Archives for posts with tag: debt

I feel like I’ve woken up in the bizarro episode of Sealab 2021. Asked for comment about the financial situation at the City Council, Gerry Brownlee is happy to give his two cents, which, unsurprisingly, are that the CCC should sell more assets and spend less. Of course, Mr Brownlee doesn’t offer to help by say, putting in all the money that the Crown initially promised, or revising some of the vanity projects which he has bestowed upon the council. No, that didn’t cross his mind. Instead, we get this bizarre statement:

Brownlee said rather than putting rates up the council should be looking at its baseline, just as the Government had done when it was faced with the double whammy of the global financial crisis and the Christchurch earthquake.

“Whenever you are in a tight financial situation you have to look at your own expenditure profile and I don’t see evidence of that happening from the council.

“I think most people would be able to come up with some example of what they would see as fairly unnecessary expenditure,” the minister said.

When the government was faced with the double whammy of the financial crisis and the earthquakes … from memory, they gave $1.8 billion dollars to a failed financial company, slashed taxes, refused to introduce a special quake levy and borrowed money from overseas. Government debt, which was around $10b when National came to office in 2008, is now $100b dollars. That Brownlee would be giving financial advice to the Christchurch City Council, pretending he’s just “a regular ratepayer” is ironic enough; that he would try and site his government’s dismal economic record as some sort of example to follow is positively hilarious.

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There was a story in the Herald business section comparing the “rockstar” New Zealand economy to the “Celtic Tiger” economy of (pre-crash) Ireland. These couple of sentences interested me:

But ASB economist Chris Tennant-Brown said the aspects of the New Zealand economy that were doing well were not debt-funded. A key driver of growth this year was expected to be the Canterbury rebuild which was being funded by insurance payouts. “I don’t see a risk there from an Ireland-style debt crisis.”

The last time I checked, the rebuild was forecast to cost a good $40 billion – and almost half of that ($16 billion) is coming from the Government. I also recall that the Government steadfastly refused to introduce a quake levy, instead choosing to borrow to fund the rebuild (it was something like $200 million a week at one point, wasn’t it?) But it’s ok – a bank economist says that the rebuild isn’t debt-funded. We’ll be fine.

p.s. I’d also note that the other star performer in the NZ economy – the dairy sector – is on the back of farmers agribusiness companies who have leveraged themselves to the hilt to convert Canterbury sheep farms to wetlands for cows.

The National Party conference is currently going on in Nelson. A couple of reporters were tweeting about remits up for discussion. One of them was a remit to  cap local body debt at 10% (part of a right-wing crusade against rates, I guess). It failed. However, it made me think about Christchurch’s debt, which is currently at 60%, and projected to hit 247%!

The council’s debt levels are about to soar from 60 per cent of revenue to 247 per cent by 2017, just a few percent shy of its 250 per cent limit on total borrowings

(That from John McCrone’s Mainlander piece about CCC debt, which you should read if you haven’t already.) Obviously, this is due to the quakes, but also the government’s desire to have things like stadiums, cricket grounds, swimming pools, which they have included in the blueprint, then shifted the cost back to the council.