Latest news with #fiscalstrategy
RNZ News
16-06-2025
- Business
- RNZ News
Greens release fiscal strategy that calls for more public investment
Party co-leader Chlöe Swarbrick says 40 years of bad fiscal programming have produced "devastating real-world results". Photo: RNZ / Samuel Rillstone The Greens have made a case for more public investment, as they releases the party's fiscal strategy on Tuesday, saying the Finance Minister's "fiscal straight-jacket is junk". Green Party co-leader Chlöe Swarbrick said the current government was "fixated on self-made constraints, while the real world crumbles around us". Following the release of its Green Budget last month, which was ridiculed by the coalition , the party has released a discussion document outlining its case for a "transformed approach" to fiscal management it says would prioritise "real fiscal sustainability". The co-leaders' foreword in the report said "if balancing the books can only be achieved by reducing our real economic capacity, then the books need to be rewritten". Swarbrick said the party's fiscal strategy unpicked the daft 'computer says no' argument standing in the way of this critical investment. "We show how 40 years of bad fiscal programming have produced devastating real-world results, as our hospitals, schools and infrastructure fall apart." The document "demands recognition" that both excessive debt and insufficient investment are "equally unsustainable". It also said a "neoliberal logic" was embedded throughout New Zealand's fiscal management framework. "However, the neoliberal prescription of privatisation, public-private partnerships and market liberalisation isn't just outdated - it's actively harming our ability to meet long-term needs." It referenced the fiscal responsibility rules introduced in the 1980s as serving a legitimate purpose then, where constraints on borrowing and spending were an "urgent necessity", because the government had come close to defaulting on its debts. "However, our emergency response to that debt crisis has become permanent policy and, for over 40 years, our fiscal culture has focused solely on the prevention of one type of crisis, while systematically creating others through chronic underinvestment." The strategy document said political leaders called for ever-tighter fiscal restraint, and reminded voters of "rainy days" to come and the vulnerability of New Zealand's small open economy to natural disasters. "However, investment to mitigate these vulnerabilities is only ever seen as a cost, while the vulnerabilities created by weakened public services are made to appear inevitable, rather than as political decisions." The party argued public investment could enhance economic development, productivity and resilience, that would then improve, rather than undermine the country's long-term fiscal sustainability. It also said the costs of underinvestment in things like infrastructure, climate resilience and human capital posed risks "as significant" as excessive debt. "Both debt in excess of our real economic capacity to deliver investment and chronic underinvestment are failures of fiscal responsibility," the report said. It said real economic constraints should guide investment decisions, rather than financial targets "divorced from their economic implications". Responsible increases in public debt should be supported by "funding strategies", the paper went on, that "strengthen domestic financial institutions to hold that debt". "We need to ensure that productive borrowing serves Aotearoa New Zealand's development, while maintaining greater economic sovereignty." It argued this framework would enable the country to build enduring resilience to growing economic and environmental shocks, and create truly sustainable prosperity. The party believed the current accounting-driven approach failed to acknowledge public investment in human, social and natural capital. Swarbrick welcomed criticism, saying "let the government's latest round of name-calling ensue", but said the Greens were providing the most "comprehensive, real-world, evidence-based economic policy" of any party in parliament. "They constitute the only serious plan to actually improve our economic and climate resilience, and create tens of thousands of good green jobs." Sign up for Ngā Pitopito Kōrero , a daily newsletter curated by our editors and delivered straight to your inbox every weekday.
Forbes
19-05-2025
- Business
- Forbes
America Survived Moody's Downgrade—Its Credibility May Not
stock crash for tapering Moody's credit rating agency issued a 'negative outlook', however, the markets scarcely noticed. Bond yields stayed put. Stocks shrugged. The dollar stood firm. But more importantly, the Moody's downgrade means trust is slowly eroding. This isn't about the United States defaulting. The default isn't due to the government failing to make an interest payment. Credibility underpins every currency, bond, and valuation. When credibility cracks, repricing is quiet. It is subtle, systemic, and has a longer-lasting effect. Markets don't scream at trust loss. They whisper. Smart investors listen. Downgrades don't represent the actual risk. It signals a steady, grinding erosion of faith in the world's biggest borrower. Political instability threatens fiscal strength. The statement was clear:The outlook change to negative reflects increased threats to the U.S.'s fiscal strength due to debt affordability constraints and the lack of a clear medium-term fiscal strategy. Two main issues are conveyed:No credible debt management approach deadlock is fundamental, not episodic. This exceeds rating outlook. It undermines market stability illusions. We now assess the U.S. by its stewardship, not its numbers. This isn't about the next quarter—it's about the next decade On the surface, nothing changed; therefore, markets didn't react. Deepest and most liquid, U.S. Treasuries remain the global safe haven. Capital flows move markets, not ratings. America continues to lead the world in terms of fiscal discipline. However, that logic conceals the truth. Credit spreads are rising. Chinese and Japanese purchasers are quietly cutting Treasury exposure. Gold is rising. These are trust cues, not panic. And they shift. Markets don't howl at credibility loss. They whisper. The danger is complacency, not catastrophe. Investors who disregard Moody's warnings fail to understand the true message: trust isn't disappearing, but it's quietly vanishing, taking valuation certainty with it. When S&P downgraded the U.S. in 2011, markets panicked—briefly. Volatility surged, but Treasuries rallied, and the moment passed. Back then, the downgrade was a warning about potential risk. Today, the context is entirely unique. Inflation is sticky, deficits are hitting records, the Fed is no longer a reliable backstop, and Washington is gridlocked with no fiscal discipline in sight. This issue isn't a theoretical concern; it's a structural one. Instead of responding to potential events, Moody's is responding to systemic factors already present. Downgrades don't always cause immediate selloffs, but they do often reset how markets price credibility. The warning signs in 2011 were about potential. The warnings in 2024 are about patterns. Trust is America's most valued financial asset, not AAA ratings. Global markets have priced American debt as secure, stable, and liquid for decades. But as trust erodes, everything changes. Instead of default risk, investors demand more to hold what no longer feels unassailable, raising borrowing costs. As confidence declines, the dollar suffers structurally. Perhaps most importantly, asset class valuations change. Mortgages, corporate bonds, and developing market debt are tied to Treasury benchmarks. Questions about those benchmarks lead to changes in global risk pricing. This situation does not involve a debt crisis. A trust crisis is more nuanced and far-reaching. The longer markets ignore the signal, the harder the adjustment. Investors who prioritize signals over noise should concentrate on pressure points instead of headlines. Treasury auctions will reveal more than a press release if foreign participation is low, especially from China and Japan. Watch the Fed— Powell won't mention Moody's, but if long-end rates rise, expect policy signals. If corporate credit spreads, particularly in the high-yield sector, widen while stock prices remain stable, it indicates a problem. In particular, listen to Washington. The Moody's downgrade presents a challenge. One part of the issue is that the government is unwilling to debate budgetary reform. Moody's is early, but the market rarely favors latecomers.
