Deputy Leader & Finance Spokesman John Pemberton

Address to Conference September 2006

 15 September 2006

Today I want to talk to you about three areas of finance: firstly our current debt situation, an update from last year’s report. Then I will touch on the current rates situation, and some solutions we can offer. Finally, I will touch on ways of providing fresh examples of our policies at work.

 Last year at our conference I said

“We want our country back!”

Well it didn’t happen. We have sold out to the debt merchants to an even greater degree. 

The Weekend Herald Saturday March 25 2006 had a headline introducing Brian Gaynor’s column. It read “We’re going broke but nobody cares”. 

The column began “NZ Inc directors – or MPs as they are more commonly known – appear to be only interested in the trivial.” 

They continue with this focus on the trivial to this date. Nothing changes.

Back to this column and it’s heading …. Brian Gaynor and the Herald …. Let me tell you we do care! And we have done so for many years. 

We have not only proclaimed loud and clear about the problem of debt, but we have also provided the solutions. 

At our last conference I quoted the debt figures. Today I update them. 

They have increased from just over $319 billion dollars to over $342 billion. A $23 billion increase!

                                                                        March 06/July 06     Interest cost  

 Figures have been taken from data produced between 31 March 2006 and 31 July 06 from the websites for the Reserve Bank of NZ, The NZ Treasury, the NZ Debt Management Office and Statistics NZ. 

It is not easy getting all these figures and making sure that there is no double counting or in fact whether I have all the debt figures …. They certainly don’t include personal debt arrangements between individuals. And I can find no mention of business or corporate debt sourced from within New Zealand. 

A guide to that answer could be found within the $277 billion of total assets held by M3 institutions. 

But again as I said last year the debt figures I just quoted are bad enough!  

The whirlpool of debt continues to suck us in. 

Our population now holds an average debt per person of $83,246 

For a family of four …. That means $333,000 … 

If we pay an average interest rate on that debt of just over 8% then the interest cost is about $30.00 billion dollars a year….. Or $7,000 odd for each man woman and child. 

 For a family of four that’s about $29,000 …. Again …. If we slashed the government and local body interest rates to 1%, used the Reserve bank to initiate the source of funds required to finance household borrowing (at 1%). The private banks can on lend these funds, at cost i.e. 1%, plus a margin of 3%. Our average NZ family would benefit by a good $10,000. 

Before I move away from the numbers let’s look at the Money Supply figures: 

Last election it was…. all about tax cuts…. and leaving more money in peoples pockets. 

There is currently nobody in parliament who could put money in to individuals or families pockets to the extent that we could with our interest rate cuts. 

This year the gnashing of teeth is about rates. 

There have been huge hikes in some places. Some people, particularly the elderly, are finding it difficult to stay in their homes, especially in areas where property values have escalated. 

The same old tripe is dragged out, by all concerned. The solutions promulgated have all been tried and failed. For decades economists, financial advisors, and other such money gurus have in fact recycled their rubbish so often,  the Green Party should give them all a medal. 

Rate hikes – the cap has been lifted, or more correctly, it has been blown off. The result of the pressure cooker syndrome, where inadequate spending on capital infrastructure is suddenly no longer an option. 

Councils are in a no-win situation, because ratepayers are demanding rate increases of no more than the “inflation rate” – while the real cost pressures are far higher. In addition, ratepayers are demanding infrastructure that is reliable, and that can meet the growth demands placed on it. 

Our solution to the rates and infrastructure problem is interest-free funding that can be repaid over the life of the asset created, paid for once and not three or four times over. 

Our solution for ratepayers is to remove the GST component on rates. 

Our overall interest rate policy will see more of a family’s income freed from debt servicing, whether it’s their own debt, or debt built into the cost of goods and services they purchase. 

It will also lower the actual cost of building infrastructure, as contracters’ debt servicing costs will also go down. 

The majority of the submissions to the Commission of Inquiry on Rates will all revolve around how to extract the rates dollar from as many people as possible, as painlessly as possible. 

The arguments will centre on who pays and how much - the business community or homeowners? Or should a growing proportion be funded from government? 

This is where the discussion will be centred. The core reasons for the rating problem will not be addressed. The ambulance is permanently parked at the bottom of the cliff. 

What are we going to do about it? 

We have the solutions, we’ve always had them, but nobody wants to know. Even in 1981 when we were apparently successful, this was so. Our party was a dump for the protest vote against the main parties, and little else. 

How do we give our solutions the credibility they deserve? In the past, we have talked about Guernsey Island, we have highlighted the success of Michael Joseph Savage and his state housing program, and the 1% revolving credit facility that the Dairy Board enjoyed with the Reserve Bank. 

 I believe it’s time we updated examples, of our policies or those similar, in action. 

Although not true examples of social credit, the locally owned banking organisations are enjoying a good deal of success: Kiwi Bank, the Credit Union movement, SBS, PSIS, Taranaki Savings Bank. They fit firmly into our beliefs that NZ banking systems should be owned and controlled by New Zealanders, and we should be totally behind their continuing development. 

Some of you may have read about the growing barter movement, a phenomenon that is world wide thanks to the internet. Barter web sites create interest-free virtual currencies that allow companies to trade products and services, outside the conventional banking system. This year, says the Herald, more than 400,000 companies world wide will swap goods and services worth about NZ$23 billion. 

The best news is, it isn’t just western companies that are joining in. Barter schemes are being set up for third world farmers, and others dealing in non-tradable currencies, cutting out corrupt middlemen. 

People are taking action, instead of waiting for some of us to argue the details. 

In the past, local currencies struggled to survive, with cumbersome, labour intensive accounting systems, and the danger of volunteer organisers burning out. The internet and sophisticated software have brought the small community green dollar exchanges into the 21^st Century. 

A New Zealand software company leads the way in providing such software. A full suite of internet and telephone banking has been developed specifically for barter groups. Some groups have member businesses in the thousands, and most trade internationally. 

This local software company would like to take their system a step further, by developing a pilot scheme in a small New Zealand town. They would involve the local council, businesses, community groups and individuals in a closed currency system that would enrich the community. An ideal town would be one that was hard hit by New Right Economics, but with its community spirit intact. 

Let me remind you about the works of Bruce Beetham. His rates voucher scheme for Hamilton City was of a similar nature. It would have been easily implemented and maintained if he had the use of the internet and suitable software available today. 

My point is, we have the policies to reform the financial system from the top down, while others who hold similar views are either changing the system from the bottom up, or stepping outside the system altogether. 

We should be embracing these alternative mechanisms. We need to put the established order between a rock and a hard place. Political pressure from the top down must be accompanied by grass roots action, such as support for New Zealand owned banking organisations and involvement in the alternative currency and barter schemes, of the type I have mentioned. 

It is time we brought success to the people of New Zealand, at every level.