In an extraordinary exchange during a recent press conference our Finance Minister, when asked why the Reserve Bank does not write off the Covid19 debt, said “it isn’t the way we manage monetary and fiscal policy”. He did not say that it is not technically possible to do it, rather he said that “it isn’t the way we manage monetary and fiscal policy”.
New Zealand has been a world leader in trying new ideas. If we had the same mindset when we had the opportunity to give women the vote or declare ourselves nuclear free then New Zealand and the world would have been a different place.
Our Finance Minister is now saying that there is “no free lunch” and that “debt has to be repaid”. He is contradicting himself, when given the option of writing off the debt he has chosen not to because “it isn’t the way we manage monetary and fiscal policy”. It is a political decision not to write off the debt and not to have “the free lunch”.
The other option is to repay the debt and that can be done by either raising taxes or cutting back on services. The Government has signalled that there will be an increase in the higher end of the tax bracket that will raise about half a billion dollars a year. This is a drop in the bucket when compared with the Covid19 deficit which is expected to bottom out at $31.7 billion. Treasury believe it could take more than a decade to get back in black.
According to Don Richards, national spokesperson for Positive Money NZ, ‘Getting back into the black will entail cutting back on services that are already stretched. It seems inconceivable that a Labour Government is prepared to consign us to a decade (or more) of reduced spending simply because writing off the Covid19 debt “isn’t the way we manage monetary and fiscal policy”. Our mental health system is under siege, child poverty is yet to be addressed, Pharmac is short of funding and the wage subsidy is coming to an end.’
Richards also states, ‘there are tough times ahead and who knows how long it will take to shake off Covid19. We need a government that is prepared to do things differently to ensure that New Zealanders do not suffer unnecessarily.