Australian Treasurer Joe Hockey writes:
APPARENTLY preparations are under way across the ditch for a Kiwi national “parity party” to celebrate when the New Zealand dollar reaches the same value as the Australian dollar.
Now we don’t need a national day of mourning over here, but we do need to look at how New Zealand has been able to put in place structural reforms that will promote future growth in their economy.
New Zealand has been busy making the difficult decisions for their future. As a result they have falling unemployment, rising living standards and a Budget that is coming into surplus.
And near zero inflation.
In contrast, Australia has a Budget that is still operating on the presumption of a never-ending mining boom.
Previous governments locked in spending that didn’t consider that there might be a fall in revenue from declining mining investment and much lower global commodity prices.
As a result of falling revenue and ever-increasing expenditure, we are currently spending $100 million a day more than we collect.
NZ took decisions to reduce the deficits, and head back to surplus. If Australia continues to borrow $100 million a day, then the interest on their debt will make it even harder to balance the books one day.
With that money we could build 40 kilometres of new road, or two brand new high schools, every day and in a week, you would get a brand new major teaching hospital. Instead, we are borrowing this money just to pay our day-to-day bills.
The opportunity cost of not getting spending under control.