FOR IMMEDIATE RELEASE
17 December 2019
The Government’s recent announcement that it will spend an extra $12 billion on infrastructure for new roading, rail, schools and healthcare projects, is welcome news. The not so welcome news is that the Government will take on an extra $19 billion of debt over the next five years; some of that debt to help pay for these projects.
Finance Minister Grant Robertson said “We are continuing to adopt a fiscally responsible approach”. Further Robertson said that they were taking advantage of record low interest rates. Even at an interest rate of 1% this would amount to interest payment of $190,000,000 paid to mostly foreign investors.
Don Richards, the national spokesperson for Positive Money New Zealand said “Robertson is keeping very quiet about another fiscally responsible approach that he is aware of and that is using Reserve Bank’s balance sheet to finance the projects.”
In 1936, the First Labour Government, via our Reserve Bank injected millions of pounds into our economy enabling the building of thousands of state houses and other worthwhile infrastructure projects. In three short years we were able to get out of a bigger hole than the one we are currently in and finance welfare systems that became the envy of the world.
The Labour Government appears to be turning a blind eye to social spending with the Children’s Commissioner calling for the Government to fulfil a quarter-century old promise to do better for New Zealand children. Social spending is not be an ‘either infrastructure or social spending’ dilemma. Using Reserve Bank Credit both can be achieved, as proven in the 1930’s.
Using Reserve Bank credit means that rather than pay interest to foreign investors, the Government pays the interest to our Reserve Bank. Essentially one arm of Government pays the other and keeps the money within New Zealand. Further, when the time comes to repay the loan, the same principle would apply – one arm of Government paying the other and keeping the money within New Zealand.
This type of spending is gaining traction overseas as Japan has been cancelling its national debt at the rate of $720 billion per year by selling its national debt to its own central bank, which returns the interest to the government. An interest-free debt owed to oneself that is rolled over from year to year is effectively void – a debt “jubilee.”
There is no need spend valuable tax money overseas to pay interest and principal when our own Reserve Bank can finance infrastructure projects. Those concerned that the practice may be inflationary need only look to Canada, where the Bank of Canada did a similar thing for thirty years, up until 1975, with no impact on inflation.
For information, contact Don Richards National Spokesperson for Positive Money New Zealand.