Responsible adults know that you don’t promise what you can’t deliver, and you don’t spend what you haven't got.
This is not a government made up of responsible adults.
Responsible governments know that if you want to cut taxes, then you have to make spending cuts to match. They know that in hard times, you have to make hard decisions.
This is not a government that likes making hard decisions. They prefer to duck them. They’ve just ducked this hard decision – they lack even the courage of their own election promises -- and now, as Bernard Hickey points out, It means the Government will borrow the equivalent of $13,225 for each New Zealander in the coming decade to pay for that lack of courage – at the same time as the income of each New Zealander is tipped to be around $10,500 a year lower unti 2011.
That figure [$13,225 for each New Zealander in the coming decade to pay for that lack of courage] is the amount the Government is likely to borrow to fund its deficits for the next decade - $52.9 billion, according to Treasury's assumptions spreadsheet stuck inside its website.
It means that every week the Treasury will go into the wholesale money markets and ask to borrow around $200 million. Every week the Government will borrow the equivalent of what it costs to build a hospital.
Every working day it will borrow about $50 million. That's the equivalent of a big Lotto winner every hour. In the space of that 10 years the Government will borrow an amount so large that it will dwarf the amount saved by the New Zealand Superannuation Fund. It will be a massive lead weight dragging on the economy.
To put it into context, this borrowing is worth more than half of the entire savings built up by New Zealanders in bank accounts and directly in the stock market over the past century of around $100 billion.
It will push up interest rates. Key and English were worried about a credit rating downgrade because, they said, it would push up interest rates by 1.5 per cent in the coming years.
They managed to stave off that downgrade, but they may not keep interest rates down. Long-term rates have already risen that much in the past three months.
And they’ll keep going right on up because every irresponsible government in the world is now competing for credit from the same credit markets, and what government can’t borrow then government will just print. Anything to avoid making the hard decisions – no matter the bill that leaves for future generations.
But there are still some few governments in the world who are prepared to confront hard time with hard decisions. Governments who understand that if you’re going to keep promises that matter, then sometimes you have to have the courage to do what’s right.
In fact, there’s a Labour Government just over the Tasman who’s making that kind of decision right now – a Queensland state government under Premier Anna Bligh who is responding to the economic crisis by selling off state assets and discontinuing an expensive fuel subsidy [hat tip Christopher Westley].
Only two months after winning an early election on a platform of financial management, Ms Bligh yesterday confirmed five government-owned corporations would be sold over the next five years and the 8.35 per cent fuel subsidy abolished from July 1.
Queensland Motorways Limited, the Port of Brisbane, Forest Plantations Queensland, and the Abbot Point Coal Terminal will be privatised, as will Queensland Rail's coal business and possibly even its freight arm and regional network.
Ms Bligh - who had not canvassed such drastic measures during the campaign and briefed caucus and selected union leaders only on Monday night - said the Government expected to raise $15 billion from the sales and save $2.4billion over four years on the fuel subsidy. . .
That’s the sort of thing a responsible government does when it’s confronted by reality and it can’t pay its bills. That’s what, repeat after me, a Labour government is doing.
But not New Zealand’s Tory government. Not this National/ACT government. They’re boasting in the House as I write this that they’re boosting spending on this, and boosting spending on the other – talking about extra money wasted on welfare as if it were an “investment” – while the only decent promise they did make, the promise to deliver tax cuts,the only promise they made that will actually deliver real productivity growth – as John Whitehead at the Treasury affirmed just this morning -- that’s the very promise on which they welched so cynically.
It’s a broken promise we’re going to be paying for for years to come.