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

#SaveCampbellLive : Mediaworks Delivered 104,000 Petition Signatures At TV3's Newton HQ
#PonyTailGate #TailGate Full Coverage

Pukeahu Park : ANZAC 100th Anniversary Dawn Service In Pictures

Roughly 18,000 people gathered this morning at Pukeahu Memorial Park for the Anzac day centenary. Anticipating the large turnout, patrons arrived as early as 4.30. It was virtually impossible to get near the Memorial after 5am. By 6, the crowds on Taranaki Street had stretched as far back as the Z Petrol station.

The screens erected around the park displayed the live events to those who had turned up. The heat generated by the huge number of people caused many to take a turn. Medics and ambulances were on hand for the fainting crowd members. Only twenty minutes into the ceremony, one medic said they had already dealt with 15 to 20 spells. More>>

 

PARLIAMENT TODAY:

War: What’s To Commemorate?

Gordon Campbell in Werewolf: Is there anything that can be validly commemorated on this 100th anniversary of Gallipoli? Beyond, that is, a fleeting sense of empathy with the thousands of soldiers killed or wounded on April 25 1915 and in the months thereafter, until the whole thing was finally called off in December 1915. More>>

MORE IN WEREWOLF:

ALSO:

Peter Ellis Case: Minister Declines Request For Commission Of Inquiry

Justice Minister Amy Adams has declined a request from supporters of Peter Ellis for a Commission of Inquiry on the basis that an inquiry cannot be used to determine the liability of any person. 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:

Greens: Govt Breaks Free Doctors Visit Promise To Kids

Documents obtained by the Green Party show that the Government decided to fund only 90 percent of doctors’ visits for children suffering from an injury in an attempt trim the cost of the so-called “free” visits. More>>

ALSO:

Other Wars: Extension Of NZDF Commitment In Afghanistan

The New Zealand Defence Force’s commitment of mentors and support staff to the Afghan National Army Officer Academy in Afghanistan has been extended out to December 2016, Defence Minister Gerry Brownlee says. More>>

PM's Press Conference: Auckland Property Prices Increasing "Too Rapidly"

John Key accepted that Auckland property prices 'are going up too rapidly” in a press conference held today in Wellington, however he said that this is not anything new. More>>

ALSO:

Press Conference: ANZAC PMs Concerned About ISIL Bringing The War Home

Prime Minister Key and Prime Minister Abbott spoke of the bond formed between Australia and New Zealand in the “baptism of fire” of Gallipoli. Abbott stated that New Zealand and Australia’s values and interests are linked, and this is reflected in the joint operation in Iraq which will begin shortly. More>>

ALSO:

Get More From Scoop

 

LATEST HEADLINES

 
 
 
 
 
 
 
 
 
Politics
Search Scoop  
 
 
Powered by Vodafone
NZ independent news