Budget 2018 – Fiscal restraint and state housing – ideological craziness exposed

The government has decided to increase the building of state housing from their extremely modest target of 1000 a year to the still very modest target of 1600 a year over the next four years.
Housing NZ is not being given any extra money to do this.
They will have to borrow on private financial markets at higher rates than the government can borrow money for.
The cost to the government will be more as a result.
This absurd result is the product of what they call “fiscal restraint”.
Here is how it works.
The government has a three-pronged fiscal strategy that requires them to achieve goals that are entirely self-imposed and don’t make economic sense.
1) A promise that the government will not spend more than 30% of GDP on its operating expenses. This is the lowest percentage of any other OECD country.
2) A promise to reduce the net public debt to below 20% of GDP by 2022. It is 21.6% now. the government budget actually shows them overshooting their target and reducing net debt to 19.1% by 2022. That means the government must run budget surpluses to repay the debt.
3) A promise not to introduce new taxes (except for regressive, anti-working class petrol taxes in Auckland).
Net Crown debt is actually around 10% of GDP. The government deliberately chooses to inflate the debt in its accounts by excluding the $37 billion Super Fund from its assets. The auditor general has criticised the government for this as it breaches all basic rules of accounting. Banks, credit rating agencies and others also include the Super fund in their assessments of New Zealand’s creditworthiness for new loans.
Under the current budget projections throughout the forecast period through to 2022 operational spending is actually well below the 30% barrier the government imposed on themselves averaging around 28% GDP.
New Zealand’s GDP is $280 billion. Government spending could increase by $4 billion a year without breaching the self-imposed limit.
Revenue, even without new taxes, is rising from 29.9% of GDP to 30.4% over the same period.
This gives the government a surplus averaging $9.5 billion dollars a year. There is a surplus averaging nearly $5 billion a year just using the more narrow operating balance excluding gains and losses.
Another billion dollars a year each thrown at Health, Education, Working for Families and Welfare benefits would go a long way to radically improving the quality of the service and the pay of those delivering it.
So why hasn’t the government done that.
The money that could be spent on current expenditure in those areas is actually being diverted into infrastructure investments that are desperately needed.
This is explained in a CTU summary of the budget?
So why can’t the Government increase spending to 30 percent of GDP? Because it is spending large amounts ($41.8 billion over the five years to 2022) on capital for school and hospital buildings, housing, rail, prisons, defence, computer systems and other investment. These all may be important but being long term projects with an expected future benefit to the country (and hence to the government) they could be funded from borrowing. Borrowing is very low cost at present – Treasury estimates their average interest rates at around 3.6 percent. 
But the borrowing limit prevents this. A little more funding is available from taxes as the economy expands and people move up tax scales, but nowhere near enough to close the gap.
While net debt falls to 19.1 percent in 2022 from a forecast 21.1 percent by June 2019, if the NZSF is included as an asset balancing against the debt, net debt in June 2019 is only 7.2 percent and falls much more rapidly to only 2.3 percent in 2021. ……. The international agencies include these assets when comparing countries. The Auditor-General has criticised the exclusion of these assets because they “pre-fund” future expenditure and therefore reduce New Zealand’s future liabilities.
We could set a debt target of around 10.0 percent on this more justifiable basis, which would still be among the lowest in the OECD. It would allow several billion dollars of prudent borrowing, freeing up funds for operational spending to address the large funding shortfalls left by the previous Government.
The waste encouraged by the rigid debt limit is illustrated by the fact that Housing NZ will be required to fund its welcome house building programme by private borrowing, almost certainly at greater expense than the government could borrow. See the section on housing below. Because it is a Crown Entity, Housing NZ’s borrowing is not included in the ‘Net Core Crown Debt’ target. The limit leads to more expensive borrowing.
This brings us back to why Housing NZ will be forced to borrow to build the state houses we need and doesn’t have enough money to build the many more that are actually needed.
This is not economic science it is religious dogma.


  1. Our ruling Tweedledee Tweedledum parties should heed the warning signs, real change is on the the way & Italy is leading the charge. Italy is about to install a radical anti-establishment government. The anti-establishment Five Star Movement and far-right League are now consulting their members on their plan. The populist parties reject EU austerity and want to renegotiate Italy’s debt.

    Guaranteed income for the poor. Poor families will get a €780 (£682; $919) basic monthly income, provided recipients actively seek work, the parties say.

    New “flat tax” rates are to be introduced. The plan aims to reduce income tax rates to just two brackets, set at 15% and 20%.

