'Damn good idea' to borrow, but money should go on roads - economist

The AM Show 02/12/2019

The Government's decision to borrow money is a "damn good idea" an economist says, but his suggestion on what to spend it on might not go down so well in the Beehive.

Finance Minister Grant Robertson on Saturday said he'd bring forward major infrastructure investments thanks to a "once-in-a-generation opportunity because of the Government's good management of the books and resulting low debt".

It comes after months of calls to take advantage of low interest rates and boost spending, particularly with an economy that in economist Cameron Bagrie says is "underperforming". 

"What we actually want to see is actually more Government spending, particularly in regard to infrastructure," he told The AM Show on Monday. "Try to get the economy instead of growing at 2 percent, get it growing at 2.5 to 3 percent."

He agrees with Robertson that Government debt is "hellishly low", and there's nothing wrong with borrowing if it boosts economic activity overall.

"We've got a bit of a Christmas fairytale combination here - infrastructure deficits, low level of borrowing and low levels of debt. Let's get on with the job."

Robertson hasn't decided yet just which projects will benefit from what Bagrie calls a "Christmas trifecta".

"I have directed the Treasury to help bring together a package of projects that can be brought into the Government's short and medium-term plan of investments," he said on Saturday, saying it would "provide certainty to the construction industry about upcoming infrastructure projects".

Bagrie says top of the list should be roads.

"We've got an awful lot of uncertainty in that sector. We've got some pretty big projects that are starting to come to an end... the risk is we're going to lose that highly skilled workforce and they're going to jump across the ditch to Australia." 

The Government has canned or scaled back a number of big roading projects since coming to power in 2017, in favour of boosting investment in public transport.

The National Party came out swinging against Robertson's decision to borrow more money.

"Absolutely no need for Govt to borrow more," leader Simon Bridges tweeted on Saturday. "It's pockets are bulging from the sweat of hard working kiwis & it's wasting billions on the likes of fees free and Shane Jones [sic]."

But National finance spokesperson Paul Goldsmith in recent months has said National would also borrow "if there are good opportunities to spend money on infrastructure". 

And in August, Goldsmith penned an opinion piece for NZME in which he mentioned Reserve Bank Governor Adrian Orr's push for "increased investment in infrastructure while money is cheap", and criticised the Government's reluctance to fund new roading projects.

The AM Show / Newshub reporter Dan Satherley