Gordon Campbell | Parliament TV | Parliament Today | News Video | Crime | Employers | Housing | Immigration | Legal | Local Govt. | Maori | Welfare | Unions | Youth | Search

 


Economic Debate Christchurch Earthquake Funding Dilemma

Max Bowden's BusinessSense: Economic Debate Christchurch Earthquake Funding Dilemma

It's been a tough week for the Govt.

First its South Canterbury Finance bail-out goes way over budget, and then it gets hit with another potentially huge bill with AMI Insurance needing help to meet its obligations as a result of Christchurch's two major earthquakes.

The interesting thing is how stubborn the Govt is being about finding ways to pay for all this. It is steadfastly against raising the money through any form of taxation, preferring the old Tory right ideological remedies of cutting spending and selling assets.

The IMF will be happy, but NZers are not strongly opposed to a levy - a tax increase by another name - to help fill the funding void. Labour says Christchurch's earthquake will be used as a scapegoat to push through National's "old world" economic agenda. Will this be the case?

The Trans Tasman Political Week's Economic Debate has been looking at this issue, and does a great job of outlining the pros and cons of the various options open to the Govt.

"Economic Debate - How To Rebuild A City A surprisingly generous 40% of taxpayers surveyed by UMR flagged their willingness to temporarily pay more taxes to help rebuild Christchurch.

They favour an earthquake levy on those of us with incomes above $48,000 rather than increased Crown debt or big spending cuts. 29% would prefer spending cuts, 22% preferred more Govt borrowing.

But the PM is sticking to his budgetary guns and eschews a levy, or tax increases, to raise the several billion dollars needed, among other reasons because he doubts taxpayers appreciate the extra impost would have to be paid for 10 to 15 years.

He may be right, but they (the taxpayers) should not be thought totally ignorant about the implications of the remaining options.

Finance Minister Bill English has flagged intentions to raise debt over the next year or so to share the cost with future taxpayers. Shifting payment to the future makes sense because we are building for the future.

But this will worsen a budget deficit already at troubling levels and because NZ is seriously indebted it risks a credit rate downgrading.

Govt waste should be eliminated and greater efficiencies encouraged to keep the deficit in check, but excessive spending cuts risk a repetition of the early 1990s experience, when fiscal austerity drove economic activity down, reduced Govt revenue, lifted unemployment payments and pushed the Govt books further into deficit.

Moreover, selected groups will be called on to share the burden - the beneficiaries of spending on culture and heritage, law and order and recreational services, for example, university students, working-for-families and social security beneficiaries, and KiwiSavers.

Emphasising the burden of the budget deficit and the risks of borrowing, the NZ Herald says a responsible Govt should be considering a tax levy for a limited term.

Economist Brian Easton agrees. He reckons costs of around $5bn spread across 10 years amounts to an annual levy of $500m (less than $5 per taxpayer a week, even allowing for inevitable overruns and the costs of servicing the debt).

This would be around 0.5% on the existing tax rates. More important, an effect of the levy would be to shift the burden from selected groups to the community generally.

Easton supports fiscal consolidation to get the Govt and country living within their means. But more critically, paying for a task so massive should be spread across all citizens and across all possible policy options."

The Govt is taking the least radical path over this issue much as it has done over other economic matters throughout its first term in office. (eg the 2025 Taskforce, Welfare Working Group and Tax Working Group recommendations.)

There seems little doubt it will win this year's election. Hopefully it will see any new mandate not as a message the country wants the same as it got over the past three years, but the new ideas it promised when John Key was first elected to office.

Once the earthquake rebuild is truly underway, the boost to the economy will hopefully enable some clearer thinking in economic terms.

Max Bowden Publisher/Editor In Chief The Main Report Business Week

ENDS

© Scoop Media

 
 
 
 
 
Parliament Headlines | Politics Headlines | Regional Headlines

 

PARLIAMENT TODAY:

  • Week in Parliament 22-05-15
  • Saturday Sitting
  • House Rises At Midnight
  • Telco Levy Bill Passes
  • Telco Levy Bill Completes First Reading
  • Social Housing Bill Passes Under Urgency

  • TPPA: University Of Auckland Warns Of Negative TPP Impact

    The University of Auckland May 20, 2015 University of Auckland Warns of Negative TPP Impact With the Trans Pacific Partnership (TPP) negotiation drawing to a close, the University of Auckland has expressed serious concerns about its potential implications. ... More>>

