The Prime Minister says that all funding options will be considered for the three proposed Auckland Harbour tunnels. But the option that entails no tolling, borrowing or public-private partnerships is being ignored.

Our Reserve Bank could create the money in much the same way it did in 2021–22 when it generated $55 billion of new money to provide liquidity to the banks and bring down interest rates.

Back then, it went about it the wrong way and it had the predictable result of pushing up house prices as banks pumped this flood of cheap new money into mortgage lending.

A better use of Reserve Bank money is to finance public infrastructure projects. Using Reserve Bank money in this fashion is called Direct Monetary Financing. We do not need to create anywhere near the money provided to the private banks because the money goes directly into the economy where it circulates, pays wages and stimulates business. It doesn’t rely on a small share of unproductive lending ‘trickling down’ into the real economy.

Direct Monetary Financing, has been done before with impressive results.

In New Zealand, in the 1930s, it built thousands of state houses and supported farmers to export their produce and in Australia it funded their First World War expenditure. In Canada from 1930 to 1975 it paid for their Second World War expenditure and built highways, airports, bridges, schools, hospitals, and other infrastructure. 

Where there is capacity in the economy, Direct Monetary Financing is not inflationary, as has been proven in the Canadian experience, over a period of 45 years.

Zero-interest Reserve Bank credit, rather than interest-laden debt, should be used for targeted infrastructure projects such as the three tunnels. It can also be used as part of the Cyclone Gabrielle rebuild, to fix our ailing three-water systems and help mitigate the effects of climate change. 

This will free up tax monies to fix our health system, address child poverty or provide tax cuts. 


Read more about Directory Monetary Finance and infrastructure funding.

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