Quote:
Originally Posted by LewisM
All those tax dollars sunk into it that could have gone elsewhere. We all pay for it, as will our children.
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Hi Lewis.
That is not correct.
The NBN funding model is
not paid for by tax.
Government's that have good credit ratings have a trick up their sleeve
which enables them to fund infrastructure without having to dip into the
tax pool.
They offer AAA-rated bonds to investors at some low interest rate,
such as 4%.
Then when the NBN, or rail network, airport or tollway or whatever
they are investing in starts to make a return - say they plan for 7% return
a decade or two down the track - then they buy back the bonds plus pay the
interest they promised.
You've forked out nothing except "IOU's" in the form of bonds, bought them
back plus paid interest from the profits you made plus you now own
that airport or tollway or broadband network plus it is making a profit
from then on.
Later, if you so choose, you can sell the entire piece of infrastructure
to private investors and put all that profit into consolidated revenue
to build schools or hospitals or pay social welfare.
And where this trick makes the most sense to perform is when interest
rates are very low. They've been at historic lows for quite a while.
So there is a counter economic and business argument that says it is
prudent to invest heavily in profit-making infrastructure at times such
as these.
Businesses do the same during these periods, that is take advantage
of very low interest rates to purchase plant and machinery to further
grow the business.
But Governments are lucky that they can write their own IOU's in the
form of bonds. I wish I could do it.
Best Regards
Gary