Today, the NZ Herald reported:
Now hold on a second there Bill English... New Zealand recorded a Government Debt to GDP of 37% last year. So where on earth is the Minister of Finance getting his figures from?
Why is this important you might ask? Put simply, high debt slows growth. The consensus within economist ranks is that there exists a threshold of debt to gross domestic product and if debt increases beyond 30%, it will negatively impact the economy. Some studies have shown a marked decrease in median growth especially in advanced countries as debt to GDP increases above 30%.
You can see why the ever deceptive Bill English has been lying about the issue... National through a fevered borrowing agenda since 2008 has increased government debt well above that 30% threshold. Their excuse last year was that interest rates were favouable, and that's why they were borrowing more than the country actually needed to. Interest rates are no longer all that favourable since the governments credit rating was downgraded, which was mainly due to the high debt ratio National had caused. Talk about shooting themselves in the foot.
It's astounding that National failed to foresee a claim on water rights that have effectively halted it's planned asset sales. After spending millions preparing to sell our children's future, National's ideologically driven neoliberal agenda is coming up woefully short.
The fact of the matter is that there's no longterm benefit for the government in selling such profitable assets, and so Bill English's excuse that the proceeds are needed for funding infrastructure is disingenuous! There's a proven longterm loss, and the government will need to borrow more or cancel a highway of little economic significance to fund these projects anyway.
The other issue is that the higher the debt to GDP ratio, the more likely New Zealand is to default on our debt obligations. You might think I'm fear mongering... Not at all. The 30% threshold effect between public debt and economic growth means that anything above the threshold has cumulative effects. In other words the more debt that needs to be repaid the less investment into the economy which reduces GDP. This also means that less taxes are collected and could result in a longterm inability to service debt properly.
I'm in two minds about National's bungling of the economy... Are they completely incompetent or are they fucking things up on purpose? Their excuses as to why we have to sell our assets seems to answer that question.
Finance Minister Bill English says disruption to the timing of the partial share floats of state-owned assets will push the Government over its self-imposed debt limit of 30 per cent of GDP.
Mr English, who is leaving today on a trip to Hong Kong, Moscow and New York, said borrowing was forecast to peak next year at 29.6 per cent and so any extra borrowing would push it over. "It's an informal benchmark - we wouldn't be getting lectures from people about how you've got to stay below but it's a good discipline on us," he said.
Now hold on a second there Bill English... New Zealand recorded a Government Debt to GDP of 37% last year. So where on earth is the Minister of Finance getting his figures from?
Why is this important you might ask? Put simply, high debt slows growth. The consensus within economist ranks is that there exists a threshold of debt to gross domestic product and if debt increases beyond 30%, it will negatively impact the economy. Some studies have shown a marked decrease in median growth especially in advanced countries as debt to GDP increases above 30%.
You can see why the ever deceptive Bill English has been lying about the issue... National through a fevered borrowing agenda since 2008 has increased government debt well above that 30% threshold. Their excuse last year was that interest rates were favouable, and that's why they were borrowing more than the country actually needed to. Interest rates are no longer all that favourable since the governments credit rating was downgraded, which was mainly due to the high debt ratio National had caused. Talk about shooting themselves in the foot.
The Government planned to get between $5 billion and $7 billion over five years for the sale of up to 49 per cent of Mighty River Power, Meridian, Genesis, Solid Energy and Air New Zealand.
The proceeds have been booked for forward spending on capital items, such as schools, irrigation schemes and hospitals. Any delay or shortfall in proceeds would mean having to borrow more in the markets.
It's astounding that National failed to foresee a claim on water rights that have effectively halted it's planned asset sales. After spending millions preparing to sell our children's future, National's ideologically driven neoliberal agenda is coming up woefully short.
The fact of the matter is that there's no longterm benefit for the government in selling such profitable assets, and so Bill English's excuse that the proceeds are needed for funding infrastructure is disingenuous! There's a proven longterm loss, and the government will need to borrow more or cancel a highway of little economic significance to fund these projects anyway.
The other issue is that the higher the debt to GDP ratio, the more likely New Zealand is to default on our debt obligations. You might think I'm fear mongering... Not at all. The 30% threshold effect between public debt and economic growth means that anything above the threshold has cumulative effects. In other words the more debt that needs to be repaid the less investment into the economy which reduces GDP. This also means that less taxes are collected and could result in a longterm inability to service debt properly.
I'm in two minds about National's bungling of the economy... Are they completely incompetent or are they fucking things up on purpose? Their excuses as to why we have to sell our assets seems to answer that question.
