Deficit in English/Key thinking on infrastructure
ADVANCE New Zealand A new design for our economic future
MEDIA RELEASE Date: Sunday, 3 August 2008
Advance New Zealand warns of deficit in English/Key thinking on infrastructure funding.
Bill English has claimed NZ debt levels are amongst the lowest in the OECD, which flies in the face of the reality that each kiwi was in hock to the tune of around 36k at the end of March this year.
In the year to March 08 NZ's debt position increased by $414 billion and more than half our international liabilities have a maturity date of less than one year. That means the government is relying on speculative investment to fund our growing current account deficit. An extra $13.1 billion of portfolio investment (hot money) moved into NZ in the March quarter to 'take advantage' of our high interest rates.
Surely the claims being made by English and Key in respect of borrowing to fund long term infrastructural development will simply see a repeat of previous crises which led to cutting slashing and burning the fabric of our nation (1990s) to, temporarily it seems, get out of the mess the debt mechanism created.
I also note that National's 'new' approach to funding infrastructure by using bonds seems to be an extension of the approach previously employed by both Labour and National over the past decade and used extensively overseas, it is therefore not new in the sense it is being promoted by Key and English. Funding infrastructure through bond issues simply means the $36k per head of debt we now service will continue to grow into the distant future. That will serve to make future governments again look at reducing service provision, more privatisation and larger current account deficits. A veritable debt driven money-go-round with no off switch!
Like individuals, nations need to be free of debt to properly prosper – that has become an impossible dream under Labour and National.
Could anyone explain what makes a billion dollars of infrastructural bonds a better funding mechanism than creating a non interest bearing credit facility through a national credit authority, as has been proposed by economic reformers for decades?