We all know Budget 2010 was full of broken promises – from NOT raising GST – to being “fiscally neutral” while borrowing an extra $1.1 billion to fund tax cuts - to being “fair” while giving a third of all those tax rebate $ to the top 5%.
Most people now realise that the gains they thought they might get are more apparent than real: the proof – even on the Governmnet’s own numbers average gross incomes don’t catch up with inflation unitl 2014! That’s two elections away!
Most now know the results are economically desultory – the current account blows out to 7% of GDP, growth is static (taking 7 years to accumulate a measley 1% extra), and what empoyment growth there is is largely unrelated to Budget meaures.
What has become clearer as the debate has progressed is just how cynically National has attempted to buy votes through a Budget increasingly seen as highly political. John Armstrong - who is no Labour acolyte to say the least – politely nailed that in Saturday’s Herald.
The game afoot is this: fool middle income voters into thinking they have a win. Push through much larger tax cuts for the upper end under this smokescreen. Deliberately stretch the government balance sheet by borrowing more to fund the cuts. Begin compressing public services, but slowly, and hope the rosy glow lasts until the election…
But Bill English could not help the Freudian slip about selling off KiwiBank. (As if anyone believes that a mom-and-pop share issue would mean shares didn’t end up in institutional hands eventually – remember Contact Energy?)
This is important as a foretaste of things to come: extensive privatisation of assets the public already owns, and deep Budget cuts to balance the books that this Government has deliberately run up by cutting taxes too far. Both add up to shrinking the state, and with it the essential services that all Kiwi families need.
Budget 2010 is not a step change, and not a step up. It’s a set up - a sucker punch for the full flowering of the Right’s agenda should New Zelanders allow them a second term.
Mr Cunliffe, what monetary policy will Labour fight the next election on and what do you expect its impact on inflation will be?
David you do realise John Armstrong also wrote another article the day before the one you refer to above? See:
http://www.nzherald.co.nz/opinion/news/article.cfm?c_id=466&objectid=10646480
Of course many people will fail to look beyond how their own pockets will be lined & see the bigger picture….but for the ones who do, well many do in fact appear to actually like & want this picture merely for the fact that it is not have Labour written all over it. You see, for many, NACTs ideas are worth giving a shot as they consider Labour to have failed in all things that matter.
Further, many do realise politics is nothing more than strategy & political point scoring – in fact, it was Labour taught this to many people that and led to the resultant disillusionment with our so-called democracy.
As John Armstrong has said in the above article “Labour will now have to really soak the rich to bolster those at the bottom end of the income scale, where its core vote resides, and still be able to outbid National in the middle.”
Another words, no matter what your view is, what your spin on this year’s Budget is, it was all about securing a win for the Nats at the next election and it is likely to have worked – which means Labour has their work cut out for them.
“…it was all about securing a win for the Nats at the next election and it is likely to have worked – which means Labour has their work cut out for them.”
Yes, I think most people have worked that one out Rebecca. In fact it seemed to me that was pretty much what David Cunliffe was saying. Of course, whether in the long run it actually works remains to be seen. There’s still eighteen months to go (assuming the Nacts run their full term) and a lot can happen in that time.
Anne I am not sure they have.
But yes 18months is a long time in political terms….
Of course, the biggest battle Labour has is separating themselves from past policies – something which I imagine is paramount if they are to regain the trust of the majority of voters.
This will no doubt be quite difficult given that the leader of the Labour party was part of the 1988 5th Labour Cabinet that dropped the company rate to 28c and the top personal rate to 33c and then was later quoted as saying:
“that reduction allows kiwis to keep more of their own money”
Apologies meant 4th Labour party….
“Further, many do realise politics is nothing more than strategy & political point scoring – in fact, it was Labour taught this to many people that and led to the resultant disillusionment with our so-called democracy.”
I think you need to go back further into our history before defining that statement as “fact”. While people your age may have just realised this is what happens in politics, it was numerous national Govts which taught people older to be wary of political point scoring.
Many stiil feel the way you do about Labour, about Muldoon, and Richardson… and possibly Mrs Shipley
I guess people have to decide if they want to dig deeper, and if by the time they have really dug, and perhaps discovered national didnt have the answers, it will be six years on. I have no problem with people voting national, Labour or whomever, I just live in hope they do it other than reliance on sound bites tailored, oh so tailored, to get us thinking/believing, repeating a certain line
@Rebecca – one of the tragedies of this Budget is that beyond the average Kiwi realising that it does nothing for them… it does nothing much for the country either. Otherwise the Treasury would have estimated more growth, and the net investment defcit wouldn’t still be heading South at 45 degrees! More jobs and a real plan to lift incomes would have been good too.
