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What interest rate the government pays

The average rate, market rates, why they differ, and a fuller calculator.

What interest rate is the government paying?

On its existing borrowing: about 3.5% in 2025/26

The 2026 Treasury documents used here do not give a single average rate, so this is calculated. Interest on core Crown financial liabilities in 2025/26 ($8.70 billion, unaudited) divided by average core Crown borrowings over the year ($247.9 billion, the average of 30 June 2025 and 30 June 2026) is 3.51%.[43][10][9] Using borrowings at the start or the end of the year instead gives 3.6% or 3.4%. Core Crown borrowings are all of the core Crown's debt obligations, including settlement deposits that banks hold with the Reserve Bank.[28]

For government bonds alone, interest expense divided by the average value of bonds gives about 3.9%.[20][21][19] The accounts give this only for the whole Crown, not the core Crown, so it is a cross-check rather than a like-for-like figure.

Market rates for 10-year bonds

The 10-year government bond rate averaged 4.6% over April to June 2026, the latest actual figure in Treasury's update.[63][48] Over the whole 2025/26 year it averaged 4.5%. Shorter-term rates were lower over the year: 3.8% for 5-year bonds and 2.7% for 90-day bank bills.[49][51][52] Treasury also says: Since the completion of the fiscal forecasts, interest rates have risen.[46]

New Zealand Debt Management (NZDM) sells new bonds at regular tenders. At its tender on 29 October 2026, the April 2037 bond (about 10 and a half years to run) sold at an average yield of 4.99%. On 22 October 2026 the May 2036 bond sold at 4.99%.[98][99] The Reserve Bank's daily 10-year rate could not be checked, so it is not shown (see what is left out).

Why the average rate differs from market rates

These are general explanations of how government borrowing works, not statements from Treasury.

• Older bonds keep their coupon. Each nominal bond line pays a fixed coupon set when it is first issued. For example, the May 2028 bond, first issued in October 2020, pays 0.25% a year, and the May 2041 bond, first issued in July 2020, pays 1.75%.[75][86] The coupon does not change until the bond is repaid. More of an existing line can be sold later at a price that reflects market rates at the time, so the cost of those later sales follows market rates. As old bonds are repaid and replaced, the average rate moves towards market rates. The bonds page lists every bond line.
• Not all borrowing is 10-year bonds. Short-term borrowing and Reserve Bank settlement deposits pay short-term rates. Over 2025/26, 90-day bank bill rates averaged 2.7%, below the 10-year rate.[52] That is one reason the bonds-only figure (3.9%, whole Crown, on the accounts' amortised cost) is higher than the figure for all borrowing (3.5%).
• The 10-year rate is one reference point. The government borrows for many different terms, so new borrowing will not necessarily cost the 10-year rate.

The annual accounts show the effect of older, lower rates. At 30 June 2026 the market value of government bonds (whole Crown) was $172.2 billion, against $177.1 billion in the accounts. Treasury says the difference is due to an increase in market rates since issuance.[18][19][22]

How fast bonds are replaced

Treasury forecasts repayments of $106.3 billion of market government bonds and $134.0 billion of new bonds (face value) in the five years to June 2031.[53][54] The new borrowing page shows these by year, next to the bonds already on issue that fall due.

How much the forecasts depend on interest rates

Treasury estimates how much the government's interest costs, and the interest it earns, would change if interest rates were 1 percentage point lower. It says the sensitivities are broadly symmetrical, so a 1 point rise would change them by roughly the same amounts in the other direction. "Net effect" is the change in the operating balance (revenue minus expenses); a plus means a larger surplus or a smaller deficit.[55][56][57][58]

Treasury's estimates cover the external exposures of NZDM (Treasury's debt management office) and the Reserve Bank together, so they are not exactly the same scope as core Crown finance costs.[58]

Try it: what if the rate changed?

• The interest bill is paid on core Crown borrowings. In 2025/26, 3.51% of average borrowings ($247.9 billion) gives the $8.70 billion of interest expense on financial liabilities; adding the $0.36 billion interest unwind gives the $9.06 billion of finance costs. The slider uses borrowings at 30 June 2026, which were higher than the year's average, so at 3.5% it shows more than the 2025/26 interest expense.
• Net core Crown debt is borrowings minus financial assets, and the government earns interest on those assets. Rate × net debt is therefore not the interest bill. It is closer to interest expense minus interest earned, and only if the assets earned the same rate (in 2025/26 that difference was about $5.2 billion).
• A change in market rates does not reach the whole debt at once. Fixed-coupon bonds keep their coupon until they are repaid (see bonds). Short-term borrowing and settlement deposits pay short-term rates, so changes in those rates reach them sooner. New borrowing is priced at market rates for its term when it is raised. The latest 10-year tender yield is shown as one example of a market rate. Recent tender yields ranged from 3.19% for the Treasury bill due Jan 2027 to 5.50% for the bond due May 2054 (see new borrowing).[110][107]