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

 

NZ On Dangerous Path To Higher Public Debt And Unprecedented Money Printing, New Report Warns


Wellington, 12 June 2020 - New Zealand is now on a dangerous path to higher public debt and unprecedented money printing with no credible plan for unwinding the situation before the next crisis, warns a new report by The New Zealand Initiative.

Covid-19 and the various types of lockdown responses have caused many governments to go even more heavily into debt and print money to sustain asset prices with borrowed money. Some governments and economists are taking about talk about printing money to a novel and alarming degree.

Report author Dr Bryce Wilkinson said in Doing whatever it takes with someone else’s money that during the 2008 Global Financial Crisis (GFC), Australia and New Zealand managed to avoid increasing public debt to imprudent levels and kept their central banks' interest rates at or above 2.5%.

By contrast, the wealthiest countries on the planet like the US, UK, and Europe increased their net government financial debt to well over 50% of GDP and set central bank interest rates below 1%. They also printed money.

Normality was not restored before Covid-19 appeared and they are now doubling up on lowering interest rates, increasing public debt, and injecting trillions of dollars into the global banking system.

“Unfortunately, the Government and the Reserve Bank of New Zealand are now heading down this dangerous path of high public debt and bloated central bank balance sheets coupled with historically low central bank interest rates.

“While some recourse to deficit spending is understandable, the worrying aspects are general absence of meaningful cost-benefit assessments of the funds being committed and the lack of a credible plan for reversing the excesses before the next crisis hits,” Wilkinson said.

The report warns that some proposals would undermine the roots of New Zealand’s fiscal and monetary constitution – particularly central bank independence from politics when implementing monetary policy.

The report highlights concerns that asset prices internationally are now being set on the basis that profits are to be privatised while taxpayers should bear the losses. New Zealand governments cannot stop that happening internationally, but they should stop Kiwi investors from developing that expectation,” said Wilkinson.

Wilkinson said policies that penalise thrift and prudent investing to reward borrowers and imprudent risk-takers are dangerous and should be avoided to the greatest extent possible. Bankers and investors should not expect to have their losses soaked up by taxpayers.

The report questions the cost-benefit case for the RBNZ to purchase up to $60 billion of government bonds with borrowed money and the current monetary policy framework that requires it to lift lower rates if inflation towards the middle of the 1-3% range when it is not clear that low rates are imposing any social cost on the community.

It also suggests that the implementation of monetary policy may be putting too little emphasise on the need for ongoing financial market efficiency and stability.

“The bottom line is that only proper justification for any policy is whether the benefits to the public outweigh the costs. We are not seen enough evidence that this is the case,” Wilkinson said.

Read more:
Bryce Wilkinson's report Doing whatever it takes with someone else’s money is available here.

© Scoop Media

 
 
 
Parliament Headlines | Politics Headlines | Regional Headlines

Gordon Campbell: On National’s Rampant Pandering To The Farming Vote

What on earth has happened to the political parties n the centre-right? Once upon a time in the US, the party of Lincoln was a respectable political party before it devolved into the cult of Trump. Here at home, the National Parry used to be able to manage and administer the economic orthodoxy in a reasonably competent fashion. Now it can barely do simple addition and subtraction. Something must have gotten into the water, and not simply out on the farm... More>>

 

Winston Peters Speech: The Gathering Storm Clouds: Ihumatao

Frequently around New Zealand you hear people say that politicians are all the same. It’s a convenient way to dismiss any careful investigation of the truth of that statement. New Zealand First since its inception has been committed to ‘one law ... More>>

ALSO:

National Agriculture Policy: Will Restore Farmer Confidence And Pride

A National Government will reduce regulatory burden and give farmers confidence for the future. Leader of the National Party Judith Collins and Agriculture spokesperson David Bennett announced National’s Agriculture policy in Gisborne today. “Agriculture ... More>>

ALSO:

Shaw: Wealth Tax Not A Bottom Line For Green Party But They Will Push For It

Green Party co-leader James Shaw says one of his senior MPs misspoke under pressure when she said a wealth tax was one of the party's bottom lines. More>>

ALSO:

Government: More Border Exceptions For Critical Roles

The Government has established class exceptions for border entry for a limited number of veterinarians, deep sea fishing crew, as well as agricultural and horticultural machinery operators. “Tight border restrictions remain the backbone of the Government’s ... More>>

ALSO:


Gordon Campbell: On Last Night’s Leaders Debate

Do political debates change voter intentions, and cause voters to switch sides? According to a 2019 Harvard Business School study conducted across 61 elections in nine countries involving 172,000 respondents, the answer would seem to be a resounding ... More>>

ALSO:

Dunne Speaks: The Election Campaign Just Grinds Slowly On And On

With just over three weeks until the General Election, the release of the first major pre-election opinion poll this week confirmed what was already being reported about this year’s campaign. Although the gap between Labour and National has narrowed ... More>>

Electoral Commission: Candidate And Party Lists Released

17 registered political parties and 677 candidates will be contesting the 2020 General Election Nominations have now closed and the Electoral Commission has released the electorate and party list candidates for 2020 online at vote.nz . Advance voting ... More>>

National: Plan To Restore NZ’s Prosperity

National’s Economic and Fiscal Plan carefully balances the need to invest in infrastructure and core public services while also reducing tax pressure on Kiwi families and businesses. National Leader Judith Collins and Finance spokesperson Paul Goldsmith unveiled National’s ... More>>

ALSO:

NZ First: Party List

New Zealand First has a proven twenty-seven-year history of bringing balance and common sense to our government. Amid the continued setbacks of COVID-19 restrictions, New Zealand First has once again sustained its profile by selecting a strong team ... More>>


 
 
 
 
 
 

LATEST HEADLINES

  • PARLIAMENT
  • POLITICS
  • REGIONAL
 


 

InfoPages News Channels