This budget was great for small business, so great ive just been made redundant from my second job, the business is closing and laying off 9 staff.
David – true, although I am just not sure if so much expectation out of a Budget in trying economic times is realistic. Further, the NACTs are convinced that their budget will do all of the above.
I believe that new jobs are most likely come out of our existing companies who will of course benefit from the lower company rate come 1 April next year. I also think that things like R & D are something we should be pushing more for in good times as in the bad times it is more about battening down the hatches and trying to hold on to what you already have…
Tracey – I would imagine most voters would probably be unlikely to look past the cliches, sound bites and sugar coated catch phrases as the reality is that they don’t have the time or desire to really think about things until they have to line up & mark the ballot paper.
Exactly Rebecca which is why so many think this is a very good budget.
” the average Kiwi “…
I’m keen to know which income band this “average Kiwi” sits in, as I have though I was an average Kiwi all along. Does the “average Kiwi” own their first home or is paying one off? Is the “average Kiwi” relatively educated, a sole income earner, self employed? Oh so many questions….
Tracey – I happen to think this is a very good budget yet I can see past the cliches. I am no simpleton!
Could be that there are many other voters who just don’t agree with Labour’s spend thrift approach to things or as John Key so aptly put it “greekanomics” or “borrow & hope”.
Could be that there are many voters who have felt the very real and very negative effects of Labour’s policies – examples of which I have given God knows how many times on this site – and feel that anything is better than the status quo.
Academia is not, I believe, necessarily synonymous with wisdom.
Labour seems to be all about academic debate with no real-life experience to give substance to their (often perceived) high class lofty opinions.
Rebecca said:
Well a very black and white statement here, but I agree there is no doubt that voters decided on a change en masse last election. (Even if they didn’t know what that change was, they had had enough of the Labour approach). Labour’s challenge now is to demonstrate that they are today quite different from Labour of 1999-2008.
An astute observation Rebecca and Labour does have its work cut out. But the corollary here is that the Budget was not about putting NZ on track with a long term vision, it was about what happens in 18 months, and what NACT thought it could best get away with within that short timeframe.
I never said you were a simpleton, you said most dont see past the cliches, I was agreeing with you.
borrow and hope… hmmmm that’s dangerous ground. Cullen ran surpluses, National just borrowed for tax cuts.
Just because you or any of us repeat something over and over doesnt make it so, and even if it does for you, that doesnt make it so for everyone.
I get it. YOU like this budget. I don’t.
Are you able to tell me where the money has come from, for everyone to be better off?
Rebecca said:
I’m sure engineering factory workers, nurses, factory fisherman and others would disagree with you.
The Right requires no academic debate, sell off assets, cut taxes, shrink Government services, make people more individualistic and less community minded…hmmmmm no new ideas required.
apart from the general lack of understanding of economics (and the obfuscation of the NP activists posting here so frequently and repeated by so much of the media) many people see the tax they pay as down to the government but the prices they pay as just the way things are. However I haven’t heard any positive comments about the Budget, but plenty of negative ones.
National taketh and then they giveth some of it back and then claim it’s generous
Remind me of Bill English’s real life experiences… please dont say “farmer”, cos that’s pretend, he’s a career bureaucrat/politician, isnt he?
John Key’s real world experience is as far from the real world as you can get?
Loota: some would argue that Labour have been merely clever enough to disguise their authoritarian bureaucratic sentiments under rhetoric that appeals to the masses and makes them seem people friendly or the ‘peoples party’. Doesn’t mean they actual were on their side.
Given the massive decline in real wages/disposable income that people like engineering factory workers, nurses, factory fisherman experienced up until 2008, I would imagine many would say they were in fact not on their side.
Tracey – I was being tongue in cheek, I knew you weren’t having a go at me!
In terms of where the money is coming from – things like the $200 million extra tax on tobacco probably go a long way to funding this but again, does this matter to most voters?
Time will tell.
Dorothy – perhaps it is who we associate with in terms of the comments we hear pertaining to the Budget.
I have only heard good things….
