It is hardly surprising Fitch has signalled a credit watch on account of our current account deficit.
The Greens have been pointing out the seriousness of our overseas deficit for many years. There is not much compassion in international circles for people who have been living beyond their means for many years and expecting others to save on their behalf.
John Key needs to realise that not all types of economic stimulus are the same. Instead of random spending on pet projects the stimulus needs to be targeted at areas that will make our economy more resilient in the long term by reducing our current account deficit.
For example, reducing our bill for imported oil, which currently only costs us some $8 billion but is set to rise to twice and eventually three times that if the recession lifts and oil demand resumes its growth.
For example, the Buy Kiwi Made programme, axed by this Government, which encourages people to feel pride in buying from NZ business rather than imports.
For example, investing in the infrastructure to reduce our climate change emissions which will cost us dearly in future, addressing the climate change crisis at the same time as the economic crisis.
This is what the Green New Deal stimulus package, launched in May, was designed to do. I won’t insult you by repeating it all – you can find it here. How would it, and wider Green policy, address Fitch’s concerns?
Investing in improving energy efficiency would reduce the need for new power stations, stimulate new businesses with expertise in energy efficiency design and products, and make businesses more profitable and resilient.
Setting fuel economy standards for vehicles entering the country would reduce our fuel import bill and the costs of doing business.
Keeping unemployed builders and other trades and supply industries in work by building more state houses for the 10,000 families on the waiting list would reduce those claiming an unemployment benefit with less need for the Government to borrow.
If we are afraid of another housing bubble, as reported this morning, it is a great time to introduce our Capital Gains Tax. It wouldn’t raise any money just now as house prices have fallen, but would warn speculators planning to buy now and reap huge capital gains, to be careful how much they pay, and consider investing in productive assets instead.
Investment in tertiary education and training would leave us with a stronger economy with more skills and higher incomes.
The Government could issue high quality infrastructure bonds to encourage saving and investment in secure New Zealand assets rather than overseas.
Instead the Government has thrown stimulus at the economy in a scatter gun way, with most of it going into new motorways. That will stimulate demand for imported machinery and vehicles and oil and greenhouse-intensive concrete and provide very few jobs. It will not increase economic resiliency, a major objective Key outlined in his speech on Monday.
Investing in improving public transport – more and better services, upgrading stations and ferry terminals, integrated ticketing – will employ 40% more people than putting the same money into roads. And it will lower our oil bill and our climate change bill in the future as people have options and choice.
The April tax cuts were targeted at those who are most likely to spend them overseas rather than here. Not quality spending, especially as we had just had the October tax cuts.
And of course reducing the employer contribution to Kiwisaver didn’t help build a savings culture.
An approach to all the credit rating institutions with a package like the Greens’ Green New Deal, explaining the intention to set the economy on a sustainable path with eventually a lower current account deficit, a stronger productive sector and more skilled workers would surely have reassured them that there is no need for a downgrade.