    Families would receive a €3,000 annual tax deduction based on household income. Sales and excise tax increases next year, worth €12.5bn, will be scrapped.

    The populist parties say they want revisions to the EU’s Stability and Growth Pact, which sets a tough budget deficit limit of 3% of GDP. The plan aims to reduce debt through “the revival of internal demand”, not by continuing austerity.

    The minimum monthly pension is to be set at €780. The plan abolishes the current pension reform that raises the retirement age in phases. Instead, a new points system would combine people’s total years of social security contributions with their age. The total must be at least 100, meaning that someone who has paid into the system for 41 years, for example, could retire at 59.

    The populist leaders disagree with the EU sanctions on Russia and want them lifted. They do not see Russia as a military threat, but as “a potential partner for the EU and Nato”.

    Of course the policy that most of you will disagree with is; It demands more EU help for Italy, the main destination for migrants arriving from North Africa. And it insists that the estimated 500,000 undocumented migrants in Italy must be deported “as a priority”. That would require the creation of “temporary stay facilities” throughout Italy for migrants earmarked for expulsion, the parties say.
    N.B. we here have no idea about the impact illegal migration (shipped over by unscrupulous people traffickers) is having on countries such as Greece, Italy & Germany.

  2. Got a magic wand and unlimited money Mike? You attacked them for their initial target, now you attack them for wanting to do more. Labour led coalition government is damned if they do and damned if they dont.

    • Do some research into how the first state house building was funded. That will tell you where the funding should be coming from for this round of new state housing.
      Then if you want to be useful, ask this government why it cant use this policy again instead of borrowing off shore at god only knows what cost.

        • Has money, debt, transformed into something different then has it?

          What has changed that requires a government to borrow on the open market rather than use reserve bank funds?

          • Most of what people think of as money is actually computer digits, created out of thin air by governments and banks.


            So-called reserves amount to less than 10% of the money in existence, and when derivatives are considers, than falls to less than 1%. It’s all Ponzi, founded on the creation of ‘new money’ to pay the interest on the last lot that was created out of thin air.

            Money as Debt


            It seems that about 0.1% of the populace gets it.

            Who has the gold that can be considered a real reserve? Not the western world. Russia, China and India.

            NZ is just a minor player in the international Ponzi scheme. And the Ponzi scheme unravels fast the moment the energy supply goes into severe decline, as it inevitably must.

            • I do hope that lots of folk go to this link. It’s very easy to follow.
              It does not however, in describing how govt. issued fiat money could be used for infrastructure, and positive money introduced into the system this way, really address the function of managing the private sector’s finances. Even if it is just the redistribution of this fiat money through the economy there is a service the community requires in managing their account of value. Either store or borrowings. Somebody has to provide this service.
              Also in making loans to the private sector, for personal housing or business, whatever the origins of the money being lent, there is a job to do in assessing who should be eligible for a loan and for what purpose, and to see that it is used for the allotted purpose and repaid. This could be done by a government agency, but it will cost. The private banking system has a legitimate function in providing the alternative.
              Back in a time when the deposit reserve ratio was controlled by government agency, and banks were not allowed to speculate in their own right but were constrained to receiving deposits and making loans it didn’t really matter that the money supply was 90% made up of multiplied deposits, It didn’t provide banks with an unreasonable return for the service of managing the job of keeping account of the everyone’s value , and was workable, except perhaps for the fact of no money being fed into the system to allow for the payment of interest. But it is totally in the hands of the reserve bank to create this if needed, and reduce it when needed if they chose to exercise that power.
              However. When as now the banking marketplace offers great reward for speculation, and no reward but considerable risk for employment generating productive enterprise, private , profit driven money management is no longer going to serve society.
              D J S

  3. This is basically how Richard Prebble et al delt with govt debt in the Rogernomics era. Turned the countries’ assets into State owned enterprises and then transferred the government’s debt onto them. “Creative accounting ” I think it was called.
    That was just before spending more money preparing them for sale than the sales recovered. Most of the preparation money having been paid to the people who then bought them.
    ” The law arrests the man or woman that steels the goose from off the common.
    But leaves at large the greater villain that steels the common from the goose. ”
    Nothing seems to change.
    D J S

  4. Grant found a print of one of Bill’s old budgets, he’d left in a bottom drawer and he used that.

  5. I was similarly like Grant Robimson; – was brought up under the Presbyterian church as our family religion.

    This chuch taught our family to be frugal and we now see thios comming out of Grant Robinsion’s own financial planning here in this budget.