Comparing and contrasting careers before parliament is fun….
http://www.parliament.nz/en-NZ/MPP/MPs/MPs/a/4/4/49MP981-Goff-Phil.htm
http://www.parliament.nz/en-NZ/MPP/MPs/MPs/c/0/0/49MP30551-Cunliffe-David.htm
P.s Tracey re “Bill English’s real life experiences… please dont say “farmer”, cos that’s pretend, he’s a career bureaucrat/politician, isnt he”
Well…..no more than most of the MPs in his age group! They are all far too institutionalised for my liking, including the so-called fresh faces.
And we could go back & forth on this idea all day! I could potentially give you a self-made Nat MP for everyone of the academic Labour MPs who can boast of a Masters in History, Philosophy etc etc many of whom have had very little real work experience before they entered parliament.
But that’s their fight don’t you think?
Oops, just remembered Bill English has a couple of degrees too and pretty much zero work experience!
No worries Rebecca, I just found it annoying that Clark was derided by Nationala nd Act as an academic. As PM and MP she probably mixed with a greater variety of NZers inher day to day work than John Key had until very recently. Agreed at back and forth.
“In terms of where the money is coming from – things like the $200 million extra tax on tobacco probably go a long way to funding this but again, does this matter to most voters?”
Well we are still borrowing $250m each week, so that tax wont go far.
This is my point…
1.2b over 2 years for GST revenue increase
8.0b over 4 years to pay for tax cuts
250 per week still being borrowed
I just want to know the truth… if everyone wins, where is it coming from, do you know, or do you accept that the budget said we get more, so we must?
Just because we are borrowing doesn’t mean we have no income coming in – tax cuts are about $1.3b each year yet total revenue for 2008/9 was $59.5 billion.
But in terms of analysing exactly where the money comes for tax cuts, health, education, prisons, MPs salaries & perks etc – I kind of want to know, but in some ways I just don’t care as I get tired of each side spinning the facts to suit their own point of view. It seems very hard to make out the forest for the trees.
The problem is most people don’t have the time to look into things properly and all parties take advantage of this.
Um, why would we borrow $250m per week if we could cover it through generated income?
I read last week that we will be borrowing an extra $450m this year, over and above current borrowings, that was directly from
the budget…
I hear what you are saying, I guess you and I are not so far apart except you lean toward belieivng the Nats and their budget and I lean toward not trusting them…
Aah so there is only a fence between us then Tracey!
I’m not saying our revenue covers all of our expenses – of course it doesn’t.
I’m just saying where it comes from is as important as what they are actually doing with the money.
People need money to live on, need public hospitals, need education, need medicine, need food etc.
We currently expect all these things to be met in part or in full by the government.
Given that the baby boomers – our largest population group- are on their way out of the revenue earning sector and that 39% of our children are being born into low socio-economic areas I am saying that what has been happening and what Labour wants the government to do, is not sustainable.
Perhaps you and I should enter politics as I am sure we provide more relevant information than your average MP!
I’m amazed how much time we waste arguing about government debt in this country. Everybody knows that the biggest threat is private debt- which incidentally is forecast to hit 100% of GDP in the next 2 years.
Shouldn’t we be devising policy to deal with that? Governement debt can be dealt with by taxation increases or expenditure reductions at the appropriate time. If banks stop lending to NZers we are totally stuffed.
Topcat: I’m assuming by private debt you mean household debt? You’re not wrong there!
By December 2008 the outstanding total debt of households had increased more than six times in dollar terms since 1990 where the average person owes something like 140% of their disposable income!
But people not spending within their means is another insidious social evil that is far too complicated and politically unsavoury for any government to tackle as it would mean encouraging New Zealanders to take personal responsibility by planning before they buy things or have children. By this I mean those who get sucked into the whole ‘buy now pay later’ garbage.
This is not to dismiss those people who struggle to even earn enough to cover their most basic costs.
On the bright side, while we owe more as a country, we do seem to own more too with household debt being about 1/4 of household asset wealth.
Of course I am regarded as being in debt despite having 86% equity in my home.
We still agree Rebecca, I am trying to find out where the tax cut money is coming from. Given that education and Health, for example got more in the budget, that is more than last year, we can assume that expense has risen.
“We currently expect all these things to be met in part or in full by the government.”
I’m not sure what youmean by this, do you mean keeping the top tax rate at 38%?
I absolutely agree the threshold for that ought to have been raised.
baby boomers will stay in work longer than tradition suggests. Those who stay after their pension is due will be paying taxes.
