So tomorrow’s budget is going to be another ‘zero budget’, because it’s incredibly important for the government’s accounts to return to surplus
before the next election to maintain fiscal credibility. And Labour agrees that getting back into surplus real fast is real important.The contention between the two main parties is which one of them is responsible for all the current debt.
But looking at the principle features of our economy, we currently have:
- A lot of unemployed people and record levels of workers migrating to Australia.
- Close to zero economic growth
- A huge amount of infrastructure that needs building or upgrading (including an entire city)
- The government can currently auction its bonds at historically low rates
Doesn’t that combination of factors make this a really good time to borrow a lot of money and invest it, instead of hurrying to pay down debt? Are there sound reasons why we aren’t at least talking about that as an option?
I know the right-wing talking points: that householders and the private sector never run their finances that way, which is why nobody in New Zealand has a mortgage and the corporate bond market doesn’t actually exist; that borrowing and investing is ‘what happened in Greece’. (That is not what happened in Greece.) And, viz Matthew Hooton on RNZ last week, that it is literally impossible for the government to create jobs – so if it borrowed $350 million dollars to build a convention center in Auckland, say, the universe itself would intervene to prevent an increase of jobs in the construction or tourism sectors.
But are there actual, serious reasons the government doesn’t take advantage of current conditions? Would a policy of borrowing and investing to grow productivity really make creditors and the bond market cry?