    We will see more similar frugal licience under suceeding burgets going forward now so don’t hold your breathe folks.

    The rich are safe with his control of the purse strings sadly.

  6. “Revenue, even without new taxes, is rising from 29.9% of GDP to 30.4% over the same period.”…which assumes an unchanged business environment…..as we are witnessing the highest oil prices since the GFC (and rising), a nascent trade war and US bond rates on the increase…..how confident are you in that that projected tax take?…Cullen (yes Cullen) was and still is fiscally prudent,,,and you can thank him later.

  7. The Budget reveals to us who OWNS and RUNS NZ Inc, it is NOT the Labour led government, the coalition government with NZ First and weak Greens in tow, it is the BANKS, the vested interest holding BUSINESS SECTOR and its owners.

    We have massive private debt already, much tied up in housing, some business investment and consumption. We have low government debt, when compared with other OECD countries.

    So Grant Robertson has shown, he is ok with letting Housing NZ borrow on the private lending market, internationally, I presume, to get some money to build more social housing, most will be tiny units in blocks of apartments, that will be the ‘intensified’ ghettos of the future, the ghettos of the poor.

    Wow, what an achievement.

    I expected this kind of budget, as the government is weak and lacks courage. The finance and business lobbyists have Grant by the balls, and the rest of the government is also held hostage, because should they step out of line of their own set fiscal restraints, the lobbyists mentioned and their mercenary MSM will destroy this government within months, claiming they lack all ‘credibility’, ‘honesty’ and ‘reliability’.

    To bring about true change, the present system has to collapse, there is no alternative to that happening, as so many out there, the common voters, are also addicted to the status quo, they are shit scared to throw off the shackles, as that means they may ‘lose’ a bit, that is a bit of ‘savings’ and ‘investment’ same have as working slaves, serving the present system.

    Only an international economic crisis, aggravating the social division crisis, will lead to the change that is needed, as undermining the present system is considered a great threat by the vested interest holding big stakeholders, it is similar to treason or terrorism, as they would see it.

    There will not be a shit chance for this government bringing the changes that are needed.

  8. We have a Blairite type Labour Party in office. They are still cow-towing to neoliberal myths (trying, as Winston says, to put a human face on Capitalism – when more dramatic change is the real necessity). Adern is firmly on the right; not surprising as a protege of Clarke and Blair – deeply into identity politics and photo ops, but hardly real Socialism). As for comments above about unlimited money – everyone should get up to speed with Modern Monetary Theory. Taxes do not fund Government spending. Neither does the Government need to borrow. A sovereign nation issuing its own currency can never run out of money and can afford to buy any activity (including social welfare, and housing) that is productive, and makes use of idle resources, both capital and labour, as long as it does not lead to excessive inflation – hardly likely these days. The worry that the NZ Government has is mainly the inflation of housing costs. Gareth Morgan has good ideas for remedying this, that the Government appears not to be considering.

    In short – a completely rubbish Budget, ptoduced by a pack of dimwits.

  9. Money doesn’t build houses. There can be zillions assigned – and if the systems and materials aren’t in place it doesn’t matter how many spins you get from a dollar.

    What materials will be used? Are they produced and processed here? Have we got a dedicated stockpile of vital materials? Or several – because Auckland is not the only place in need. Is it?

    If we are importing building materials – from where? Why? What’s the wait time? What are the risks? (Apart from bugs in the shipments.)

    Will these be bog-standard, barely insulated and miserable matchboxes? Or are we using the opportunity to drastically upgrade the quality and longevity of our public housing stock? (The old 1940s-50s shiplap and rimu are still going pretty well. Tradies had better training in those days, though.)

    Are we using traditional boots in the mud methods? Or are we using prefab and new technologies? If we do the second method then we have a chance indeed to meet and pass the target, as well as rapidly upskilling a specific workforce. Would unions back this?

    I know I haven’t been partiularly looking yet surely we know these basics.

    Whatever weird things the government does with money – I’m far more interested in the fundamentals. And if those aren’t in place it matters diddly-squat how much anyone can borrow at what interest rate.

    PS this is NOT something we can leave to our wonderful corporates or magnificent mandarins. Christchurch rebuild is there as a cautionary tale and Lianne Dalziell as a shining example of perfect doormat. Let’s not.

