What are we getting ourselves into?

The Herald has published an enigmatic portrait of John Key – National Party Leader and person currently looking most likely to be New Zealand’s next Prime Minister. I recommend it – it’s a good read if you’re at all interested in Kiwi politics. And because Key & National are playing their policy cards so close to their chests, we have precious little else to go on in forming an estimation of the man and the likely positions of the Party he leads.

My summary: He comes across as a decent enough bloke, personally, but it seems likely his underlying views are far more right-wing and radical than many voters currently perceive them to be.

When questioned on this topic, he tells the Herald:

“My underlying philosophies remain the same.”

So his beliefs remain the same, the difference is in the language?

“Yeah, I think that’s largely correct.”

This is a startling admission which suggests that the real John Key is actually the John Key who originally entered Parliament, not the version we see today.

One interesting policy hint the article identifies is that Key might be willing to use debt more liberally than Labour has to help fund infrastructure investment.

Infrastructure development will be a major feature of National’s programme and it is an area where Key’s knowledge of financial markets will come to the fore. He wants to develop infrastructure bonds as an investment asset class beyond what Labour has so far done.

“Let’s be honest, that’s the one bit of the New Zealand capital markets which is blindingly obvious by its absence,” Key says.

Okay, so let’s assume that this would be a good thing for the operation of capital markets in New Zealand. It sounds plausible to me that it would be – a new class of investment, greater depth and volume etc.

What other implications might this have?

Obviously, it would help to make National’s promised ‘bold’ (aka bigger than Labour’s) tax-cut programme fiscally viable. If we fund more of our infrastructure through debt than through tax derived government income, clearly we need less tax revenue up front.

It could also be a bit of a gamble: future income (GDP) would need to be greater to service the debt. If we are, as a nation, investing less than optimally in infrastructure because we don’t want to load up the tax-burden too much, then the gamble might be a good one that shoots us onto that much fabulised ‘higher growth path’.

But, we are already a highly indebted nation – what if the promised growth doesn’t occur? The investments might be badly made. Anyone remember Think-Big? The international economic situation might change permanently and markedly for the worse – surely everyone who’s been paying any kind of attention has heard of concerns about peak-oil, climate-change, water-shortages, over-fishing, non-renewable resource depletion by now?

If the infrastructure-debt gamble didn’t pay off, we’d be even more reliant on the grace and favour of international banking. Overseas experience (yes I know I should find some links for these assertions!) suggests that experience would not be pretty. We would lose even more control over our economic destiny. All our government programmes would need the approval (explicit or implicit) of people whose only concern is return on capital, people to whom social programmes seem nothing but a wasteful impediment to those returns.

Finally, I would question the very objective of the borrowing – even if it works, what kind of growth would this debt fund? Would it be environmentally sustainable? Would it be socially just?

Seems like a pretty important public policy issue to me. One that needs more than speculation followed by brief discussion in the last weeks running up to an election. National should release their policy now, so people can make a good choice about it.


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