    NZ Flag: Flag Referendum Gets Hit Hard In New Poll

    The latest Campbell Live text poll confirms it is time for the Prime Minister to listen to the public and shelve his flag referendum, says the New Zealand First Leader Rt Hon Winston Peters. More>>

    Gordon Campbell: The Government’s Belated Moves On Property Speculation

    Is it a property tax on capital gains or a capital gains tax on property? The Jesuitical distinctions in the government’s spin about its latest moves on property speculators are all about whether the government can claim that it jumped, or confess that it ... More>>

    Grant Robertson:
    Key Can’t Just Be Prime Minister For Parnell

    John Key must show New Zealanders in next week’s Budget that he is more than the Prime Minister for Parnell, and is also the Prime Minister for Pine Hill, Putararu and Palmerston North, Labour’s Finance spokesperson Grant Robertson says. In a ... More>>

    Labour Party: More Regional Jobs Go In Corrections Reshape

    News that 194 Corrections staff are to lose their jobs will have ramifications not only for them and their families but for the wider community, Labour’s Corrections spokesperson Kelvin Davis says. Prison units at Waikeria, Tongariro and Rimutaka ... More>>

    ALSO:

  • NZ First - Prison Job Losses to Send Money Offshore
  • TPPA: ‘Team Obama’ Regroups On Fast Track, Still Not Deliverable

    ‘After yesterday’s stinging and unexpected defeat for the Obama administration’s attempt to advance Fast Track legislation in the US Senate, Senate leaders have worked up a compromise they think will get them past this blockage’, according to Auckland ... More>>

    NZ Government: 5,500 More Doctors And Nurses In Our Hospitals

    Health Minister Jonathan Coleman says a record number of doctors and nurses are working in District Health Boards across the country. More>>

    Controller and Auditor General: Katherine Rich Conflict of Interest Decision

    We are writing to you about a matter that has been raised with us by members of the public. More>>

    ALSO:


    Budget 2015: Andrew Little On The 2015 Budget

    Speaking to the Chamber of Commerce, the Labour opposition leader attacked the government’s approach to economic issues facing New Zealand. He said they have been “more than reckless in their complacency” and “the next week’s budget will do nothing ... More>>

    Defence Force: NZDF Building Partner Capacity Mission Personnel In Iraq

    NZDF Building Partner Capacity Mission Personnel in Iraq The New Zealand Defence Force Building Partner Capacity training mission contingent is in place at Taji Military Complex in Iraq. The Chief of Defence Force Lieutenant General Tim Keating says the ... More>>

    PM Press Conference: ACC Levy Cuts Announced

    In a press conference this afternoon in Wellington, ACC Minister Nikki Kaye proposed $500 million worth of ACC levy cuts. More>>

    Quakes: New Process For Red Zone Crown Offers

    Canterbury Earthquake Recovery Minister Gerry Brownlee has announced a process to give everyone a say on the Crown offers to owners of vacant, commercial/industrial and uninsured properties in the Residential Red Zone. More>>

    ALSO:

    Gordon Campbell: On The Battle Obama Is Waging Over The TPP

    For the past two and a half years, this column has been arguing that the fate of the Trans Pacific Partnership (TPP) deal will hinge on whether US President Barack Obama can win Trade Promotion Authority (TPA) from Congress... Last week, the White House finally, finally unveiled a draft TPA Bill. More>>

    ALSO:


    Gordon Campbell: On lessons for Labour from the UK election
    If the polls were right – and the pollsters kept telling us how accurate they’d been in 2010, and even Nate Silver was getting the same results – there seemed no way that the British Labour Party could lose last Thursday’s British election. With Labour predicted to win around 270 seats and the Scottish National Party batting around 55-60 seats, Labour seemed to be home free. But…as we now know, things didn’t turn out that way. Labour ended up with 232 seats and the Conservatives swept back to power with an outright majority, after winning only a little more than a third ( 36.9%) of the votes cast.MORE >>
    Also.

  • NZ PM John Key - PM congratulates David Cameron after UK election
  • The Nation IV Transcript - Hack Attack author Nick Davies
  • Get More From Scoop

     

    LATEST HEADLINES

     
     
     
     
     
    More RSS  RSS
     
     
     
     
    Politics
    Search Scoop  
     
     
    Powered by Vodafone
    NZ independent news