IMF report misses the point
“There is no reassurance to be had from an International Monetary Fund (IMF) report which stated that New Zealand has the second smallest government debt of the 23 advanced economies it analysed” said Stephnie de Ruyter, DSC Party Leader.
“The IMF staff report released last night found that New Zealand’s economy is “well-placed” to deal with “unexpected shocks”. That comforting declaration was based on the high fiscal space afforded by the government’s budget and the relatively small government debt. But the report misses the point.
“Taking a broader, more inclusive view of New Zealand’s economic position delivers a rather less comforting picture. In reality, our debt to overseas lenders is about $243 billion – that’s more than 100% of our GDP. Last year interest payments on that debt totalled more than $5.6 billion. Although that is a simplistic glance at our indebtedness, New Zealand can hardly claim to be “well-placed” while under a dead weight of debt.
“The debt of a nation, whether incurred by its government or by the private sector or by a team effort, is still the nation’s debt. And that debt, with its interest payments, is a burden which impacts on every aspect of economy activity. It inhibits our ability as a nation to chart our own course, to create our own future, to determine our own destiny. It makes us debt slaves to the world’s money masters.
“The Public Finance Act provides that our Finance Minister ‘may borrow on behalf of the Crown if in the public interest......from any person, organisation, or government (either within or outside New Zealand)’. Surely it can’t be in the public interest to be obligated to overseas creditors, and to pay interest indefinitely for the privilege?
“The DSC proposes a sensible alternative: adopt a programme of new economics, using the existing facilities available through our publicly owned central bank, the Reserve Bank, to issue and allocate New Zealand’s money supply. And give New Zealanders the freedom and the independence that is their right” Ms de Ruyter concluded.
Published: September 2010