The Government allowed Housing New Zealand to borrow billions to build new state houses despite advice from Treasury that such debt would be expensive and risky.
In May, the Government announced it would be building 6400 new state homes over four years.
The funding for this came principally from $2.9b Housing New Zealand were allowed to borrow independently, instead of through regular Government borrowing. …
In a February briefing, Treasury analysts wrote that borrowing directly through the crown would save $11 million per year. This was based on a plan to borrow $1.75b instead of $2.9b. A later analysis estimated an additional $3m-$6m in annual interest costs for every $1b borrowed by Housing New Zealand.
So it is cheaper to borrow money through the Government, rather than have Housing NZ do it directly. So why wouldn’t you. I mean why cost taxpayers more money by having a higher interest rate?
In essence, overseas credit rating agencies would not see this debt as separate from Crown debt given the agency delivered such a core service, and thus would just factor it into their decisions about New Zealand anyway.
Because of this it risked the credibility of the Government’s Budget Responsibility Rules – as it was essentially a loophole through them.
So basically Labour are unable to keep to their own rules they promised. So they found a loophole, which means taxpayers pay more in interest.