Submission to -
The New Zealand Productivity Commission
Low - emissions economy inquiry
6th October 2017
This is only the introduction and the conclusion. Read the full submission here (pdf)
The biggest bar to implementing many of the suggestions in the Commission's report, and the one that will cause delays and even failure to do so, is not willingness to make change, but the financial burden involved in doing so.
No where does the Issues paper canvas any innovative funding mechanisms for research and development, development of new technology, implementation of new processes or strategies for moving from the current state of emissions to new lower targets.
The major unexplored funding mechanism is that of government or central bank created money – not borrowed from any other source. It is a mechanism that was used very successfully by the government elected in New Zealand in 1935 following the great depression.
Government has, through its ownership of the central bank (the Reserve Bank) the power to create new money, without the bank needing to get it from anywhere else, and to spend it into the economy. There is not unlimited capacity to do this, but there is significant capacity to do so without inflationary consequences, especially if the new money is invested in creating assets or developing production.
That capacity could be used to fund research and development, development of new technology, and incentivise the implementation of new processes or strategies for moving from the current state of emissions to new lower targets.
Other funding mechanisms such as additional taxes on businesses will result in higher prices for consumers as those taxes are costed into the price of products.
This, or additional taxes on the public, or commercial bank borrowing by the government (the interest on which, and the loan itself, will have to be paid for by taxpayers) will impose further heavy burdens on the public, many of whom are barely surviving economically now.
There is both local and international support, from highly qualified economists, academics, and commentators, for using this funding mechanism.
We submit the Productivity Commission recommend the use of new central bank created money to fund the transition to a new low carbon economy.
Deputy Leader - Finance Spokesperson