How we can get the $100 billion we need to spend on infrastructure at no extra cost
The Economic commentator Bernard Hickey made an important point about the proposed infrastructure investment. It is way too small to make much impact on the years of neglect.
Writing for Newsroom he said that...
“This $6.8 billion package is nowhere near enough to solve an infrastructure crisis created by 30 years of under-investment and record-high (and unplanned-for) population growth over the last five years.
“The Government should use the power of a barely-geared balance sheet (19 per cent of GDP) and record-low interest rates (1.38 per cent yesterday for 10 year Government bonds).
“The Government would use its balance sheet to re-engineer Auckland, Tauranga, Hamilton, Wellington, Queenstown and Christchurch for affordable, warm, dry and productive housing and rapid transit systems that enable carbon zero by 2050.
“A proper number would be at least $100 billion of infrastructure, house, road, rail and public transport subsidies over the next decade.
“That would still leave New Zealand’s net debt well below the 40-60 per cent levels of our AA rated peers and lift our overall productivity in a way that would easily pay for it through our broad-base-low-rate tax system”
It is even possible to find $100 billion sitting around in various government accounts right now that is not being used productively or even usefully.
There is actually close to $100 billion in the ACC fund and Super Find combined which could be used.
ACC existed most of its life without a fund for future liabilities as it was established as a pay-as-you-go system to avoid ACC acting like a for-profit insurance company. ACC can do that because it is a state-owned entity backed by the power of a government to tax. All current liabilities are paid from current income. Having a huge fund to cover future liabilities for the next 100 years is only needed if ACC is being prepared for sale which the 1990-2008 National government was planning to do. Labour stopped the sale but didn’t go back to pay-as-you-go.
We were forced to pay levies way above what was needed to build up this fund. It’s our money lets have it back for something useful. The insurance model being used means that this year ACC had an “accounting deficit” of $8.7 billion because lower interest rates increase its liabilities.
For more on ACC see my previous blog.
The Super Fund is also based on a political decision, not an economic one. It is simply economically illiterate to believe using pre-funding for and particular future government expenditure is necessary. If that were true all government’s in the world would do it. What is needed is for an economy to be more productive over time. That happens with appropriate expenditure on people and infrastructure to make us more productive.
Cullen created the “Cullen Fund” to hold onto part of the government surpluses by holding it in a fund so he did not have the pressure to spend the massive surpluses he was creating. It was never true that National Super was unaffordable. A recent study by the Retirement Commissioner has confirmed that fact for at the next 30 years. Most countries like NZ have superannuation costs similar to what New Zealand will have in the future already. The 1999-2008 Labour-led government was partly responsible for the infrastructure deficit we have now. The surpluses could have been used for infrastructure then (or cutting taxes on workers) and if he had wanted to reduce debt that could have been done by bringing in some taxes on wealth which are non-existent in NZ.
I have also previously written about how the government “commits a form of accounting fraud when it refuses to include the $41 billion in the NZ Super Fund as part of the government’s assets.” This has been criticised by the Auditor General but continues anyway.
The money is there to do what needs to be done. What is lacking is simply the political will.
OR THEY COULD USE THE RESERVE BANK ACT TO PRINT MONEY FOR A “”EMERGENCY” PUBLIC NEEDED POLICY” AS CLIMATE CHANGE IS INDISPUTEDLY.
WHO ARE JACINDA’S “EXPERT ADVISORS’ AS THEY SEEM TO BE ABSENT HERE?????
tHE LAST TIME THE RESERVE BANK ACT WAS USED WAS AFTER THE 1929 GLOBAL FINANAIL CRASH SO WE ARE NOW ENTERING THAT SAME STUATION TODAY WITH LACKING INFRUSTRACTURE AND INCEASING UNEMPLOYMENT AGAIN.
WAKE UP LABOUR!!!!!!!!
