How much debt do we want to leave our grandchildren?

We’re borrowing about $240 million a day.

Some of that is for infrastructure which will help economic growth and serve several generations.

Some of it is for services which will make the population healthier, better educated and more secure.

Some of it will benefit our grandchildren and some of it won’t.

It’s not unreasonable to expect future generations to pay something towards things from which they will benefit, but some of the $240 million we’re borrowing is paying for things which will have little or no worth for our descendents.

If we don’t want to leave an unreasonable amount of debt for our grandchildren we have three choices:

We could spend less and the government is working hard to reduce public spending and make the rest more productive.

We could pay more tax but our tax system is already complicated and inequitable. Besides, higher taxes are unpopular and often counter productive.

We could increase economic growth which is by far the best option.

One way to do that is by mining and Gerry Brownlee explains the benefits of that in today’s NZ Herald.

. . . Mining in 2008 was a $2 billion industry and contributed $1.1 billion to exports.

Including oil and gas, the mining industry employs around 6000 people – and those jobs are highly productive and highly paid, relative to other sectors of the economy.

Mining is an important part of regional economies such as the West Coast and the Coromandel.

The Government is currently borrowing around $240 million a week and we have more than 100,000 people unemployed. The tradables sector of the economy has been in recession for the past five years.

That is unsustainable and the Government accepts the challenge of improving our economy and living standards.

We need to do some things to improve the income side of the ledger.

The suggestion that a tiny part of the conservation estate might be opened up for mining has been greeted by a level of hysteria which ignores the benefits:

. . .  mining already takes place on conservation land in New Zealand. There are 82 mines operating on conservation land and 118 permits for mining are at present active over conservation land.

Some people argue that New Zealand would not see any benefit from increased mining and that all the profits go overseas.

Yet the largest mining company in the country, Solid Energy, is 100 per cent state-owned. All its profits go straight towards spending on government services. There are also many New Zealand-owned mining companies active on New Zealand land.

The average ownership structure of resources companies listed on the NZX is 57 per cent New Zealand and 43 per cent overseas ownership. Others that are fully overseas-owned pay both company tax and royalties in New Zealand.

Some argue that the royalties from mineral mining are small, meaning it’s not worth it for New Zealand. But royalties are just an added bonus from mining.

The real benefits from mining are the jobs created and economic activity generated inside the country. That activity generates company tax revenue for the Government as well as economic growth.

The economic benefits are clear but it is important that this doesn’t come at a high cost to the environment.

Many New Zealanders are rightly concerned about protecting our natural environment and some say mining is inconsistent with that goal. The Government shares this concern and we will make sure any mining on conservation land in New Zealand is done responsibly and carefully.

Mines in New Zealand are subject to strict environmental tests. The higher the conservation value of the land concerned, the stricter the test. That fact will rule out open-cast mines on Schedule Four land.

Modern mining is totally different from its image in the past. Companies are required to rehabilitate the land after they leave and mitigate the effects of their activities as much as possible.

A good example of a responsible mining company is Pike River Coal in the Paparoa Ranges, which won an award from the Department of Conservation for the environmental consideration it displayed in developing its underground mine.

Some have also argued that mining puts New Zealand’s clean and green image at risk and that tourism may be affected. But the Government is proposing only a small increase in mining activity for quite large economic gain.

Tourism numbers rose between 2000 and 2008 while the mining sector grew and mining permits were issued for conservation land.

Other countries are able to marry their environmental image with a strong mining industry – for example, Canada. There is no reason New Zealand cannot do the same.

 The proposal to open up a tiny part of schedule 4 land to mining is not a foregone conclusion.

The government is calling for submissions on the discussion document.

Most of the response to the proposal so far has been negative and comes from people who are well organised.

It’s important that those of us in favour of the proposal make submissions too, not just for our own sakes but for those of our grandchildren.

We have a responsibility to ensure  economic development doesn’t come at the cost of the environment. We also have a responsibility to ensure that emotive and ill founded concerns about the environment don’t stop economic development.

P.S. Kiwiblog and Keeping Stock also discuss this issue.

One Response to How much debt do we want to leave our grandchildren?

  1. Rimu says:

    The Government has no clue what benefits mining on protected land could bring or the costs. How are we meant to rationally weigh the pros and cons when the Government doesn’t know what they are and has made no effort to find out? The Government just wants to dig and pray.


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