Goldsmith in favour of higher debt levels
The economy looks set for a shot in the arm after National’s finance spokesman Paul Goldsmith has opened himself up to borrowing $36 billion more than his predecessor Steven Joyce.
He said the party would not be seeking to drive debt further down, changing a policy that stretches back to the beginning of the John Key years.
It puts Goldsmith on similar footing to the current Government, which is also in favour of higher debt levels.
The comments represented a massive shift in National’s position on debt, which hasn’t changed since then-finance Minster Joyce committed to reducing net debt to between 10 and 15 per cent of GDP by 2025.
The difference between 10 and 20 per cent of GDP will be roughly $36b in 2025, based on the latest Treasury forecasts.
Goldsmith said yesterday that he believed the current Government’s target, which is to reduce net-debt-to GDP to 20 per cent by 2022 was ‘‘about right’’.
‘‘We haven’t signalled that we’re going to be trying to drive it down to 15 per cent of GDP,’’ he said.
He said National was open to borrowing more, if there were good infrastructure projects available, especially as the cost of borrowing was currently very low.
Treasury sold $50b worth of bonds (debt) yesterday afternoon with yields (interest rate) of 0.94 per cent, a record low.
Finance Minister Grant Robertson, who has faced a lashing from the Opposition for his Government’s borrowing, described Goldsmith’s position as ‘‘interesting’’.
National has struggled to find a position for itself in the debate over public debt.
It put out a 2020 economic plan on Monday, where it opened itself up to reconsidering debt levels, but did not specify a target.
Ahead of the 2017 election, Labour and the Greens committed reducing net debt to 20 per cent of GDP by 2022, a relatively low debt target.
The plan was an attempt to detoxify the Green party’s economic reputation, which was beginning to rub off on Labour.
Since then the Government has faced repeated calls from the business community for increased infrastructure spending, funded by borrowing.
Brad Olsen, an economist at Infometrics, said the economic landscape had shifted to favour upward pressure on the 20 per cent debt target.
‘‘The economic outlook does look a bit softer, because of that people are more relaxed on what that target looks like,’’ Olsen said.
He said other developed countries, many with much higher levels of debt, would not be ‘‘quibbling’’ about 5 per cent movements in the debt target.
Reserve Bank Governor Adrian Orr also appears to be calling for greater stimulus as growth begins to slow.
He told the Australian Financial Review from an annual meeting of central bankers at Jackson Hole, Wyoming, that New Zealand and Australia both had relatively low debt-to-gdp ratios, giving them more room to borrow in the interest of stimulating the economy. One News Prime Minister Jacinda Ardern has said a large donation to the National Party broke the ‘‘spirit’’ of election donation laws.
The National Party received a $150,000 donation from a company owned by Lang Lin, a Chinese racing billionaire in 2017. The donation was the largest the party received over the 2014-17 electoral cycle, the NZ Herald reported.
Foreign donations to political parties are capped at $1500 in New Zealand, but foreign individuals are able to get around this by donating through a New Zealand company, which is legal.
In this case the donation was made by Inner Mongolia Rider Horse Industry NZ (IMRHINZ), a New Zealand company, which is wholly owned by its Chinese parent company.