Bernard Hickey: False comfort from chief borrowing addict

151 comments
Prime Minister John Key. Photo / Getty Images
Prime Minister John Key. Photo / Getty Images

Prime Minister John Key proved this week he is our enabler-in-chief. He was like the nation's reassuring friend who calmed our fears and nerves about spending more than we earn.

Don't worry so much, said Key this week, as he justified the sale of our largest privately owned group of dairy farms and foreshadowed heavier foreign borrowing over the next couple of years.

Relax. We can always borrow more and sell some assets. After all, we've only sold 1 per cent of our land so far.

Chill. Our foreign creditors will keep lending to us because we are the friendly, smiling borrowers who have everything under control, he crooned.

We are the lucky country with grass galore, close connections to China, a flexible currency and the ability to grow our way out of trouble, he said.

But excuses and reasons are easy when you're trying to justify holding on to an addiction. Foreign debt and asset sales to foreigners are the nation's enablers.

New Zealand has been spending much more than it has earned since about 2000.

In the past 12 years, we added about $100 billion of foreign debt and sold off a bevy of private assets to ensure we could maintain our lifestyles. Meanwhile, falling productivity and the growth of government undermined our ability to export our way back to prosperity.

When will someone stage an intervention to shake us out of our trance?

Key is not the prime minister to do it. He has presided over a Government that has financed a blowout in its deficits funded by foreign creditors, including the Chinese Sovereign Wealth Fund that has bought our bonds, along with Kim Dotcom.

Key campaigned to extend a programme of state asset sales that would lead to significant portions ending up in foreign hands.

The only way to end our addiction to overspending is to throw out the enablers of foreign borrowing and selling assets to foreign interests.

The proportion of our national income that has to be siphoned off to foreign creditors and asset-owners has risen from 2 per cent of GDP in the early 1970s to about 8 per cent now.

Eventually we will not be allowed to borrow more and will not have anything left to sell. Who will reassure us and enable us then?

Bernard.hickey@interest.co.nz

- Herald on Sunday

Have your say

We aim to have healthy debate. But we won't publish comments that abuse others. View commenting guidelines.

1200 characters left

Sort by
  • Oldest

© Copyright 2014, APN New Zealand Limited

Assembled by: (static) on red akl_a5 at 31 Aug 2014 08:26:40 Processing Time: 616ms