It is election year, and it is true that the major political parties all announce big spending promises to get the voter to tick their box on the ballot paper. This is all well and fine, but when the costings come out for how much their promises will cost and how they think it will all be paid for, things are not what they seem…
All of a sudden, money is flying everywhere. A few examples of Government expenditure promises that have been made since the start of 2017 include (all monetary figures in N.Z. dollars):
- Money for 800 more Police officers across New Zealand – cost $500 million
- Potentially buying four Poseidon maritime surveillance aircraft, which would cost $2 billion – I will address the case of these aircraft in a separate post
- A social investment package for children in the Fiscal Budget due later this month – cost $321 million
The problem is that New Zealand’s debt has increased massively since former Prime Minister John Key took office in 2008. After nine years of fluctuating between $15 billion and $20 billion it began climbing steadily in 2009, and was around $48 billion in 2012. Granted that in 2010 the Government had to pay out $1.6 billion as a result of South Canterbury Finance collapsing. And it could not have foreseen the magnitude 7.1 earthquake three days after South Canterbury Finance collapsed. Nor could it have foreseen the 22 February and 13 June 2011 aftershocks, which added another $35 billion to the total.
But this does not excuse the 5 1/2 years of unrestrained debt growth since then, which is now thought to be about $90 billion.
The New Zealand Treasury said that at 30 June 2016 it was aware of total liabilities standing at $197 billion. That was a $10.5 billion increase on 30 June 2015.
I am of the opinion that our debt growth is out of control and that we need to take substantive steps to rein it in. It was made more concerning by a report yesterday that suggested New Zealanders have little in the way of financial reserves or assets that they can fall back upon in hard times. The Government cannot be expected to rein in private debt, but if New Zealand were a secure, relatively water tight nation in terms of financial leaks, where both public and private sector show greater fiscal responsibility than they currently do, I wonder how much those debt figures and their rate of growth in $b per year would be.
So, it is with interest and a bit of concern that I wait to see what big money spending promises the other parties conjure up in order to woo our votes. Announcing a policy or plan is one thing, but being able to pay is quite something else.