“‘buy now pay later’ garbage.” – kind of like the budget – everyone is better off, we will tell you how we pay fo rit later, or we will borrow more (couldn’t resist)
“what Labour wants the government to do, is not sustainable.” not the other one about being paid for by govt…
I meant that having a cradle to the grave welfare expectation along with funding failed models (that seemed so wonderful in theory like WFF, ACC & the DHBs) which are not working is costing our teeny tiny country far too much money in terms of what the taxpayer can generate in the long term.
Borrowing to pay for tax cuts that are long overdue so that the NACTs keep their 2008 election promise – if that is in fact what they have done – is neither here nor there considering that long term we will not be able to pay for our education, health, transport & prison services.
Even if some baby boomers continue to work, I doubt they would be bringing in a full time pay check and well, taxes on Super are next to nothing (and always have been – before any tax cuts the 19.5% rate used to work on a table formula where it started at 16% for benefits and increased according to how close you got to the $38k threshold).
And then there is the greater issue where we have nearly 40% of our children being born into very low socio-economic areas, a group of children that are often used as political football but are very rarely validated & supported by respective governments.
I think this Budget is the first step of many that recognises our limitations in terms of providing free public services.
Interesting how there has been no mention of cutting Kiwisaver too – my guess is because long term they are going to phase out National Super and replace it with a contributions scheme similar to that in the UK.
They already cut in half employer contributions (kiwisaver)- clearly dont want to close this particular gapwith Australia, and stopped ocntributing to the Superfund, so need to deal with that here.
I don’t agree with employers being forced to pay 12% or whatever the rate is in Australia and am pleased they cut the rate required here.
I am not sure that employers in the UK are required to contribute a certain amount in the UK – I know they can contribute but not sure whether this is compulsory or voluntary?
@Topcat – I totally agree with you when you say:
“I’m amazed how much time we waste arguing about government debt in this country. Everybody knows that the biggest threat is private debt- which incidentally is forecast to hit 100% of GDP in the next 2 years.”
The way out of the private debt is a combination of savings, reducing the financail deficit on the currrent account. Last thing you’d do is sell off the only ank you own….
Well, my understanding is National’s plan, from campaign to today is to be more like Australia and close the gap.
Rebecca, geunine question, where do you envisage the money for education, health, police etc comes from in a world where people pay low taxes? More user pays?
So basically there are three major ways to address the private debt issue – tighten lending, limit imports or boost exports.
The first option would potentially send NZ into an Icelandic meltdown. The second would be too ‘nanny statist’ or ‘old hat’ to even think about.
Which leaves us with the third option. It’s the best of a bad lot, but is up against various factors – fluctuating exchange rates, the ‘DFC syndrome’, cargo cultism, among others.
Rebecca, being National leaning I’m not surprised that you think
Since increasing savings levels and increased locally available capital would be good for our economy over the long term.
Its not important if you’re thinking just short term though.
Australia has, of course, the long term vision in mind which is why they have gone to 12%. NACT has the short term (18 month) vision in mind, which is why they’ve gone the opposite way and are pleased with it.
I am astounded with all this winners lossers talk on the left wingsites. The only realisation that has occurred regardingth ebudget and has been accepted by contributors it that NZ is a low wage society. What has not been discussed is what is a suitable income level to live on within NZ?
It is all this someone gets more out of the budget and someone gets less. No real Macro discussion on what is (I will reiterate) a viable wage to live on. We seem to be on this micro discussions. No wonder we do not progress with small minded reviews of issues.
Tracey the answer to your question is yes.
Loota – why does the government have to control our money in order for us to save more? Are we that brainless and simple we are not capable of doing that on our own?
Isn’t it far better to address the issues that caused many people to go into real debt due to not being able to meet their basic costs? Issues which I will predictably add that were ignored by the previous government for many years such as skyrocketing costs of housing, food, petrol, power etc etc.
The only way private debt reduces is by people having more income at their disposable.
Lower taxes help this doesn’t it? How can it not considering that Labour’s much loved high taxes did nothing to stop household debt skyrocket in the boom times – and I am talking about debt that does not pertain to appreciating assets such as houses. I am talking about personal loans to merely get by, to pay for the kids clothing, school fees etc etc.
For me to believe that Australia’s 12% employer’s contribution is viable & necessary I would like to know how much employers have to contribute in the UKs National Insurance model – a model that has been proven over many decades…..
