Hi RA readers – I’ve been off air a bit lately due to running around the country on the post- Budget speaking tour, and because my laptop died!
Today parliament shifted into a new stage of the Budget debate – the Appropriations Bill that legitimises the Supplmentary Estimates (amended spending lines) between Budgets 2009 and 2010. It was remarkable for what it does not say – nothing about a plan for protecting jobs or lifting incomes during the worst of the Great Recession. No new ideas over there.
Quick feedback from the Budget tour: spoke to about 20 groups, a mixture of Labour-organised public meetings, community sector groups and businesses. Hard to tote up exactly but would have seen close to 800 people face to face: groups of 160 down to about 25, plus individual business site visits.
The feedback was clear: most Kiwis understand that by the time inflation of 5.9% next year eats away the tax swindle, and wage growth is held down, they will be worse off. That includes increased govt charges like ACC and ECE, plus power bills, rent and higher mortgages. The Government made the classic mistake of overpromising and under-delivering. Kiwis hate the rise in GST. They know the tax cuts aimed primarily at the wealthy are unjust and inefficient.
Was it a coincidence the govt’s polling fell 5% in the week after the Budget?
Second, businesses and commentators understand that the Budget lacks a real plan for jobs, incomes and growth. Fiscal prudence matters, but it is no substitute for a strategy to address the yawning triple deficit around the savings gap, current account deficit and innovation deficit. Gutting Kiwisaver, the R and D tax credits and NZSF prefunding made these worse. The Govt’s innovation package, which represents only 39% of the value earlier striped out, has been almost universally panned.
Third, the added debt from the unaffordable tax cuts has opended up $1.1 bn fiscal hole over 4 years, $9.2bn over 12 years, and that makes the job of turning the boat around ever harder. National will seek to fill this “strategic deficit” through asset sales and service cuts. Don’t let them!
Future posts are going to broaden out somewhat to the rlated issues of monetary and fiscal settings that surround the needed economic strategy.
That remains to be seen Loota – 18 months and they have shown very little signs of doing this (apart from the wonderful speech Phil Goff gave at the beginning of the year).
I think most of the stuff will still be in second draft, plus caucus probably still has a tonne of arguing to do over the different options and the detail in those options.
So yeah, I agree with you Rebecca, very little appears to be in a condition ready to be released to the public domain.
‘Remember, as long as real incomes are growing at a rate faster than inflation, who cares?’
Wow Loota once again you amaze me with such talk. Easy said not easy done. ARE wages going up faster than Inflation? No their not. Get some figures to proove me wrong I’d love to see them I might go looking for some now. And wages definitly won’t keep up with the forecasts that are coming out now as we are coming out of the recession.
You can’t just ignore Inflation like that! As inflation increases it does so exponentially.
The task is to greatly increase per capita income. OK so its not ‘easy done’. So what, are we going to shy away from the challenge? Maybe choose the path of least resistance?
Perhaps you will agree Dylan as long as NZ relies on sheep and cows for foreign currency, and our largest corporates are foreign owned with a mission of pumping NZD out of our local economy, our incomes will stay stagnant while Oz, Singapore and others will continue increasing their distance with us.
You suggested forceable nationalisation of these industries but I will now suggest that’s also ‘easy said not easy done’.
And I did not say that our current per capital income growth would outpace inflation at say 4.5%, the reason of course is in my para 1.
No reason why inflation could not be capped at a higher level if we thought that the level of economic and employement growth resulting was worth it. And I don’t mean capping it at 25%, I mean at 4.0, 4.5, 5.0, 5.5%.
Its going to be 5.9% this year which is unpleasent because incomes for the poorer will be static and its not actually going to be inflation fuelled by excess money or jobs in the market place, quite the reverse.
Oh come on
How about going the whole hog and be just like Zimbabwe 
Only if we can have elephants and tigers too
And why not change our name to ‘Rhodesia’
Yes even the Libertarians (who favour no inflation as far as I can tell) talk about how limiting inflation to 3.0% is hampering our potential economic growth…
I also remember Key and English effectively calling DC and Goff mad for suggesting it earlier this year and have now foistered measures on us meaning we’ll get 5.9% this year and ETS cost increases to boot…
Tax cut —- poof…
Guys I was not saying we should avoid Inflation at the cost of Economic growth I was saying that it’s a bad idea to target economic factors other than Inflation with monetary policy geez…
Yes Inflation needs to happen to let the economy grow I never said it didn’t who do you think your argueing against? All I’m saying is that if you neglect it it will get out of hand. Giving Monetary policy other economic goals is neglecting Inflation because other economic goals cause Inflation that’s all I’m saying. I don’t know how you deciphered Don’t let inflation get out of hand to never grow the economy.
‘You suggested forceable nationalisation of these industries but I will now suggest that’s also ‘easy said not easy done’.
Well at least I actually gave a method while I gave the suggestion. Everything you say is really generic, Oh we have to increase technology oh we have to increase per capita income, Yeah but how? Isn’t an increase in technology a goal that’s gone unsaid since the dawn of man anyway?
Look I can put this into better word’s – The Government has economic goals of GDP, Employment and better welfare. The Government can’t include inflation control in it’s goals because that’s contradictive. Just as the RBNZ has controlling inflation as it’s goal, it can’t have GDP Employment and better welfare as it’s goals or it’s contradictive. It’s impractical to set goals that conflict each other weather your the Government the central bank or an ordinary person.
GDP is to some extent the wrong goal to strive for in isolation, it is vital to consider GNP and also green GDP alongside vanilla GDP.
You are right Dylan you can’t maximise all goals at the same time as some will conflict with each another. But you should be able to aim for an optimum balance, and perhaps work out some innovative ways to reduce the conflicts inherent between different metrics.
Basically 5% unemployment is no big deal – as long as it is a fast churning group and not the same 5% of people permanently unemployed.
“and not the same 5% of people permanently unemployed.” Why not? They could all go feral and then we could make a reality tv show about them
Man you have a cruel sense of humour lol
Yeah then we could sell the concept to Hollywood and they could make films about homeless people fighting each other for $5 notes.
Oh wait they already done that
From the BBC. Corporations get a big tax break while ordinary citizens get wage freezes and VAT increase.
http://news.bbc.co.uk/2/hi/business/10379329.stm
I can see NACT having inspired day dreams about this budget.
Whoops wrong thread soz
Our current reserve banking system is really interesting, it is a real hodge podge of balancing inflation, interest rate, restricting wage growth, restricting employment, trying to balance all for the greatest economic growth, i.e. greatest good…
All the while we all want no inflation, very low interest rates, no unemployment, big wage increases and massive economic growth (sustainable of course)…
Reserve banks can’t build advanced high value added industrial and service sectors all by their lonesomes methinks…
Yeah politics isnt work, doesn’t see anyone mixing with all kinds of different groups and people, in fact, its such a plumb job everyone is queuing up to do it.
Where can I find P Goff’s announcement DC?
Found it
http://www.nzherald.co.nz/politics/news/article.cfm?c_id=280&objectid=10654084
Good on him, god they have some awful photos of him online, I swear they do it on purpose
Has anyone else noticed the sheer number of photos of him with pucked fish lips?
Spud – hadn’t noticed but now that you mention it…..
Tracey – not taking the bait…I don’t do pettiness.
It’s no accident Rebecca – this particular photographer clicks on purpose when his lips are protruding