Fast-forward to 2016, and we still have all the ingredients necessary to improve living standards, reduce poverty and improve inequality, so what's missing and why are these issues coming to the fore?
The problem is that a large section of the population does not own any assets, and the most obvious and accessible asset to own is land.
With the boom in Auckland property, we have seen a massive boost to the wealth of those people fortunate enough to have owned land. Many people have become millionaires simply by owning their own homes. Those who have been renting have missed what is probably a once-in-a-generation move in substantial wealth creation.
By those people missing out on wealth creation, the gap between rich and poor grows ever-wider. As a society, we need to recognise that this is a massive social problem that, if left unresolved, will eventually create unrest.
To resolve inequality, let's take advantage of low borrowing rates to build infrastructure and housing to allow the younger generation to build an asset.
Step 1: Launch a $100 billion Infrastructure Bond to be used to fund key projects, such as housing, transportation, healthcare and, importantly, financial education/literacy. The terms of the bond would be $100b at 3 per cent per annum for a 30-year term.
Step 2: Build a fast-rail link between Hamilton, Tauranga and Auckland. In my opinion, this project should be built by the Chinese. We could leverage off this, no doubt, with the Chinese government, for better trade deals. Give them a five-year deadline and a nice completion bonus. The condition should be that they employ local contractors to capacity, before bringing in their own teams. Cost: $18b.
Step 3: In Hamilton and Tauranga, build 40,000 new four-bedroom homes. Some basic conditions could be they are for first-home buyers only; house and land package $400,000; 5 per cent deposit; you must be aged 18 to 40; you can't sell the house for five years (unless due to death or separation); you must be employed; priority is given to young families; via Kiwibank, borrowers can access the Infrastructure bond and get a 30-year mortgage at 3 per cent per annum. Cost: $16b to build, but then repaid over 30 years.
If you can't grow the wealth of your nation, poverty, inequality and all the other social issues associated with that will grow.
So far, I have only spent $34b, but look at what you get. Similar things on a smaller scale could be rolled out across New Zealand.
Outcome 1: The $100b Infrastructure Bond could be sold like "war bonds" were, and would form an integral part of any KiwiSaver investor's conservative portfolio. The aim would be to have 80 per cent of the bond funded by Kiwis.
Outcome 2: Think of the benefits of a train travelling at a top speed of 350km/h. The distance between Auckland and Hamilton is only 127km. We would see improved tourism, fewer cars on the road, reduced commute times between major North Island cities, and massive job creation.
Outcome 3: As a country, we are not giving something for nothing. People still have to work hard and pay the loan back, but we are giving a massive leg-up to the next generation to own their own homes, build assets, gain financial independence and reduce inequality. As the money gets repaid from the first project, it could fund the next.
The bottom line is if you don't own an asset, such as property or shares, you can't grow your wealth. If you can't grow the wealth of your nation, poverty, inequality and all the other social issues associated with that will grow. Society and the Government need to act. We can fix this.
We now have the lowest interest rates in recorded history. This is the time to borrow and get it done. So, come on, John Key, take action.
