From Penk’s Pen – Fiscal discipline should guide us.

I hope that everyone is coping OK now that winter has truly come.  Obviously it wasn’t much of a summer, or even autumn for that matter, with all the heavy rain.  Even on the occasions that this didn’t cause catastrophic flooding, it seemed to have an unfortunate effect of making many of us (yes, myself included!) feel less “sunny” in disposition.

In terms of things we can control, it’s been an interesting time to reflect on the need for good decision making in politics.  Just going back briefly to the subject of storms and floods, it’s been very obvious that the short-term sugar hit of spending on interesting “nice to have” projects should never have been allowed priority over stormwater infrastructure.  Activities as mundane as clearing culverts are among the most important duties of government, whether local or central, and I really hope these lessons have been learned.

Thinking about short-termism has put me in mind of the recent Budget presented in Parliament.  While there are lots of little things that will please certain sectors of society – for example, the online gaming industry being granted subsidies – the overall picture is important across generations.  Increasing the nation’s debt levels in the way we’ve seen in the past few years is risky at best.

The heightened possibility of a credit downgrade for New Zealand might sound like something that should concern only economists (and unusually dismal ones at that!).  In reality, though, we’ll all lose out if overseas lenders take a dim view of what’s happening with book-keeping in the Beehive.

The rising interest rates many local households and businesses are getting whacked with, by their own banks, are a direct result of the Reserve Bank putting up the Official Cash Rate.  And of course that in turn has been happening because too much money has been pumped into an economy that remains relatively unproductive, causing inflation.

It’s sometimes not easy to sell “fiscal discipline” as a philosophy that should guide political decision making and therefore it’s easy to criticise those who urge caution.  Politicians aren’t doing anyone any favours, however, if they pretend we can have it all.

And why does any of this matter?  Astute readers already instinctively know the answer: if we don’t worry about the pennies today then the pounds will not take care of themselves tomorrow, to use the old proverb.  We must not let the young people of this area get saddled with disastrous levels of debt for the country to repay or constrain the choices they want to make.

That’s my slightly bleak message this wintry month but I promise a brighter one in the next edition!

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