Part one of this post showed that S&P placed NZ on negative watch because of the savings gap, the huge (mainly private) net international debt and our under-diversified export profile (and consequent vulnerability). It all adds up to lenders perceiving potentially greater risks and seeking compensation through higher interest rates.
How did the Government react to the news? Did it front the issues and explain its “plan”? Not in your life.
Alex Tarrant at interest.co.nz did a great job of covering John Key’s rather bizarre, meandering post-Cabinet press conference here. Interest.co.nz’s coverage if the political debate is here.
Mr Key manages to contradict himself three ways in two paragraphs:
“Nothing has changed from our point of view, in fact if anything, our position looks stronger from our point of view (really?)…
We accept that we’ve had to take the earthquake on our balance sheet, accept tax revenues have been a bit weaker this year than we had anticipated…(corporate was 22.4% below 2010 forecasts, gst 15.8% below!)”
So… nothing has changed, we are stronger, but we are weaker. Classic. He must have been eyeballing three different journos and guessing they wanted three different answers, so why not try to please all of them at once?
The coup de grace is his attempt to pass it all off as Ireland’s fault. True, the Irish are in a bit of a bog, but lets assume S & P can tell the difference between the land of the long white cloud and the emerald isle.
Back in the real world, one thing is for sure, S&P won’t be amused if Messrs Key and English try to talk their way out rather than addressing the fundamental issues: how about trying to grow savings, diversify and lift exports, and reduce private international debt? Who knows, they could even turn it into a plan?
why would they want a plan when they can rely on the NZ media to treat it as if nasty foreigners are being unfair to poor little NZ?
“how about trying to grow savings, diversify and lift exports, and reduce private international debt?”
Allowing a current account deficit of 6%, spouting on about the low govt debt and allowing NZ debt to mushroom out of control when there was an opportunity to establish a Lab govts legacy was lost, and now we are left with finger pointing. So nothing has changed, except that the world has entered an adjustment period for living the unrestricted good life.
GST being below expectation is good is it not?
I await from Lab with details the blueprint to the promised land, and I hope that we will be given ample time to digest this. Perhaps I will be sold on its message and believe on your (Labours) ability to be delivered and become what you are after, a swinger.
Yet Nat have done little in changes from the policy path that was led by Lab, just a few deck chairs rearranged.
“The coup de grace is his attempt to pass it all off as Ireland’s fault.”
Way back john key said he wanted NZ to become the next ireland.
But unlike Ireland, NZ has nothing like the EU to bail us out. If we go bankrupt we screwed for good!
Minor typo above I reckon, D.C.
The S&P negative watch must be used by Labour as a wake up call to financial journalists, commentators, business people that National is a Government which is sleep walking the country towards a financial cliff.
Key has become a Ceausescu parody.
While the economy burns he thinks of a ‘new plane for the airforce’, which he will use of course.
All the better for his growing personality cult.
how about trying to … reduce private international debt?
Perhaps Labour could offer him some tips on that, drawn from its own awesome successes in this area while in govt?
Psycho, it wasnt a problem when Labour was in government, the lenders couldnt shovel money fast enough.
What we need is a PM with international financial experience- where will we find someone like that.
Secondly we need a PM who can carry out a plan successfully.
Whats your suggestion to finding some one with these unique skills
CV – thanks for finding the typo
Herodotus – fair question mate and you will see a great deal of specific policy rolled out before the election. There is a very active policy renewal process under way and it is in good shape. I know it can be frustrating waiting but there is due process to be gone through if it is to mean something, and be good enough to make a difference.
Maybe Key’s still thinking he has some (blind?) cash tied up in currency speculation.
A currency speculator might have quite bizarre ideas about what “good” movements in our economic position is — depending on what way he is betting.
…it wasnt a problem when Labour was in government, the lenders couldnt shovel money fast enough.
Which is like saying tooth decay wasn’t a problem last year, we couldn’t shovel the sugar in fast enough…
Pyscho, when I was a teenager you had to get permission to get foreign currency to spend while on an overseas trip.
Are you saying we should have gone back to that system.
Ghostie – Clark and Cullen were hardly International financial whizzs and look at the mess they left. Give me John Key any day.
On a different note off topic [deleted, as you note, off topic, Grant}
Labour did try to deal with private debt insofar as it tried to encourage saving via kiwisaver? National reduced the carrot that was kiwisaver, I dont know if that has had a negative result or not.
Let’s consider the following question being put to the PM and let’s anticipate his response …
“How have you been managing your Government’s contradictory positions this year?”
“Aaahhh, ummm, errr … Nothing has changed from our point of view, in fact if anything, our position looks stronger from our point of view .. We accept our positions have been a bit weaker this year than we had anticipated.”
Way back john key said he wanted NZ to become the next ireland.
