Iwi Bonds Could Reduce Cost Of Treaty Settlements

Treaty settlements are here to stay. They’ve happened, they’re happening and they’ll keep happening. The Treaty of Waitangi is entrenched in how the entire public sector functions so there is no going back.

John Ansell is an idiot for trying to engage in historical revisionism. I used to think some of his political ads were good, now it is clear he is a kook. He also proves how many right wingers have no clue about how New Zealand actually functions and where the power lies.

Because I care about reality and reducing the cost of government wherever possible, I’ve come up with a way for the government to lower the cost of Treaty settlements.

There is no need to engage in asset sales to finance Treaty settlements. While we know that state sector ownership results in boo-boos like Solid Energy wasting $100 million on renewable energy, that’s the reality we operate under in New Zealand so making the process less painful is more productive.

If the prediction of an extra $5 billion to $6 billion is true, there is no reason why this should be in a lump sum.

The government should simply issue a fixed term 30 year bond with a yield of 4% and pay the interest bill.

Iwi would get $5-6 billion of government bonds with annual interest payments of $200-300 million dollars.

If they want to invest in their own projects then they can borrow against their bondholdings which would be good.

Yes, the government will have an ongoing interest liability. But when they’re currently borrowing $12 billion a year it’s cheaper to issue the interest stream instead of selling off assets in the middle of a massive global recession where earnings multiples for NZ assets are very low compared to almost everywhere else in the world.

The present value of $5,000M in 30 years at 4% is $1,541.59M.

I’d put that into the NZ Super Fund which has not had any contributions for the past few years and add the proceeds of $6 billion from asset sales.

Here’s what my proposal would look like:

Assumptions:

  • $5,000M Treaty Settlement figure agreed on
  • Government could earn 4% return on $5,000M or $200M each year for the next 30 years if they held the $5,000M themselves
  • Present value of $5,000M 30 year bond is invested at 4%
  • $6,000M is achieved from asset sales and invested in the NZ Super Fund at 4%

Please comment if you think something is wrong with my assumptions. Perhaps I shouldn’t include the recurring $200M? Even so, the government still loses a hell of a lot of future net wealth and income by offering cash now to Iwi.

 

 

 

 

 

 

 

 

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