The Greens launched their Budget alternative this morning. Titled “Smart Green Economics” it lived up to the billing, as did its Economic Policy launch before the Budget. Extra heft was provided by BERL economist Dr Ganesh Nana with a commissioned paper arguing that the Government’s asset sales programme leaves the government accounts permanently worse off, and may also worsen the country’s deficit, our “largest single vulnerability”. The BERL paper is here.
Russel Norman argued our current account deficit is in decline, our net international investment position is declining and that manufacturing, 20% of our export economy, is being decimated. He also said that the 2010 tax switch was not fiscally neutral as the Government promised, but has left us $2.2billion worse off. Spending $14 billion on roads when the real oil price is likely to double over the coming decade is also a poor quality spend.
Russel Norman didn’t just critique, but also pointed to the opportunities in smart green economics. Openings in the geothermal sector mean it would be tragic to sell off Mighty River Power. Other opportunities combining economic rebalancing, fiscal resilience and the smart green economy include capital gains tax, reprioritised transport spending, putting a commercial price on water, extending the home insulation scheme and boosting research and development. More included setting higher standards for fresh water, higher mining royalties and royalties reserve fund, putting a real price on carbon, having a public option of Kiwisaver, supercharging our energy SOEs, and investing in our children.
Plenty of positive stuff to think about there.
Ganesh Nana explained the difference between Government debt and deficit, and external debt and deficit. The first may or may not be bad, the second is ll bad. He said lack of clarity in much media comment around the difference between these led to confusion, with which I heartily agree. The asset sales programme as stated does not address the Government’s debt, simply replaces one asset with another. He argued that with $100 billion sitting in term deposits in the banks there was plenty of opportunity for Government to borrow from New Zealanders at realistic rates without affecting our external deficit. Again, plenty to think about.
It was good to hear about opportunities and alternatives. We’ve heard enough of TINA.