Both sides of the political spectrum are preaching prudent debt management, despite government debt to GDP one of the lowest in the developed world. 123rf
Both sides of the political spectrum are preaching prudent debt management, despite government debt to GDP one of the lowest in the developed world. 123rf
COMMENT:
Recently I wrote an article titled Don't rely on the current government for growth, with the premise being that the coalition government seemingly has no desire to use their balance sheet to offset slowing growth and assist in building long-term legacy assets.
This, despite funding levels havingnever been more advantageous. Remembering, the government can currently borrow ten-year money close to one per cent.
Whilst the proposed increase in the superannuation age from 65 to 67 has garnered most of the headlines, what caught my eye was the oppositions stated objective to "reduce our overall debt burden when the economy is growing so there is capacity to borrow when times are tough."
All sounding very sensible but somewhat uninspiring, maybe a fair description of Simon Bridges, but I digress.
Simon Bridges' roadmap for the economy sounds all too familiar. Phpto/Michael Craig
So, on the one hand we have the Reserve Bank governor out in the press encouraging Kiwis to be borrowing and spending by lowering the official cash rate to one per cent, yet we have both sides of the political spectrum preaching prudent debt management, all the while our government debt to GDP is one of the lowest in the developed world.
This inability to grasp the concept of needing to invest now, for the long term seems lost.
I acknowledge that there are myriad of issues when it comes to execution. We have all seen the struggles that the private sector has faced within the construction industry.
However, this shouldn't act as an excuse for government to sit on their hands.
The public private partnership model is nothing new, but I can't help but feel that any material progress is being hamstrung by the Government's reluctance to spend money and/or partner with the private sector.
Not all the commitments outlined by National were underwhelming. For instance, the idea of allowing inflation to be deducted from interest income is interesting.
In theory, if you are earning 3 per cent in the bank and inflation is running at 1.50 per cent, then half of you interest income is tax-free. That is an innovative suggestion that has merit when you consider the challenges investors currently face in this low interest rate world.
However, I would like to see a little less use of the word "consider", and a little more "action" regardless of what side of the political fence you sit.
Finance Minister Grant Robertson during his pre-Budget 2019 speech at Parliament. Photo/Mark Mitchell
Maybe, both the Government and the opposition should be listening a little closer to their Reserve Bank governor.
