Contrast stark

Dr Malcolm McKinnon has written of the comparison between the first Labour Government, and the Ardern ministry, claiming the former was not actually transformational (Dec 1). This seems somewhat of amisrepresentation of what actually happened in public finance practice after 1935.

As he wrote in his book, the government faced a financial crisis throughout the 1930s, but the creation of the Reserve Bank enabled monetary expansion.

McKinnon suggests Labour chose not to borrow money overseas (in London), when it actually couldn’t raise new money there. He claims the central bank credit facility was used sparingly. In fact, all of the new state housing scheme was funded by a housing account opened at the Reserve Bank.

In truth, there was not a lot of money available to borrow, other than from the trading banks, which drove a hard bargain up to 1935. It’s also unclear what he means by money being available from the government’s own lending department.

The main one was the State Advances Department, which had found that many of its mortgagees had given up making payments, and had become tenants in their private homes.

So the contrast between the Savage and Ardern ministries is actually quite stark. The first Labour Government pioneered the first form of ‘‘quantitative easing’’, something the current independent Reserve Bank is now finally forced to utilise.

But it is not because of any bold policy initiative from Ardern and Grant Robertson.

Simon Boyce, Paraparaumu Beach