Being that National has managed to more than double our total government debt, could somebody please explain why they're borrowing so heavily?The OECD’s Statistical Annex (PDF) predicts New Zealand’s General government gross financial liabilities as a percentage of GDP is set to grow from 28.9% in 2008 to 50% in 2013.
How are we expected to service that?
The excuse National uses for the high rate of government borrowing is to blame it on the recession and the Christchurch earthquakes. However the Christchurch earthquakes are set to cost the government $8.5 billion... which is around 10.6% of National's additional borrowing regime.
What about the effect of the global recession on our borrowing regime? This Treasury paper from 2010 gives an indication of the cost to New Zealand of the global recession:
The recession in New Zealand began in the March 2008 quarter, before any OECD nation, as a result of domestic factors. New Zealand’s recession was thus one of the longest, although was also among the first to finish and one of the shallowest. The fall in real GDP of 3.3% between the December 2007 quarter and the March 2009 quarter was the 6th equal smallest with Canada. Only Poland, Australia, Greece (where recession is yet to finish), Switzerland and Norway had smaller falls. New Zealand, like Australia, did not suffer the worst of the global recession because of factors such as a sound financial system and continued growth in China.
Clearly this does not account for the nearly $80 billion debt mountain National will get us into by 2013.
So why would National intentionally get New Zealand into debt? Nick Smith made the excuse earlier this year that National was borrowing more than is required because interest rates were favourable.
However the double downgrades have now made the additional borrowing more difficult to service. It's also important to keep in mind that National were warned of the possible downgrades in July 2009 but continued their massive borrowing regime.
Being that MOM privatization will make very little difference to our huge and growing government debt, the sale of our strategic assets for a song gives private interests a foot in the door for further privatization... because the lost revenue stream means that we're not able to service the debt National has intentionally got us into.
It's interesting that private debt suddenly started to decrease in 2008 while government debt immediately started to increase. Between September 2008 and June 2011 government debt grew by $23.5 billion while private debt fell by $41 billion. This makes National's accounting look decidedly fishy.