DURING A SPEECH BY WINSTON PETERS IN GISBORNE BEFORE 250 PEOPLE DURING THE 2017 ELECTION WE HEARD WINSTON REPLY TO A QUESTION; HOW ARE YOU GOING TO RESTTORE THE DELAPIDATED RAIL DAMAGED BY NATIONAL GOVERNMENT?
WINSTON SAID “WE WILL USE THE RESERVE BANK ACT TO RESTORE OUR RAILWAYS AGAIN AS THEY DID DURING THE 1935 ERA AS THE FIRST LABOUR GOVERNMENT OF MICHAEL JOSEPH SAVAGE DID; – AND OUR THEN GOBAL TRADING PARTERS HAVE DONE SINCE THEN.”
Agree CG.
How do we then keep the country safe from being savaged by banker’s attack dogs, the US, UK, Israel and all the other free loading corrupt banker running the world’s biggest racket.
Although I agree that the Reserve Bank can be used to create the money for our infrastructure, I am fairly certain that the quote from Winston Peters is now out of date and that he will deny ever having said that.
No well first of all there’s a whole bunch of loose change just lying around after the earthquakes and natural disaster after disaster just waiting to be picked up. And that loose change is educational and health co-payments and insurance. So all these fee’s that go to private providers are ripe for nationalization and reintegration back into the tax system to pay for the maintenance universal health and education and welfare. We are already nationalizing to-big-to-fail insurance companies that have been taking customers premiums for decades and going sorry, fuck off. So there’s billions a year in easy co-payments that can be brought back into the system cleanly.
Money to pay for all this is not the only problem we don’t have the people power to deliver all that infrastructure. Our infrastructure is already not coping and I am not just talking about roads we need more houses or all kinds we need more teachers , we need more doctors, more builders, more Radiologist, more Schools, better public transport and we have water issues to name a few. More immigrants means more pressure on all of the above. Its a complex beast and one that will take time, a good long term plan and money plus resources. I hear some people saying the government should not interfere with the market as the market will provide really!
The National government brought in almost a million people now isn’t that interring with the market and who has this effected and who has it benefitted the most. Then what about nationals housing policies knocking down our state housing and selling of large tracts of land more interfering with the market yet they preach other wise. Then they sat on their chuffs for 9 years and now we see them saying they would do this and that. I fucken hope these mongrels don’t get back in we will go backwards again. I don’t vote for Winstone but I would rather him in there than the other lot who have shown there true colours.
Labour and National have both conspired to wreck the housing market and suppress wages by continuing to support uncontrolled & unsustainable immigration. It’s mainly Auckland that’s paid the price – infrastructure investment is 30 years behind the population growth. And still the Govt doesn’t invest the same per capita on Auckland projects. Thanks Wellington wankers for our endless traffic jams and crappy slow trains and useless ticketing system. Not to mention the regular spillages of sewage into our harbours, and the awful sprawl of millionaire mansions all around the fringes, all going to wealthy immigrants, while Kiwis sleep in cars and damp garages. A pox on all our neoliberal politicians
I suspect a major problem is that most of the people in a position to follow through on these excellent ideas don’t understand enough about economics to do it – this includes anyone in Labour, National, Act and the entire Treasury department along with James Shaw and Michael Cullen.
For anyone who doubts that government can’t embark on massive expenditure projects without bankrupting the country just answer the question: How did the first Labour Government pay for the welfare state and the state housing program?
The left promised to give up its radical/extreme tendencies for social democratic change. It was a win win, only the right think they can renege on there side of the Social Contract.
And to implement such massive infrastructure building, ‘Comrade Treen’ would open the gates to tens of thousands additional immigrants, who would be given PR more or less straight away, as he is so open minded on workers’ immigration to NZ Inc..
Make big corporations pay their share of tax and limit their ability as China has done to “off shore” vast profits. Another obvious one is limit immigration but of course both of these solutions requires government working in the interests of the people not big business and banks.