Key: Give Auckland a big Govt loan
A conference on Auckland and the Covid-19 crisis hears calls for flexibility from the Government, including a loan to fund big projects and allowing foreign students into university quarantine
Former Prime Minister John Key is urging the Government to throw out the rulebook and give Auckland Council a big, interest-free loan to allow the city to fund needed infrastructure during the economic crisis.
Key, speaking at a summit on Auckland's future, said local bodies were too constrained by debt limits and a new way must be found for the big construction projects the city required.
"In crises, we have to have flexibility and a bit of creativity and that's what we need if we are going to get Auckland going."
He had a chastening message overall, predicting this was the start of a "very significant contraction".
“There’s a lot of stress in the system which eventually is going to manifest itself in signicant issues.”
Property and equity market performances were strong now but low interest rates were helping mask underlying problems. Ongoing construction and the numerous cranes operating were simply "another one of those sectors that you can be lulled into a false sense of security over", Key said, noting the Global Financial Crisis from 2008 had proven construction "is a lagging indicator, not a leading indicator".
He favoured allowing the University of Auckland to bring in its international students and organise their quarantine, and suggested foreign ownership laws could be relaxed to attract international, high net-worth migrants and investment.
On stimulating infrastructure and jobs in Auckland, he said: "The blunt truth is ... local government has a real issue in New Zealand only being able to raise money through rates."
If councils raised debt, that very quickly stretched their balance sheets and there was nothing that could be done.
"If we turned around and say 'Let's use this opportunity to build some core infrastructure for Auckland and have councils on the hook for some of that infrastructure ... how can they fund that?’
"We are at a time where these are very unusual conditions, the Government can raise money at 1 percent or less internationally. It might be a time where it starts saying: 'We'll put on the balance sheet a very large, effective interest-free loan, we'll allow them go above their normal balance sheet caps’ - but somehow we've got to get the cash into Auckland Council because they are not going to be able to raise that money by raising rates because you've got a vulnerable community that can't pay a hell of a lot more than they are.
"You can't send them off to the banks to borrow money because, frankly, they're pretty tapped out in that space and we need them to be doing things....
"Realistically, the only way you are going to be able to do that is some sort of suspensory loan from central government to local government."
Auckland Mayor Phil Goff responded from the audience: "I'm in favour of that."
Key, now chair of ANZ Bank, was a keynote speaker at Auckland's Future Now, convened by Auckland Tourism, Events and Economic Development (Ateed). Speaking of his experience leading the country during the Global Financial Crisis and aftermath of the Christchurch earthquakes, he said flexibility was one of three vital factors in a crisis, after calmness and clarity of message.
"I learned through Christchurch that the number one rule in the rulebook is to throw out the rulebook."
He paid tribute to Prime Minister Jacinda Ardern's clarity of message during the pandemic and her Government's early implementation of an extensive wage subsidy scheme, praising Dr Ashley Bloomfield for a "sensational job" as Director-General of Health.
But he urged those leading the response to be open to a change of direction if the facts change.
"As we used to say when I was running the National Party, when I was running the show: 'There's no elegant way of dismounting the galloping horse. If there's a problem, you've just got to get off and change," Key said.
"We've got to work out what we can do, otherwise we are going to accept that that's our lot and I don't think that's going to work long-term for the growth of the economy. There's just too many jobs at stake.
"So what happens is we run the risk of terrifying ourselves that we actually can't do anything. We can't run the risk of community transmission but that doesn't mean for instance you can't have someone come into the country, like there is every day at the moment for returning New Zealanders appropriately applying the quarantine and testing of them before they come into the community."
Earlier, former Air New Zealand chief executive Rob Fyfe, now back as a business advisor to the national Covid response team, recommended Ardern use her high levels of public trust to help implement a national tracking and tracing system that works.
Fyfe believed the existing Covid app system had been "completely ineffective". He gave an example of an event he attended in Wellington with Ardern and 350 others, where many people scanned the same QR code but all that would tell contact tracers, if someone had been infected, was where they were. They would have to track all 350 people rather than, say, the 20 to 30 people each attendee had been even close to.
A bluetooth-based system that recorded those a person had been in close contact with was "the only way".
New Zealand had largely regressed in its precautions against Covid-19 as the time passed without community transmission, Fyfe said, noting conference attendees were gathered at a time when the public considered there was little need for self-distancing, no restrictions on movements, no masks, and hand sanitiser use had fallen away.
"We are now highly vulnerable to a new incursion across our border. A single super spreader could easily infect several people before they are ultimately tested and found to be carrying the virus ... and before we know it, we will have a Melbourne-style lockdown in Auckland and New Zealand's gateway to the world will be shut."
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