NZ Infrastructure investment robbed for cheap labour and wealthy untaxed - Bernard Hickey

 NZ Infrastructure investment robbed for cheap labour and wealthy untaxed

https://twitter.com/bernardchickey

Bernard Hickey



So,... here's the problem. Both National & Labour have opened the permanent & temporary migration taps since 2000 to replace the locals leaving permanently and provide cheap labour to juice GDP growth & power budgets back to surplus fast (& keep debt low) but they did it while underfunding infrastructure to the tune of $100b, InfraCom says. That allowed them to keep taxes low (& not tax cap gains). Taking GDP growth benefits today & postponing costs. Another form of intergenerational wealth transfer. Capital gains galore. Our population grew 1.4%/yr or by 1m to 5m in 16 yrs to 2019. 1.6%/yr from 2010 to 2020. The trouble is eventually the infrastructure/transport/housing/water assets reached breaking point. The covid straw broke the back of our infrastructure camel.

So then Labour decided to limit migration post-Covid to take pressure off infrastructure. It could have invested to fill the $100b deficit & plan for another $100b needed to cope with InfraCom forecast for net migration of 25k/year to 2048, but decided in May it couldn't/wouldn't do it because that would mean higher taxes (probably some sort of wealth tax) and higher debt to pay for it. That would break the fiscal rules both parties have signed up to for 30 years: tax no more than 30% of and debt no more than 20-30% of GDP. Three Waters is Labour's attempt toto solve the problem of funding infrastructure for more population growth by lifting taxes (via water charges) & Government debt without breaking those rules about core crown tax/debt & avoiding asking voters for permission (spoiler: it's not really about co-governance)

That decision not to invest $200b makes sense only if you also limit migration & heavily use congestion charging/housing densification/mode shift to limit transport investment. But now we know Labour (& National) are not doing either of those things Labour just removed its migration planning range, reopened several residency visa programmes, increased various temporary migration quotas & delayed tougher wage rules for most employers importing migrants. Partly due to National's promise to loosen settings by even more and Labour is soft-peddling on its densification and mode shift plans because suburban home-owning double-cab-ute driving median voters don't want them, as the council election results showed.

So what happens now? Our pop'n grows fast again. Without enough infrastructure which contains wage growth, reduces interest rates, increases residential land values (because councils won't open up new land or allow much densification) & powers Budget back into surplus via surging GST/PAYE taxes. Brilliant? Not really, because our hospitals, motorways, schools, bus networks, (non-existent) rail lines are already at breaking point. IE The systemic hospital overcrowding & underfunding revealed today.

So how could or should we do it differently? We should start by agreeing to a ProdCom proposal that is endorsed by the InfraCom to have an agreed population growth target that both sides of politics (and voters) know about & agree to. That means agreeing on a migration level we can handle now & want in future, and then planning and funding infrastructure for that which means agreeing on higher taxes & higher debt levels to double public infrastructure investment of 5% of GDP now & business investment of 10% of GDP to 30% total investment of GDP/yr. And agreeing on a migration level that doesn't further stress infrastructure & keeps up with growth. InfraCom's $200b deficit forecast was based on 0.75%/yr pop'n growth with 25k net migration/yr. Our pop'n growth in last 10yrs was 1.6%/yr with net migration 50k+. At that rate, which the latest loosening implies, we'll add next 1m to 6m in 11.5 yrs.

That would be 6m by 2030. That's 7.5 years away! So where's the urgency about infrastructure investment? And/or limiting migration? Grant Robertson talks mostly about 'keeping a lid on debt'. National wants loose migration settings too. And has no infrastructure plan.