Recovery package will cost taxpayers billions - it could have cost zero

17 March 2020

From Chris Leitch, Leader

 

Taxpayers will directly fund bigger profits for the shareholders of banks and other overseas financial institutions as a result of the economic rescue package just announced.

Taxpayers already pay approximately $4 billion dollars every year in interest payments on existing government borrowing.

The borrowing will be done by the issue of new government bonds for purchase by banks and overseas insurance funds when the Reserve Bank could have purchased those bonds directly.

That would have provided a source of debt-free, zero-interest money with no cost to taxpayers, to fund the economic rescue package.

Despite invoking the ghost of the 1936 Labour government, which financed the building of 30,000 state houses with Reserve Bank money, Finance Minister Grant Robertson has chosen to ignore that shining example and boost profits for the private sector.

Taxpayers will pick up the tab for billions in interest payments and the repayment of the debt.

Central banks buying government bonds directly is a common occurrence in Canada, Japan and China, so using it here would not be out of step with conventional practice.

The rescue package is a great start to keeping the economy ticking over, but its long term cost will fall heaviest on those less well off - again.