I’ve been thinking … affordability and jobs are going to be key moving forward in recovering from COVID-19 and this article (linked below) where some of the Provincial Growth Fund money could be spent goes some way to finding solutions to both.
But it still looks like picking at the fringes. Another issue cropping up is affordability of property rates at this time. Rates can be an unaffordable burden that at this time won’t help people get through. There is a push to reduce rates, reducing rates means councils need to cut spending on projects and people, which risks increasing unemployment with negative long term flow on affects.
I believe we can ramp up spending on things that matter while potentially reducing rates.I’ve avoided wading into debates since my public sacking but now it’s time for all councils think outside the box and for government and the Reserve Bank to dip into the alternative monetary policy war chest. The bank has announced it will buy Government Bonds, but mainlining money into the economy through job creation would be far more valuable and in my opinion see better results for every day people.
Economists believe COVID’s economic shock will be similar to what was experienced after WW2. Back then, in recovery mode, the government led a massive infrastructure program – much of the infrastructure under our cities, the highways and houses we live in and use today were built then.Much of it is old now – and what better time to create projects to renew it. This will create jobs and help get New Zealand through.
So what could/should be done?Councils are in charge of major infrastructure renewal programs – that comes with a hefty pricetag that is picked up by ratepayers.
This has led to two issues:
1) Rates go up or
2) Councils fail to invest in infrastructure to keep rates down.
All New Zealand councils are required to have a 30 year infrastructure strategy so they’ve already mapped out some pretty major projects that just need funding.Let’s bundle together 10 years of this work and accelerate it over 3 years. This would be a massive undertaking, but as we have seen in Christchurch after the earthquakes, it can be done. There are ways.
How do we fund it? I’m not naïve… I know this will cost billions.
That’s money councils don’t have and can’t get through increasing rates and many councils are coming close to debt limits. This is where the Government and Reserve Bank come in.
I’ve heard this morning the Finance Minister say that he doesn’t want govt to get involved in helping councils and that they should be looking to cut money to pause rates increases. Admirable and I agree, pause rates for businesses and residents who are affected. And councils can cut costs but that can sometimes defer from the objective.
Doing these may not be the best thing to do right now. The outcome is likely work delays and further job losses, not just in councils but the private sector organisations servicing them.The Reserve Bank has an alternative monetary policy tool and it needs to use it to implement large scale asset purchasing. Not in the way it has been done before but in the physical infrastructure that needs to be repaired. It could alternatively print money to just fast track the work.
This is a form of quantitative easing but this way the money is inserted directly into the pockets of business and workers. It is a big ask, a change in thinking and needs to be carefully managed to avoid high inflation but it is possible. Last year I spoke to the Reserve Bank Governor about this as an option to help fund our still unrepaired earthquake damage (the bill for that btw is still over $1 billion). It was feasible then but now it is needed nationwide and fast.
In the example above, there is little to no subsidy currently from the government to do this essential infrastructure work. The $145 million ish comes from rate payers pockets and is all borrowed money. Bringing this forward now would make more peoples properties safer from flooding, potentially reducing their insurance premiums and if paid by the bank would save the city residents again. Jobs, investment, savings and safety.
The above are just local examples for one very specific set of circumstances that I know about. This idea can be replicated for any work program over every part of New Zealand.Another tool that could help councils is the Reserve Bank doing an interest rate swap on any current debt. Believe it or not nearly 15% of the Christchurch City Council’s rates take is spent on interest so being able to lower the interest paid on the debt would make a massive difference. Savings that could be past directly onto ratepayers (and, in turn, on to renters).
What is the outcome?
Imagine having solar roadways that generate energy, facilities that burn waste cleanly to create electricity, new housing, new urban ecosystems (Avon-Ōtakaro anyone?), walkways or my personal favourite, bus shelters that are bee sanctuaries.
That’s the nice stuff.More importantly though, saving jobs, giving families income and giving New Zealanders the chance to have some world class infrastructure. Clean water, healthy waterways, managed waste. We could transform our entire countries infrastructure over the span of a decade and avoid what is going to be a tsunami of problems and costs that the next generations will need to mop up.
Sure this is bold and may be controversial but it can be done. Councils all over NZ have the data and the work programs. They are ready to be taken over and done. It does not need to be just council forward works either, any infrastructure group should be considered across NZ, like NZTA. What a wonderful legacy to create out of this very tough time.We just need leadership and political will.https://www.stuff.co.nz/the-press/business/120710581/coronavirus-funds-to-boost-kiwi-economy-after-lockdown-should-trickle-south?fbclid=IwAR0JKN0-uQWKv10wIaiGVF53avdYJjOKIYOtKGqU729Txr_lwgsMDxHtmT4https://www.pri.org/stories/2019-07-30/dutch-city-turning-bus-shelters-bee-sanctuarieshttp://www.avonotakaronetwork.co.nz/