Monday, July 04, 2005

Infrastructure Investment

This speaks for itself really.

A record $21 billion in capital spending on transport over the next ten years. This is exactly the sort of money that would be gobbled up by the tax cuts that the right are irresponsibly touting at the moment.

The great American economist J.Galbraith talked about this kind of situation in the late 1950s when, in spite of a great deal of "private prosperity", he observed great "public squalor" as essential economic and social infrastructure became increasingly run down.

Our hard won surpluses can be frittered away on the electoral bribe of tax cuts, which probably won't even add up to all that much for your average working family, or we can invest in the economic infrastructure that is the basis of future prosperity. In business it's called investing in "plant", and any firm that doesn't adequately invest in plant over the long-term is setting itself up to fail.

National's record in the 1990s was to do just that, and in Auckland we are now suffering because of the "public squalor" that resulted. This government is now spending 10 times more on transport in Auckland that National was in 1999.

Labour is the only Party fighting this election that is actually prepared to invest in New Zealands long term economic prosperity.

16 comments:

spooks said...

No, no no no. If we are to look at recent history, let's please remember that Labour has had the public purse for eleven out of the last twenty years, National nine. So some of us know where the blame really lies.

Second, why should my nearly-retired father have to pay for roads he will probably never use. We are always in a catchup paying for roads. Most of us tend to forget that God didn't give us roads, and when we get that $100 first driver licence, someone before us has already paid for the several billion dollars worth of roads that that $100 licence buys access to. Roads to the average 16 year old, are something like beaches, the just ARE, and always were.

If everyone had to put cash up front to buy a house, most of us would be living in Mugabe shantytowns. Same with cars. Most people borrow for their house, and many for their car, so that they can get a good house and a good car, and can use it while they are paying for it.

What we have done wrongly in recent years, under both parties, Mikey, under both parties, is drive on the equivalent of shanty roads, instead of having sensible balanced financing plans, so that we can have good roads as well as good houses, paid for by the people who use those roads, not paid for over and over by their parents.

spooks said...

Do you have a house yet Mikey? Did you (will you) get a loan for it so you can use it while you are paying for it?

spooks said...

Or do you expect your parents to provide your house for you?

Anonymous said...

How does National's policy, if there is one, which is proving less likely by the day, match or better Labour's?

Whaleoil said...

How exactly do you know that this is exactly the kind of money that would be gobbled up by tax cuts.

Really you take the cake sometimes.

How about you write some of your own word instead of spouting Dr Mike press releases.

Anonymous said...

With all the money labour is apparently spending on infrastructure Mikey, they should be able to get a good deal on stones with which to dispatch all the adulterers and homosexuals as advocated last night by the good Dr Choudary, lol.

spooks said...

"In business it's called investing in 'plant'" -- Mikey above.

But no business would even think of financing "plant" from current year revenue. If they did, the business would probably never get started, would never grow, and would almost certainly fail. The business borrows, buys plant, and pays for the plant while it it being used, and earning revenue.

Anonymous said...

Whaleoil - do you know what's National's policy is?
Does National?

Whaleoil said...

Actually yes, I do know what their policy is. Suggest you go to www.nationaltv.org.nz and watch Maurice Williamson's clip...very enlightening....

Whaleoil said...

Oh and check this out too... http://www.buildroadsnow.org.nz

Anonymous said...

New Zealand needstobeglassed

kiwik said...

I lived in Auckland 1998-99 and I LOVED it there. Hope I'll go back sometime to visit all my kiwi friends. NZ is a wonderful country. I'll keep this blog on my list.

spooks said...

My comments above have made several arguments and given examples of our normal behaviour of paying for houses and cars, and plant, while they are being used. It is not our normal behaviour to pay for these major capital items either up front, or from annual revenues, or incomes. If we did we would live in shanty houses, drive clapped out cars, and businesses would fail. I have asked why similar behaviour has not been applied to roads. The result over recent decades has been under-investment in roads. I have presented that it is perfectly sensible to do the same for roads, as individuals do for their houses, and the same as businesses do for plant. By doing so we CAN invest in infrastructure, and the people using the infrastructure can pay for it. I say that this is preferable to making our parents and grandparents pay over and over, for things to which they have already contributed massively, and which our parents and grandparents will use less and less themselves. Paying over and over for things they no longer use. Well, how about we give our parents and grandparents a break and pay ourselves for the things we plan to use.

No responses, I notice.

(And btw, ageism IS the new sexism and racism, in case you young people hadn't noticed your own behaviour and attitude to older people in recent years. And this ageism manifests in many different ways. Maybe we could discuss it more some time - not this thread.)

spooks said...

Michael, thanks for the forum. Sorry it had to be broken. Believe it or not, I enjoyed the conversation.

See you next time round.

michael wood said...

Of course Labour's programme of infrastructure development does make use of borrowing to some extent. Net Crown debt is (I think) forecast to remain at around a stable 20% under current economic forecasting.

The difference is that Labour is also saying that the current generation of taxpayers, given good fiscal conditions, do have some responsibility to also make a contribution - we have after all been shirking it for the past 20 years!

Let's use your house example. My wife and I do currently own a house, and yes we do have a mortgage. We use financing because we don't have the capital to fund the purchase ourselves. However, had have been fortunate enough to have a big enough dollop of cash to buy the house upfront, we would have been crazy not to! By having to debt finance we will pay hundreds of thousands extra in servicing costs over the long-term.

Why do you think it is a sensible fiscal strategy for the government to choose this option when it can minimise those servicing costs by using the current strong balance sheet to pay for a number of important initiatives?

spooks said...

I actually thought I'd covered that quite explicitly.

Pay attention.