Positive Money’s team put in a submission on the Local Government (Water Services) Bill and followed it up with an oral submission to the Finance and Expenditure Select Committee on 5 March 2025. (Transcript and full submission below.)
Below is the transcript of the introduction to our oral submission by Auckland spokesperson, Cliff Hall.
Honourable committee members
We are grateful to address you today, because we believe we can help improve this bill.
I will speak for 3 minutes and leave the balance of our time for questions.
When we first read two of the clauses in this essential bill, we were alarmed. One clause allows councils to borrow money in foreign currency. Wasn’t it foreign-denominated debt that caused so much pain and asset sales in the 1980s?
Another clause permits lenders to extract every last cent from councils in financial trouble, through security arrangements so onerous they would make a banker blush. We wondered, are we running this country for the benefit of people, or banks?
Then it dawned on us. The bill’s funding ideas rest on a false premise: that our country does not have enough money, and must bend over backwards to attract foreign finance. That is wrong.
NZ is a sovereign country with its own currency. We can use our own Reserve Bank to fund some infrastructure at very low interest rates, using direct monetary financing. NZ used DMF successfully before, from the 1930’s right through to the 1980s.
Many councils are already burdened with more debt than they can afford. This bill doubles the amount they can borrow, but does nothing about the cost.
This is like throwing an anchor to a drowning man!
The stress is hitting not just councils, it is hitting home. Ratepayers are struggling to pay their rates, let alone new water charges. A friend of Don’s was in tears, saying high council rates mean he can no longer afford to live in his house, and will be selling up and renting. Nobody wants that.
And it is unnecessary. DMF is part of the solution, lowering the cost and improving access to finance for all councils, large and small.
We realize that finance is just one small part of this essential legislation, but if you don’t get that right, nothing else matters.
Our submission includes a proposed framework we call “Local Water Financing Done Well”, for council water organisations to use DMF responsibly in a way which secures significant benefits and avoids commonly cited problems.
Low cost. Sustainable. Intergenerationally fair. Beneficial to all, not just the financial sector. Please recommend Direct Monetary Financing.
…/ends