Not just way back, a couple of weeks ago he went with the idea of New Zealand being a financial hub, like Ireland.
Except, unlike Ireland, New Zealand does not have the EU to bail it out.
How did the Government react to the news? Did it front the issues and explain its “plan”? Not in your life.
I don’t think that the government has a plan, not a macro one. When the government was bringing in a revenue surpluses, the National opposition demanded tax cuts as the cure. When the National party got to the government benches, they claimed tax cuts were the best way to stimulate the economy in bad times.
The plan was tax cuts. Bill English has achieved it, things are now getting worse, he doesn’t really have a clue from this point.
What fresh policy does Bill English have to build “good household saving behaviour” which would improve our S&P rating? No policy what so ever.
It used to be that Cullen got slammed for being an “academic” is it time to slam Bill for being a career bureaucrat sheltered from the “real” world
While we’re at questioning the blissfully ignorant finance minister, what’s with getting his brother, Connor English, to appear on political tv programs like q+a?
No suprise to find that he is to tv punditry what his brother is to sensible management of the economy.
Must be all that fat of the land they drink down in Southland. It’s gone to their heads.
It’s called outsourcing
“So… nothing has changed, we are stronger, but we are weaker.” Key must have stolen his approach from Spike Milligan, who famously once said “we don’t have a plan. That way, nothing can go wrong.”
So… nothing has changed, we are stronger, but we are weaker. Classic. He must have been eyeballing three different journos and guessing they wanted three different answers, so why not try to please all of them at once?
On the contrary, I’ve suspected for some time that John Key is New Zealand’s first Daoist Prime Minister. From the Tao Te Ching:
Nothing under heaven is softer or more yielding than water; but when it attacks things hard and resistant there is not one of them that can prevail. For they can find no way of altering it.
That the yielding conquers the resistant and the soft conquers the hard is a fact known by all men, yet utilized by none.
So John Key’s an amorphous puddle Danyl.
That does sound likely.
Re the private international debt… did that increase by $100 billion under the fifth Labour government or was it more than that?
GST is down because people are spending less and saving more (or paying off debt). This has also affected corporates.
Under the fifth Labour government exporters were told they would be better off moving their manufacturing off-shore.
So your problem is what ?
Jen, love the Milligan quote. Still giggling to myself.
@ Danyl – so Mr Key is really so shallow that he is deep?
Of course Danyl, that description would also fit a jellyfish
Im more interested about Labours economic plan. We hear lots about Nationals ‘lack’ of a plan, but hear nothing of Labours. Future blog post from David maybe?
Off topic but just out of curiosity why do all these comments get censored? I can understand for inappropriate language etc but the lack of free speech is a bit worrying. Maybe instead of rubbishing other people’s idea they could include them in theirs. Might improve the poll ratings a bit.
David – I agree that increasing savings and reducing private international debt are good common sense objectives. Part of the way to do that is to spend less.
Assuming that you believe government should lead by example, what government spending will the next Labour government cut?
This interview by Bernard Hickey on why we shouldn’t be going for a free-trade agreement with the US fits in here. Such a “free-trade” agreement isn’t about free-trade – it’s about limiting governments so that they can’t act in the countries best interests.
@ Matt, @Sean; I am giving a speech tomorrow lunchtime to the Institute of Policy Studies that should help to answer your questions. It will be publicly released and you are welcome to a copy – I will post to my website http://www.cunliffe.co.nz and facebook page.
David – will you post a link here too?
Free trade with the US is an oxymoron. The US is one of the most regulated and protectionist countries in the world.
FREE TRADE with them means they freely export to us, and we freely import from them.
David:
Read your address.
So you’ve been working and thinking. Good on you. It shows.
You’ve set out a damning description of Nats,
a thoughtful analysis of the options, and
a compelling case for a change to a new way ahead.
Hey David
I have just re-read (!) your address.
You know what?
You’ve made me think I want to stay on in NZ and lend my hand to re-build NZ.
Looking forward to more.
p.s. forwarding to my network of family, friends & work mates
Thanks for this David
No doubt it will be picked at. BUT it can only be picked at because it exists and that is a start.
It is a shame it will fly quite low under the radar for now, it reads like a Party Conference Speech.
I will leave others with more knowledge than me to pick over the bones and extrapolate the impact of certain aspects.
This is a classic David. I only wish you could explain us what money is, and give a lecture on Austrian economics. If you could do that, one could start to expect some good things from Labour.
Why do you think that being able to give a lecture on Austrian economics is going to lead to good thigns from Labour? Its not logical.
You do know that in the 1980′s Labour were the original Friedman Freemarket Team? What more do they need to explain to you?
David,
Can you give more detail on the inward transactions tax you proposed in your speech/policy release? I couldn’t find any detail anywhere, and it would be a significant change to our current environment for investment.
Thanks.