In 2008, John Key’s line was ‘New Zealand doesn’t have a debt problem, it has a growth problem’. In Budget 2010, he said the Crown would be back into surplus in record time. In December, he said debt wouldn’t force a downgrade. Now, he says debt is such a problem we need to slash and sell. When did he mean what he said? Never. It has never been about debt.
Key has three, sometimes conflicting, goals in government: be adored, don’t do too much hard work, and funnel more of the country’s wealth to National’s elitist supporters.
Debt or its lack is just a convenient excuse for policies that enrich the wealthy (and the illiterate will buy it wholesale).
In 2008, even though the debt projections were worse (remember, the ‘decade of deficits?’) Key said that debt wasn’t a problem, therefore we could afford to borrow $1.5 billion for the April 2009 tax cuts directed at the rich (does anyone even remember those?).
In Budget 2010, the net debt projections had improved dramatically to the point where we’ll back in surplus in four year’s time. Our government remained one of the least indebted in the world, and even our country as a whole was less indebted – our net international investment position has improved from debt equaling 93% of GDP to 85% of GDP as people borrow less. Again, this was cause for tax cuts directed at the rich, which aren’t fiscally neutral but will, according to Treasury, cost $1 billion over the next four years.
But, now, for no apparent reason, debt is supposedly such a problem we need to start slashing spending (the $800 million nominal increase is barely enough to cover health’s minimum increase due to inflation and population growth, everything else will be cut in real terms) and have a fire sale of assets. Yet, despite debt suddenly being a crisis issue, I notice that Key hasn’t reversed the tax cuts that he made when he said debt wasn’t a problem.
Audrey Young hits the nail on the head when she writes:
“Even if these had been golden days, and there had been no global recession to put the Government’s books in a parlous position about now National would be outlining a programme for partial asset sales to take into the 2011 election.
Good times or bad times, it was going to be part of its agenda for a second term… And what has become clear in the past two days is that National’s big message this year is going to be debt – fear of debt.”
Key wants to sell $10 billion of assets, supposedly to ‘Kiwi mums and dads’. How many of the 1.5 million households can afford to stump up $6,600 to buy their share? Not too many, I dare say. Certainly not the 50% of households with no net savings. Who will buy instead? The rich, and overseas interests.
Key says it’s slash and sell or borrow more but Bernard Hickey shows that selling assets is more expensive than borrowing:
In total, the four SOEs potentially up for sale generated total dividends last financial year of NZ$732.5 million and shareholder (government) equity stood at NZ$9.642 billion. This implies a combined (and very raw) dividend yield of 7.6% last year.
Yet the government is currently having to pay around 5.5% for the new debt it is selling, mostly offshore.
So on the face of it the government is a net loser by selling half of these state assets and avoiding having to raise new debt.
Look past the excuses about debt. Look at who benefits from each of these policies. Like I said yesterday, the question for each policy is ‘cui bono’ and the ones who have benefited from Key’s policies every time are the rich.