Who’s going to pay it back?
Have you asked yourself that question at any point in the last few weeks, as governments around the World scramble to respond to covid-19? All of these billions of dollars being borrowed and sprayed, these wage subsidies and tax breaks. Who’s going to foot the bill? Who’s going to shell out? Who’s going to be the last one in line at the front desk when the restaurant closes for the night?
Don’t get me wrong. New Zealand is in a pretty good position relative to most other countries. We had low debt going into this, and with a bit of luck, we’ll get back to a higher level of economic activity faster than most countries. Tell you what, never have I felt so pleased to wake up to the sound of an angle-grinder as I did at 8am on Tuesday morning.
And of course I’m not advocating for the government to let our economy go to ruin. The wage subsidy has been pretty effective in supporting Kiwi businesses with at least part of their balance sheets up until this point. But already the cost of that is in the double-figure billions. And depending on what Grant Robertson decides with his budget and the ongoing support and stimulus in the coming months and years, we could be looking at doubling our sovereign debt as a percentage of GDP. Tens of billions of dollars.
So who pays? Because the way we’re set up at the moment, even before the coronavirus we had some massive expenses in the works: ticking fiscal timebombs waiting to go boom. Superannuation costs, with the rules as they currently stand, are going to balloon in the next decade or two with a surge of Kiwis hiiting retirement age. Then climate change: upfront costs of adapting to life and protecting our assets and infrastructure in a steadily warming world are going to be astronomical.
I’m not going to make this an us-versus-them thing, and throw around generational blame. We all have skin in the game. But honestly, until this point, politicians of all stripes have pretty much kicked these issues down the road. They’ve jabbed their fingers in their ears and agreed that it’s for a different government in years to come to have to sort out.
We have to extend our perspective and our concerns beyond just the here and now. At some point, for a start, there are surely going to have to be changes to our tax base. I’m not saying we should just increase income tax or that changes need to be made overnight. But we have to ask if our tax base is suitable for the debt we have to service. Maybe we have to reconsider our superannuation rules and policies such as fees free university.
I don’t worry for my future. But I do worry for my friends, and other people of my generation and the ones thereafter. I worry for my nephew. Maybe you worry for your children or your grandkids. You should. The sooner the health crisis is over, the better. But then there has to be a reckoning. Will we leave this bill to our kids, alone? Or are we truly all in this together?
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