Choosing marginally lower mortgage rates

This is a free preview of a paid episode. To hear more, visit thekaka.substack.comBriefly in my Picks n’ Mixes and Daily Chorus of the top news, scoops and deep-dives in Aotearoa’s political economy around housing, poverty and climate on Monday, September 22:* 1News reports this morning Christchurch Hospital Emergency Department doctors have sent a letter to Health NZ pleading for more staff, funds and space. * The doctors say they’re massively overloaded, often in code red and some patients wait so long they have to leave the ED, with one dying in the carpark.* Both Labour and National Governments have pressed down on health funding as a share of GDP for decades in order to keep size of Government and debt under 30% of GDP, which has been the Treasury-led mantra for 30 years.* Treasury says it’s more important to keep debt low, ‘in case of emergency’ and both Treasury Secretary Iain Rennie and Public Service Commissioner Brian Roche say the New Zealand Government is ‘at its fiscal limits,’ which they say means they have no choice but to refuse pay increases and refuse health, housing, education and transport capital investment requests.* But New Zealand’s gross debt of around 45% of GDP is barely half the OECD average and the Crown’s full balance sheet picture including NZ Super Fund, ACC and other assets show the Crown has: net debt of 20% of annual GDP; 40% of annual Crown revenues; equity of around 43% of GDP; and the Government’s net interest bill of $2 billion a year represents a cost of 1.2% of annual revenue.* Just imagine if you went to your banker to borrow money for a medical procedure to save a child’s life and said your current mortgage was worth 40% of your annual income and was currently costing 1.2% of your annual salary to service. Would you expect your banker to say no?* Most first home buyers take out mortgages worth 500% of their salaries and initially have to pay over 30% of the salaries in interest costs.* The Government is essentially saying it believes asking financial markets to borrow to properly fund our EDs and stop people dying in carparks is too risky because they fear financial markets saying no to a request to borrow more. That’s even though our interest costs are 1.2% of our income. And unlike a regular borrower, the Crown has the power to force everyone to pay it taxes.* This belief that the 30/30 rule is both appropriate and so valuable it can’t be breached is not only wrong, it is essentially prioritising slightly lower borrowing costs and the resulting one or two basis points of lower mortgage rates over the lives of people dying in car parks. Surely overloaded EDs is the emergency a strong balance sheet is designed for?* In my view, the Government choosing lower mortgage rates over healthier people, homeless people and more investment in future economic growth is a political choice. It is not a financial necessity. It’s also a sociopathic choice.Paying subscribers can get more detail and analysis in the video and podcast above, along with analysis, charts and all my Picks n’ Mixes below the paywall fold. They can also comment and join our chat section.My Picks n’ Mixes for Monday, September 22My Top Pick n’ Mix Six