Rebecca said:
I’m not sure of the dynamics of it but it has worked very well for Singapore and Australia. Two countries which we were on a par with a few decades ago (or even a head of). Now we’re just league behind. No need to reinvent the wheel, the lessons have already been learnt (oeverseas).
Actually with a higher income banks and finance companies are happy to lend you more, increase your credit card limit further, and assist you into more debt – not less. You know how it works.
Loota: that may be the case but who is struggling to pay back their household debt? Who is most susceptible to the loan sharks and the like which cripple so many families?
Herodotus: I believe that a suitable living wage is one that meets basic costs, costs that form part of our basic human rights (food, shelter & clothing).
My estimates is that this would equate to at least $36.5k in the hand for a family of 4 (not taking into account other variables such as childcare/age of children).
Basic reasonable costs would include approx:
$320 p/w rent
$200 p/w groceries
$150 p/m power
$38 p/m phone
$180 p/m petrol
$380 p/a car reg/wof
$150 p/a 3rd party insurance
$50 p/m aside for car repairs/servicing
$500 p/m for miscellaneous – doctors, clothing, shoes, school fees etc
If you owned it is likely you would need another $2k per year for rates, repairs etc.
Rebecca you are the first to come up with an idea of this so thanks and yes I agree $100/day is about what I thought, with some variances to geography with living in Ak and Wgtn slighty higher than the average and some small centres a bit below. the only data I am aware of is the Household spending data that states that the average cost is $1000/week this data was about 2-3 years old. And the $100/day is to be at the biottom end of participating as a family within society, then there is the cost and functionality of split families.
But how can we score keep on winners and losers when we do not even know what is a starting point, then those below & just above this level requier govt spending (Tax system or rebates) to become active participating members of society and can have some sort of fulfilling lifestyle.
You’re welcome – I have got the figures from our own budget but downsized it to what I would consider minimum to get by now & have used the rent figure we were paying for a shoddy place in Wellington 3 years ago – believe it or not, $320 was quite cheap!
Herodotus
“It is all this someone gets more out of the budget and someone gets less. No real Macro discussion on what is (I will reiterate) a viable wage to live on. ”
Funny how our comments flow from what the Finance Minister told us. he and the PM said “no one is worse off”. We certainly havent had a macro discussion spearheaded from the top.
other than that I do actually accept your point. We need to stop looking to our so-called leadership on just about any issue, because the type of leadership we now have (and have had over the years) is NOT about being extraordinary, innovative, courageous, or even, leading” it’s about branding and sound bites and the three year termat
I’ve already stated elsewhere I would like to have seen the first 10k tax free. Seems to me everyone would have got an identical tax cut… if that s an important issue for some.
what I do know is the superfund was getting a far better return than most kiwis who had invested in funds or other stock related options in the last few years. Economy of scale applies to huge funds in particular. The deals and doors that open to that sized fund, and returns are NOT available to you and I.
All is not lost; unfortunately the world economy may conspire against National.
Debt crisis in Europe, it is not about Greece, population is only 11,000,000. Greece is a symptom of a much wider structural problem within the EU and it is teetering, if it goes say hello recession
China – economy is overheated. China holds 2.5 trillion in foreign currency reserve and is under pressure to devalue the Yuan to balance world trade. Who is going to purchase all the US bonds China needs to sell to avoid losing out to the possible inflation devaluation of these assets. There GDP may take a hit as they change gears to focus on the domestic market and if China even reachs for a hanky we are stuffed! Don’t forget North Korea either, the rhetoric is cranking up.
That provides an opportunity to communicate real structural change in our economy and by this stage middle NZ will know they have been had.
Just some interesting Dominos are being set up that a smile and wave won’t help.
Just got to make sure that we pay down our own personal debt and put some savings away coz there is a chance that there will be a rough ride…
Loota, dont want to sound negative, you do your upmost reduce debt world craps out so you it takes you an extra day to sink, we all end up the same way even the Morgans, Hitchens, Watsons et all will end up the same way.If the world takes a worst case scenario any way we have 1 year and 7 months until summer solstice.
Reb re cost of living. Scary thoughts I think politicians have re this is that how do the retirees survive on 66% of avg wage and how do you get a welfare and tax to allow families to survive and not get the red neck (read middle class) backlash, and the real cost (not just financial) of family breakups.
For me a family breaks up and a financially successful unit breaks up into 2 that can not and do not cope , the whole has greater worth that the individual components.