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

Gordon Campbell:
On Gaza And Burning The Israeli Flag

One of the selling points in New Zealand’s campaign for a temporary seat on the Security Council is that we have a pluckily independent voice to offer on international conflicts.

This image is not entirely self-delusional. When we did occupy a temporary UN Security Council seat in the 1990s, New Zealand was forthright about the need for the international community to actively respond to the Rwanda genocide. On April 14, 1994, New Zealand, Nigeria and the Czech Republic were the only nations to call for a forceful UN intervention to halt the killings. It was a proud moment in the diplomatic record of the Bolger government.

What then, is the current National government doing with respect to the slaughter in Gaza? More>>

 

Parliament Today:

Red Tape: Local Regulations Go Under Microscope

The Government says it is accepting nearly all of the recommendations the Productivity Commission has made on ways to improve local regulations. More>>

ALSO:

Spending Questions: Claudette Hauiti To Step Aside At Election

National Party President Peter Goodfellow confirms that he has received notification from List MP Claudette Hauiti that she plans to step aside at the 20 September election. More>>

ALSO:

EPA: Board Of Inquiry Rejects Basin Flyover By Majority Of 3 To 1

The independent Board of Inquiry delegated to decide on the Basin Bridge Proposal has, by a majority decision (3 to 1), cancelled the Transport Agency’s Notice of Requirement and declined its resource consent applications for the construction, operation and maintenance of a flyover on State Highway 1 in Wellington City... More>>

ALSO:

Gordon Campbell: On The Non-Apology To Tania Billingsley

The refusal by Prime Minister John Key to issue a personal apology to Tania Billingsley has been accompanied by an array of excuses... Yesterday though, Key’s choice of words indicated that an apology was the last thing on his mind. More>>

ALSO:

Conventions: Winston Peters On The Nation

Winston Peters opens door to standing in East Coast Bays electorate, says it's an "exciting point" and he's thinking about it. "I’ve had a whole lot of people writing to me and calling up and saying ‘why don’t you have a go in East Coast Bays’." More>>

ALSO:

Waitangi Tribunal: Report On The MV Rena

In its interim report, the Waitangi Tribunal has found that the Crown’s conduct in response to the grounding of the MV Rena on Otaiti (Astrolabe) reef breached the principles of the Treaty of Waitangi. More>>

ALSO:

Gaza: Wellington Protest For Palestine Calls For End To Bombing

Around 300 people gathered outside the Israeli Embassy in Wellington on Friday to protest Israel’s occupation of Palestine. More>>

ALSO:

Gordon Campbell: On The Failure To Prosecute The GCSB

So one hand of the state – the Independent Police Conduct Authority – has now washed the hands of its brother agencies, and declared that all hands are clean. Case closed. More>>

ALSO:

Get More From Scoop

 

LATEST HEADLINES

 
 
 
 
 
 
Politics
Search Scoop  
 
 
Powered by Vodafone
NZ independent news