So, let me get this straight. Debt is bad. So bad, in fact, that the Government is willing to sell assets that produce higher returns than its cost of borrowing to free up money and avoid taking on more debt. That would actually increase government borrowing by $100m+ a year forever but, in the short-term, would offset the need to borrow $6 billion. But this same Government is now planning to borrow to fill a $5 billion hole in its transport budget caused by its unneeded motorway projects.
The rules of business are pretty simple:
If you’re going to borrow, do it for things that produce wealth in excess of the cost of borrowing.
If you’re going to sell assets, do it when you have a use for the money that is more valuable than the returns (and other benefits) of asset ownership that you’re giving up.
National’s doing the exact opposite: selling valuable assets to avoid low-cost debt, then taking on about the same amount of debt to build motorways that are worse than worthless, with costs that exceed their benefits.
It’s like selling the money tree for firewood, and then going out and buying a white elephant on the credit card.
It doesn’t make sense. Well, it doesn’t if your objective is the best outcomes for New Zealand. If you’re looking out for the elite – who want high return assets at bargain prices and want taxpayer-subsidised roads to their holiday homes – then it makes perfect sense.
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