The Government recently ignored advice from Treasury urging Housing New Zealand to borrow centrally to build new state homes, to avoid the high interests rates and additional risk incurred from borrowing elsewhere. The Government’s decision to allow Housing New Zealand to independently borrow billions of dollars, so it can avoid higher levels of Crown debt and therefore stick to its self-imposed Budget Responsibility Rules, highlights that its fiscal policies are less about managing resources responsibly but instead creating a false appearance of responsible management.
Auckland Action Against Poverty is calling on the Government to scrap its Budget Responsibility Rules, properly fund the building of the tens of thousands of state homes needed, and repair the current stock in dire need of maintenance.
“The government is so concerned with pandering to big business and the media to try and manufacture a reputation of fiscal prudence, that it’s not even fulfilling its most basic duties of funding vital public services. There is nothing stopping the government from doing this. It has the ability”, said Ricardo Menendez March, Auckland Action Against Poverty Coordinator.
“The Government plans to build 6,400 state homes over the next four years, with this funding coming primarily from $2.9b Housing New Zealand was enabled to borrow independently, instead of through regular Government borrowing, despite the Treasury’s advice. About $234m of new money was allocated to the crown agency. If the Government had taken on that debt centrally, core Crown debt would’ve likely to hit the arbitrary Budget Responsibility Rules’ ceiling of 20% of GDP.
“The government is proving to everyone that its self imposed fiscal straight jacket is purely political and not based on sound economics. It is forcing public services to borrow from more expensive sources when Treasury have spelled out that this will make no difference to the economic reputation of the country, as the government still backs the agency financially.
“The Budget Responsibility Rules are preventing the Government from being able to adequately house our homeless community, and properly invest in the current state housing stock. The growing levels of inequality and infrastructure deficit require the Government to change their restrictive fiscal approach. If the Labour led Government is serious about addressing poverty in New Zealand, it will have to scrap the Budget Responsibility Rules.”