National and Labour wrong about debt limits


When I was growing up I was taught – as was everybody else I know – that if you borrow money, you repay it. A rule that I abide by as best as I can to this day.

Spend within ones limits, unless you borrow money that you acknowledge is not yours and has to be repaid, was another rule that I was taught. For me, borrowing is something I would personally only do in an emergency and only if I could repay in full as soon as the problem has passed.

I will admit now, I did one economics paper at University only because it was suggested that I do one. To this day I do not know why because I knew when I enrolled in it I was not going to pass. I knew I was not interested in it in the least. I was correct on both accounts. I failed, made a conscious decision not to retake it and never looked back. So one might argue that I therefore know nothing about economics and am probably not the best person to judge the apparent bipartisanship in Parliament when it comes to raising debt limits. It might also be argued that running a country’s finances is a lot more complex than a private bank account.

As a student at the University of Canterbury I would sit in the main cafeteria watching the student debt clock that the University of Canterbury Students Association installed before I started, going up by tens of thousands of dollars an hour, hundreds of thousands of dollars a day and millions each week. I did challenge them on occasion as to the accuracy of the clock and was told rather patronizingly that it was. I asked myself and others whose fault it was that student debt was out of control and how it was going to be recovered. We could not completely agree – some thought it was entirely the Government for removing or undermining social assistance such as the postgraduate allowance, and the emergency unemployment benefit. Others thought it was the tertiary institutions, while still more thought it was students spending up large. Whatever the case it currently sits at $15 billion.

Politicians no longer seem interested in addressing how this debt will be repaid. The most recent figures point to 731,000 people having a debt averaging $21,000 to be repaid. Maybe it is a beast that they have put in the “too hard” basket. But that unwillingness to tackle this makes me wonder why I should trust them with handling the debt that would ensue.

I believe in saving borrowing for a rainy day period or for after a natural disaster where you will have unforeseen expenditures that will not be immediately obvious. After the Christchurch earthquakes, suddenly finding N.Z.$35 billion was not something New Zealand could do in a rush so in that instance we had no choice but to borrow. But how are we paying it back? ARE we paying it back? I hope so, because the more we pay back now, the better position we will be in financially for when the next disaster – be it an Alpine Fault earthquake, the Waimakariri River breaks out or one of the volcanoes in the North Island erupts – hits.

National and Labour’s bipartisanship on letting New Zealand’s government debt level increase is therefore something that I find alarming. It also brings me back to my favourite mantra of “growing the pie, instead of slicing and dicing the pie”, which I have described in recent articles.

If we do decide to increase our debt levels, which National’s Finance spokesperson Dr Paul Goldsmith is quite open to doing, we need to know what instruments we are going to use to raise the money. Raising taxes appears to be a no-no on both sides of the house for a change, with possibly only the Green Party interested in doing so. My own position on taxation can be found in other articles.

 

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