The Budget: State of the Nation

Bill English’s “boring budget” is full of miscommunications and misleading information, fairly typical of a right wing government that wants to hide what it really has planned. Included in this budget is the giving away of state land in Auckland, the continuation of massive changes in the public sector and of course wildly hopeful expectations of the New Zealand economy. Most of this information on the controversial topics had already been leaked by the start of the week. The Key government has produced what seems like a Labour-lite budget. And it is true that Labour would perform most of these policies if it were in power and in fact some of the policies are borrowed straight out of earlier Labour election campaigns. But what is significant here is what National doesn’t say in this budget.


The government has announced a review of public land in Auckland, to free up space for development. The housing crisis in Auckland is particularly acute and indicative of wider problems in the economy. All over the advanced capitalist world, house prices have skyrocketed in response to lower returns on investment from the productive economy. These are speculative booms, with investors going into the market because the returns of capital gain are so extensive compared to the rest of the economy. Housing is not productive – it does not create products to sell, it merely passes on money in a similar way to a Ponzi scheme. Investors are hoping when they buy a house that market prices will continue to increase and the next sucker will buy up the property and give them a return on their investment. Money in a capitalist system cannot stay still, due to competition, and with the influx of money from central banks the world over, the global economy is flush with money looking for investment opportunities. The problem is that there are few productive investments that will actually make a return. As such the “fictitious” economy – speculation, derivatives, housing, military investment – all things that got the global economy into trouble 7 years ago, grows enormously threatening the system yet again. The problem is not international buyers – but local investment speculators and the government’s recent attempt to bring in a severely limited capital gains tax, lacks the teeth to do anything at all to curb the speculators.

The land deal in Auckland is an extenuation of the policies that Housing New Zealand has been doing for the past few years, except wider in scope to include all of the public sector. Controversially the land will be given free of charge to private developers to build houses upon until they are sold. It’s only that that the government will then ask for fair market rates on the land. But given the government’s recent history of essentially giving away state assets at bargain prices that rate is unlikely to be much at all and will benefit the rich few.

Dr Nick Smith, who only announced the policy after it was discovered by 3 News, was talking about land owned by universities, schools, tertiary institutions, health boards, defence, Housing New Zealand, the New Zealand Transport Agency and Department of Conservation reserves. Much of this public land that will be now given to private developers at no cost was originally taken from iwi, and under the Public Works Act should rightly be given back to those iwi. With National attempting to finally ‘wrap up’ the Treaty claims process it is unlikely this land will ever be given back to Maori. This again is a continuation of the alienation of Maori land that has been standard practice of the government since the settlement of New Zealand.

Not one section of this policy has any guarantee or even any mention of affordable housing, prioritizing first home buyers, limiting speculation or even how many houses will be built. It is a cynical stunt that appears to be for resolving the housing crisis – when in actuality is about transferring wealth to the richest among us – National’s mates. Mates like Carter Holt-Harvey’s owner Graham Hart – NZ’s richest man – who has invested heavily in the property market, particularly in Auckland, over the last 10 years and as a result of this and other vulture capitalist ventures has more than tripled his wealth since 2008.

The Public sector

The budget policy report barely discusses the public sector in any real terms. It consistently talks about “improving productivity within tight financial constraints” “get[ting] more efficiency” and “improving long term-performance”. But what is really behind these statements? Bosses and the government only really know a couple of ways to improve efficiency and productivity and that is by investment, cutting wages, extending hours, or laying off staff. With this government’s consistent rhetoric about surpluses and financial stringency, investment in the public sector is extremely unlikely.

With looming contract negotiations with many public sector workers – including the primary and secondary school teachers and the nurses at the end of the year – National has set the tone for these neglected sectors: make do with what you have and do not expect much. This is in the face of a $500 million shortfall in the health budget last year, leading to many District Health Boards looking at downsizing services in their area to lower costs.

Recent changes to HNZ are a good example of the model National has building for public services – in essence they must make money no matter who they trod on, or who loses out in the deal. Continuing in the background of this is the merger between HNZ and the now massively changed Work and Income NZ. Bonuses and rewards are offered to WINZ workers based on how many people they are able to get off the benefit through work or otherwise. Changes to HNZ staff have been shocking with a reduction in the amount of staff working there. In the South Island for instance there is now only one person that has to meet with families in need before they can even be put on the ever-growing list of families that need support with housing, greatly underestimating the damage done by NZ’s housing crisis. Privatisation is the name of the game, This month we also had New Zealand’s first fully privately run prison open up in Wiri, South Auckland. Run by notorious British company Serco it will now take charge of nearly 25% of the entire prison population of NZ, for a very lucrative price.

