Bernard Hickey: Plugging leaks opens floodgates

An expert panel has estimated 89,000 homes could fail at a cost of up to $23 billion. Photo / Supplied

Opinion

I get nervous whenever I hear ministers of the Crown talk about "ginormous" financial problems that are "elephants in the room" that they want to use taxpayer money to fix.

I worry we are about to be presented with a fait accompli where many taxpayers pay huge amounts to a few other taxpayers for a long time.

I'm talking of course about the leaky building crisis and the moves afoot by the National-led Government to help fund some sort of bailout in tandem with local governments in Auckland in particular.

The scale of the problem is only just dawning on policymakers and the shock of the likely cost has yet to really register with the public. Yet decisions are being taken behind closed doors without public discussion.

Last weekend Building and Construction Minister Maurice Williamson lifted the veil somewhat on a monster of a problem that deserves wider debate. He was reported as saying he was sitting there with his head in his hands wondering how to deal with the "ginormous" problem at a time when the Government is already forecasting deficits for years to come.

He described the problem as the "elephant in the room" in budget discussions. An expert panel has estimated 89,000 homes could fail at a cost of up to $23 billion. This panel estimated 90 per cent of all apartments, townhouses and units built between 1992 and 2005 could leak badly in the next 15 years.

Astonishingly, Prime Minister John Key has already talked about the Government "guaranteeing access to funds" for leaky homeowners to borrow to pay to repair their homes and not have to pay interest or repay those funds until they die.

Even more astonishingly, Key believed the effects of inflation on property values would help solve the eventual problem of having to pay back this debt. He effectively suggested this would be a painless solution for the taxpayers at large.

Nothing could be further from the truth. The Government is already borrowing $240 million a week to fund its current budget deficits. New Zealand's net foreign debt is likely to top 110 per cent of GDP by 2014.

This puts us in the same basket as Greece, Spain and Portugal, all of whom have lost the confidence of international investors and face massive spending cutbacks and depressions.

New Zealand's foreign debt situation is being ignored because most of it is being held by Australian banks, who are effectively underwritten by the Chinese-backed Australian economy.

We are seen as a suburb of Australia, which is seen as a province of China. That's fine, until international investors look behind our veil to find our leaky buildings, slow growth and hollowed-out workforce.

Meanwhile, the last thing we should be doing is adding more mountains of debt for future generations to pay off while paying the health care and pension costs of the baby boomers.

Yet that is what John Key and Maurice Williamson are talking about with their guaranteed funding plan for leaky building owners.

Are New Zealand's taxpayers in Invercargill, Westport and Kaitaia prepared to pay for the owners of mock Mediterranean mansions in Herne Bay, St Heliers and Takapuna to reclad and rebuild their townhouses?

Is it fair those who bought these leaky buildings after 2002 when the issues became known should be bailed out too? Why shouldn't those who made capital gains 2002 to 2007 use those gains to pay for the recladding?

Is New Zealand prepared to saddle its younger generations with unsustainable debt so home owners and investors in Auckland can retire with a safe nest egg, free health care and a bullet-proof pension over the next decade?


bernard.hickey@interest.co.nz