  10. It makes sense to me because I know why there are nipples on men.

    There are nipples on men because when we’re being constructed pre natal there is a stage where who knows what we’re going to be yet. Girl or Boy. Who knows? So, lets just get the nipples on and we’ll figure the rest out later.

    In NZ/AO’s case, the fortunes to be had were there ( Nipples) so lets take it all then worry about getting caught later ( Hence nipples on both boys and girls). Like the Great NZ/AO Swindles. The nipples are there. No going back. ( Am I making sense? I don’t think I am… : (

    We were robbed blind by a cadre of greedy crooks who must now work ever harder to cover their tracks while NZ/AO was being built. Their greed and narcissistic ego’s would forever change NZ/AO. But into what? A prosperous and happy country or a poverty damaged country suffering from societal dis-ease to make one or two many $-billions.
    I’m sure there are parables better than stories about the dawn of man-nipples
    The point I’m trying to make is, our country was rich, and showed it off. Then it was robbed blind and now we must be ever convinced that we’re broke-as. Otherwise, we might just start asking where the fuck the money went? And most importantly, as the budget shows, where it’s going now. Today.

    NZ/AO’s evolved into a shitty little sack of lies and they’re hoping we’ll keep swallowing them.

    We were led to believe that our country was a struggle and that what we did was of little value but please, keep doing what you’re doing. Nothing to see here. Leave it up to us and we’ll see what we can do. Won’t be easy, but we’ll try. Now, back to the TV. Everything’s fine. Nothing to see here.
    Example: Alan Gibb? 1986 $46 million
    1998 $200 million
    That’s quite the hourly rate there Al?

    Does that mean two things?
    Thing #1
    Reveal the truth about our wonderful and wealthy country producing world class and vital goods… Or?
    Thing #2
    Try to keep a lid on the lies, swindles and deceit until the last lying crook is dead in his/ her coffin.
    Lets be honest. We’ve struggled since the 1960’s really. The 1970’s were a last hurrah for our economy, then the crooks of the 1980’s and ’90’s slipped the dagger in with a twist.
    Labour hasn’t got the knackers to go for Thing #1. Because there’re too many mates who’d go down. Natzo’s ? Same-Same but different.
    Thing # 2 Is our current status quo.
    NX/AO’s an extremely wealthy country on all levels.
    Here’s what and why and whom.
    Thanks @ Wild Katipo .
    New Right. NZ

  11. The housing ponzi scheme will continue .. to pay for borrower’s mortgages, renters will overcrowd to met rising rent. Immigration will provide a steady stream of people for this required overcrowding and the government will continue to provide aid to mortgagees and employers via the likes of Working-for-Families and increased accommodation supplements.

    The brain-drain will be back in 2019, combined with the coming private debt crisis and Robertson’s unwillingness to invest – New Zealand is likely to be completely polarized. There will be the rich and then there will be the homeless/working poor.

    Crime will increase.

  12. I love the way you guys pour your Shit on Labour.

    You are real heroes. National parasites and other vermin adore you.

    My sincere regards. Long Live Labour.

  13. Labour’s housing policy is very depressing. From choosing to waste money by NOT using the cheapest government interest, in some sort of attempt to fake the books accountant style, to selling off public land for private housing like Unitec, instead of renting it to renters when there is a massive rental shortage not likely to abate any time soon.

    …And then not having means testing on the purchasers! It’s so crazy. Any decent person will keep right away from purchasing those houses, apart from of course the greediest who probably have plenty of family money but happy to take advantage of tax payer assets sell offs competing with the genuine people who hope against hope they might get a property that isn’t hours away (+petrol tax).

    Then labour being in denial about what’s caused the crisis which is lazy immigration on steroids, +70k per year new residents, + 100k+ work permits + tourism + no accurate records + satellite families + encouraging illegal workers and then thinking 1600 houses will cover the 200k extra people coming in yearly that they don’t even know whose here anyway and what they are up to. It’s insane.

    Then expecting industry like Master builder’s who benefit from keeping housing as high as possible for their industry profits to give Labour advice on the housing crisis!

    Prior to the election overtime Labour went on about their housing policy their ratings went down. Jacinda saved the day, by actually giving them something else to talk about, so their Nat Lite housing could be out of the headlines for a few weeks so that while Jacinda was telling a few F-wit’s in the media off about the status of her womb, the average voter could not be reminded repeatedly and proudly about Labour’s screwed up policy.

    Sadly labour try, but they lost touch with reality on housing a long time ago and think that their ideology will somehow solve it when basic maths, says not happening.

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