Charities have also been asked to pick up government responsibilities and fill in the many gaps in welfare service, while at the same time their grant funding has quickly dried up. With WINZ reducing its contributions for things like food grants and other emergency essentials, charities such as the Salvation Army have been forced to increase programs to help those in need. The newest policy is now what is termed “Social housing” essentially passing off the government duty of care to find adequate housing for its citizens onto these already overstretched charities. It is the privatization of government housing and nowhere is this more strident than in Glen Innes. The government can’t even get these social housing providers on board and as such transferred 2800 homes from HNZ to a government holding company called the Tamaki Redevelopment corporation, effectively removing government safeguards and responsibilities to tenants from these state homes.

On top of all these changes a recently announced review of the function and services of Child, Youth and Family show exactly what priorities the National government have when it comes to providing for our needs. On the panel is a police officer, the organizer of a Scottish charity, a current minister of social welfare, and the former Maori Party chief of staff. Nowhere is there space for a social worker – the one who knows what is required to fulfill the duty of care. This is the continuation of privatization of these social services. The public sector’s health is in critical condition.

The Economy

Most of the budget policy statement is based around trying to justify this mythical return to surplus that Bill English has been planning since National came to power. However even a return to surplus, as minimal as that maybe and the huge cuts that would be required to do it, would barely make a dent in the roughly $88 billion that the government owes to overseas investors. This value is much higher than government figures due to them writing off financial assets against the debt – a bogus calculation. New Zealand pays over $4 billion dollars a year just servicing the interest on this debt; a financial hole that will be difficult, almost impossible to come out from. The cost of the infamous tax cuts at the beginning of National’s first term, at the start of the GFC is over $3 billion a year. It is the highest recorded debt of a NZ government and the fastest increase in debt ever in our history. On top of the government debt is mortgage debt, some $214 billion, the vast majority of private debt in New Zealand. If there is a housing crisis, most of this debt can never be paid back – and house prices cannot continue to rise forever.

Why this matters is that debt traditionally all over the world has been used by the capitalist class to force countries into specific policies. If our country has solvency issues, or ‘our’ economy breaks down and the state has to approach institutions like the IMF and World Bank for loans, these loans come with stipulations for one the money spent by this loan wouldn’t necessarily go into the New Zealand economy. It would be used to pay off creditors and would continue the cycle of debt as we would then have to pay off the interest on that loan. The inevitable refinancing of the loan, then comes with political requirements, the axing of public sector workers, reducing entitlements and benefits, cutting education and healthcare, and privatizing as much of the government as possible. Greece is the most recent and strident example of these policies.

The National government may already be well on its way on this ideological crusade to privatise the government institutions and sell off assets – but this continuing debt spiral leads to a much more desperate situation. Despite the government’s notions that we can save ourselves by cutting social welfare, and the public sector – we can’t. No amount of cutting wages can restore the economy – because the New Zealand economy needs workers to buy its products. New Zealand capitalist economy, in order to function properly, desperately needs better wages, higher investment in infrastructure and taxes on the rich and in particular speculators. But sadly capitalism can’t afford those things – the speculators are the only ones making any profit – meaning that the profit rate for companies that actually produce things is so incredibly low that it’s not worth investing in.

Key made his fortune, gained his position at Merryl Lynch and made millions for his mates in 1987 through manipulation of New Zealand currency to crash the economy and now he is doing it again with far higher consequences. New Zealand capitalists and international investors are making a mint off the selling of assets, the opening up of oil and gas exploration and the incredibly low taxes in New Zealand. Yet nothing is being done to make sure that those who make the real economy – the workers – can survive. It is a contradiction in New Zealand capitalism that spells dire things for the economy in the near future.

Capitalism cannot solve its own problems; it merely shifts the burden onto other areas – the cost of lack of investment and development in productive sectors is now being shifted onto the public – and most of all the poor. There is only one solution to the ravages of capitalism – the working class must take ownership of the real economy – the means of production – in order to create a world for themselves and everybody else that is not based upon profit and competition. In short there is only one solution and that is revolution.