Kaikoura Main Highway Rebuild A Unique Economic Opportunity

Media Release

Thursday 15 December 2016

Kaikoura Main Highway Rebuild A Unique Economic Opportunity

Democrats for Social Credit Finance Spokesman Chris Leitch is calling on the Government not to borrow the money needed to rebuild the main highway through Kaikoura.

“The rebuild provides a unique opportunity for the government to fund the $2 billion project direct from the country's central bank, the Reserve Bank, as recommended by the International Monetary Fund in 2012”.

In its report titled ‘The Chicago Plan Re-Visited’ the IMF recommended that governments should source funds from their central bank rather than borrowing from private banks as this would save taxpayers immense amounts in wasted interest payments.

The authors of the report, led by Deputy Division Chief Michael Kumhof, now Senior Research Advisor at the Bank of England, say “..allowing the government to issue money directly at zero interest, rather than borrowing that same money from banks at interest, would lead to a reduction in the interest burden on government finances and to a dramatic reduction of (net) government debt..”.

After all, both the Reserve Bank and the private banks would create the money necessary to fund the project.

The Bank of England in its Quarterly Bulletin 2014 Q1 confirms that when it states “One common misconception is that banks act simply as intermediaries, lending out the deposits that savers place with them. Rather than banks lending out deposits that are placed with them, the act of lending creates deposits — the reverse of the sequence typically described in textbooks”.

The Public/Private Partnership model currently favoured by the Government for major roading projects should be thrown out, as this also requires borrowing from private banks and imposes a similar interest burden on taxpayers.

Public/Private Partnerships and Government borrowing from private banks are simply a direct line of corporate welfare with taxpayer’s money bulking out bottom line profits for already rich investors.

Central Bank funding for infrastructure projects was a great success after the depression, when taxpayers paid for projects just once instead of several times over because of the massive interest bill, and only the intransigence of a government wedded to neo-liberal economics is stopping it from being a great success again.

ENDS

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