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

Half Empty: Dairy Prices Drop To Lowest Since August 2009

Dairy product prices fell to the lowest level in more than five years in the latest GlobalDairyTrade auction, led by declines in butter milk powder and whole milk powder.

”Stocks of dairy commodities are building across the globe due to Russia’s current ban on importing dairy products from many Western nations, and a lack of urgency from Chinese buyers, while at the same time global milk supplies are expanding,” AgriHQ dairy analyst Susan Kilsby said in a note. More>>

 

Slippage: NZ Universities Still In Top 3% Globally

This year the University of Auckland ranked 175 (down from 164 last year); the University of Otago ranked 251-275th (down from 226-250), both Victoria University of Wellington and the University of Canterbury held their ranks (at 276-300thand 301-350 respectively), while the University of Waikato dropped from 301-350 to 351-400. More>>

ALSO:

Gordon Campbell:
On The Last Rites For The TPP

The Trans Pacific Partnership trade deal is one of those litmus issues that has always had more to do with one’s place on the political spectrum than with any imminent reality... For the TPP’s friends and foes alike though, the end now seems nigh. More>>

Gordon Campbell: On The Farcical Elevation Of David Seymour

With the election won, it’s time to find jobs for the boy. David Seymour is the Act Party’s latest scrounger to be rewarded by the National Party, and not only with a seat in Parliament. More>>

ALSO:

As Key Mulls Joining ISIS Fighting: McCully Speech To UN Backs Security Council Bid

It is an honour to address you today on behalf of the Prime Minister and Government of New Zealand. Our General Election took place last week - our Prime Minister Rt Hon John Key is engaged in forming a government and that is why he is unable to be here in New York... More>>

ALSO:

Labour: Cunliffe Triggers Party Wide Leadership Contest

David Cunliffe has resigned as Labour Leader, but says he will seek re-election... If there is any contest the election will have to go through a process involving the party membership and union affiliates. More>>

ALSO:

Flyover Appeal: Progress And Certainty, Or Confusion And More Delays?

Lindsay Shelton: The Transport Agency, embarrassed by the rejection of its flyover alongside the Basin Reserve, says it’s appealing because the decision could “constrain progress.” Yet for most clear-sighted Wellingtonians a 300-metre-long concrete structure above Kent and Cambridge Terraces would in no way be seen as progress… More>>

ALSO:

Gordon Campbell: On Cunliffe’s Last Stand

Right now, embattled Labour leader David Cunliffe has three options. None of them are particularly attractive for him personally, or for the Labour Party... More>>

ALSO:

Key Seeking 'New Ideas': Look To Children’s Commissioner On Poverty - Greens

John Key should not reinvent the wheel when it comes to ideas for tackling child poverty, and instead look to the recommendations of the Children’s Commissioner’s Expert Group on Child Poverty, Green Party co-leader Metiria Turei says. More>>

ALSO:

Get More From Scoop

 

LATEST HEADLINES

 
 
 
 
 
 
 
 
Politics
Search Scoop  
 
 
Powered by Vodafone
NZ independent news