Burns Brendon: Local Government Borrowing Bill — In Committee 
Burns Brendon: Local Government Borrowing Bill — In Committee 
[Volume:675;Page:21175] 
BRENDON BURNS (Labour—Christchurch Central) 
: 
 I thank the Minister for his ongoing response to the questions that members on this side of the Chamber have been putting. It is a good example to us of how Parliament should work and is from time to time known to work. I hope we can continue in that vein. This part of course is in respect of the provisions for the new Auckland Council to borrow in foreign currencies. We know that the Government has another set of proposals around asset sales. The proposition there is that mum and dad investors will be those who buy those assets. The question I want to put to the Minister is this: where is the capital likely to be coming from for the Auckland Council? If it is the case that it is able to borrow in foreign currency is Treasury advising the Minister and the Reserve Bank that that is where the Auckland Council is likely to be taking most of its borrowing from? If that is the case ipso facto it would suggest that that is the most likely market for other sources of investment. I think we know that at the moment the Chinese Government for one is contributing a fair amount of the Government’s debt profile and obviously in a situation where we are a debtor nation we have to be grateful for whatever sources we can rely on for capital. But I think New Zealanders would like some indication of where the Auckland Council is likely to be obtaining its capital from. 
The Minister indicated in the last part that the collective way in which the rest of the funding agency works provides some sort of inherent protection and I want to know how that relates to the Auckland Council in respect of any borrowing that it does offshore because although I think we know that local government in this country is very broad and soundly based it is not unknown for councils to get into trouble. I think of cities like Lille in Belgium which many years ago went bankrupt after high borrowing. Also we are now seeing cities in North America where the rating values have absolutely dropped as factories have moved offshore and the rating bases have dropped to maybe 10 or 20 percent of what their value had been perhaps a decade ago. It has caused enormous problems for some communities in North America. We are not in that prospect but in the spirit of cooperation we have been having members would like to know the likely debt profile that Auckland City will be entering into. Where is the capital likely to be coming from? 
I raise this concern too. While we are a debtor nation the best thing we can do is where possible create capital internally. Quite a lot of effort is going on at the moment to raise capital. I think of the University of Canterbury which has been in the market quite recently to try to raise funds for its institution. Obviously we have huge costs relating to the debts coming out of the Christchurch earthquakes. There will be a big demand upon capital. What will Auckland be competing against in terms of the provision of that capital? Obviously we have seen announcements from the Earthquake Commission in the last few weeks that effectively its coffers have run dry in respect of any further major natural disaster. That will be putting pressure upon debt programmes. 
It is a difficult time for us as a nation in respect of borrowing when we have those various pressures upon us. Auckland obviously has a huge infrastructure demand that needs to develop and grow. Hopefully a lot of the funding it will be raising under Part 2 will be put towards public transport programmes to assist Auckland to be a viable and sustainable city into the future rather than endless building of motorways with all of the climate change implications they bring. I would like the Minister to comment just briefly upon the likely source of capital that the Auckland Council will be likely to attract. Where is it going to be coming from? 
I guess the final comment I would make in respect of this is that every dollar that we borrow offshore—and we need to borrow many—carries with it an additional cost. Next week the Reserve Bank governor will announce his latest position on interest rates. The signals are that the market will hold but at some point interest rates will rise and every time we import capital and it repatriates back out that keeps our interest rates high and our dollar high.