Richard Prebble's
Letter from Wellington
Monday, 10 December 2001

Government Borrowing set to Rise

When Michael Cullen updates the state of the Crown's finances next week, he's likely to announce several hundred million dollars of new borrowing. Analysts predict the government could be forced to add more than $500m to its domestic bond borrowing programme this year - and even more next year.

Dr Cullen's spending binge in his first Budget has left just $815m in the kitty for new spending in election-year - and the government faces rising pressure to put more than half of that into health.

This year has seen a taxpayer-funded shopping spree including more than $1b to bail out Air NZ, $600m for Dr Cullen's super fund (rising to $2b year in two years), $78m for Kiwibank and $81m to buy back Auckland's rail corridor.

Even before September 11 and the Air NZ bailout, the government had projected its net debt to rise by about $1b for each of the next four years. Now, it's going to blow out further.

So Much For Open Government

Helen Clark campaigned on open government and no more secret deals - but that promise has been long forgotten. Margaret Wilson admitted last week that the Upton report on Susan Bathgate did "raise issues" but the report remains locked up in the Minister's office. Hugh Rennie QC also admitted the Solicitor General had told him there'd be a further investigation into whether Bathgate should lose her two other warrants - on the Complaints Review Tribunal and the Social Security Appeal Authority.

But the deal is now done. Bathgate resigned from the ERA but she'll keep her remaining two warrants.

The PM and Wilson say the Complaints Review Tribunal will be disestablished in December, so the question of Ms Bathgate keeping her warrant to stay on as chair is academic. What they haven't said is that the CRT is to have increased powers, its name changed to the Human Rights Review Tribunal, and the existing membership, including Ms Bathgate, rolled over.

Nick Smith's Bid to Cut Red Tape

Former Cabinet Minister Nick Smith is campaigning to cut red tape surrounding the RMA (an Act that Sir Geoffrey Palmer dreamed up but the National government passed). But Smith's concern for speedy legal process doesn't extend to his own case where IRD victim Dave Henderson is suing him over his comments in a 1999 Sunday News column. Smith has instructed his lawyer that he would "prefer the matter not be heard for 12 months given the election next year".

Smith wants to stretch the case out for as long as he can - well, at least past the next election. He also doesn't want to be judged in the Nelson District Court by a jury of his own voters - he instructs he would "prefer the matter be heard before a judge alone". Smith wants the voters to vote for him - but doesn't want them to judge him.

Kiwibank woes

NZ Post is struggling with its franchise holders, such as "Books and More", who will lose valuable retail space to the two Jims' Bank. The proposed payment per transaction does not compensate them for their losses, even on NZ Post's rosy forecasts.

Setting up the new bank will cause disruption at the busiest time of the year. Staff are tied up with training, and valuable retail space has been lost. The impact on NZ Post's own shops this Christmas is considerable.

The financial sector union, FinSec, has advised Post shop staff they should get a pay rise - to $14 to $16.75 an hour as tellers, not $12 as shop assistants. Minister Burton was right when he said the business was still fluid - it's getting more so by the day.

Student debt mythology

New IRD Commissioner David Butler has exploded the endlessly-peddled myth that graduates are fleeing New Zealand to escape their student debt. Mr Butler told the Finance and Expenditure select committee that only 5,184 graduates overseas are in arrears for their debt. And their average debt is only $3,900. There are five times that number of graduates in arrears still in NZ.

Graduates are being pulled overseas by fatter pay packets, they're not being pushed out by debt. The loans aren't the problem. Low wages are. The remedy is better economic policies that will create real growth.

Solomon Island Elections

The NZ and Australian governments have financed elections in the Solomon Is where the previous elected government had been driven out of office by a police coup, the country racked by civil disobedience and the treasury looted by politicians. The outgoing government was arguably the worst in the Pacific, having collapsed the economy, racked up $400m in debt and left insufficient money to pay civil servants' salaries.

Richard Prebble was part of a team of observers from Commonwealth countries. He reports the elections appeared to be fair and free. Seventy percent of sitting MPs were defeated. But some of the most corrupt MPs were re-elected and several new MPs have links to armed militants.

The deposed PM was re-elected with a big majority and his party has the second largest number of MPs. No party has a majority and the really interesting election will be for PM next week. The trouble with elections is that politicians always get elected.

More Anti-Business Moves

The government intends to grant local councils the power of general competence - in other words, the ability to get into any activity they like. Other proposed law changes will allow councils to rate telephone, power and gas companies, and charge special rates on hotel rooms.

Add all this up and it means bad news for ratepayers and more compliance costs for business.

Good Idea, Margaret

Labour Minister Margaret Wilson was recently overheard telling a colleague while buying lunch that she was under stress from a heavy workload. Poor Margaret said she was snowed under between now and Christmas. The overworked Minister said she wished she could pull the Health and Safety in Employment Amendment Bill off her desk and put it in the bottom draw.

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