5 billion operating balance. No or negative income means a bank would decline the application. The US is worse – their net operating balance was approx negative $2 trillion. So Mr Obama your application is declined also.

So do we jump ship? I don't think so. At least not off the coast of the US. Indeed, the worry would be that you would jump off the ship at the point where your GPS says America is, only to find it is lost in a cloud of financial oblivion. I'd rather be a Kiwi any day of the week.

Josh Hoskin is a member of Goldridge Wealth Management, a national financial advice network. Phone 07 571 8899 or email [email protected] to see us for an initial meeting at no cost. A disclosure statement is available free of charge on request.