There are lots of areas to debate around asset sales and I intend to do some short posts over the next week or so. Number one :-
Key’s approach is a bit like selling the family home to pay off the mortgage.
Sounds great in theory until you either end up paying more each week in rent than you did on your mortgage so your (foreign) landlord can make a profit – or you end up sleeping on the street.
Whereas Labour’s approach to housing is keynesian.
That is you go see the bank manager and propose to him that you borrow more on the house so you can pay the interest on the existing loan and at the same time borrow again to pay the extra interest on the interest.
Go try that with the bank manager and see how long you last in their office.
Don’t forget National is going to buy new state assets with the proceeds. So it’s like selling a house, paying off the mortgage and getting a more affordable house that is better for your family. Or we could take the analogy further. The Government will keep a majority holding, so really it’s more like letting people pay you to have use of a few rooms and then using the money to invest further in other areas.
Hey whale it was your mates who decided to pay $44 million a week in tax cuts to the 10% of NZers on the highest (declared) incomes. That is what more than anything else is driving the deficit
And Edwin if you believe it is Key’s plan to stop @ 49% then I expect you will spend the rest of the morning talking to fairies in your garden.
Trev – National didn’t give the highest paid anything. They merely started taking a little less off them than your lot had been doing.
To suggest otherwise would be like suggesting that a house breaker who didn’t take all the TVs or computers from a house was ‘giving’ the homeowner these devices.
You can’t give someone something that’s already theirs! (Apart from in the lexicon of the Left, of course).
Ok George you think all tax is theft. Not worth continuing discussion.
Trev – not sure how you imply that.
I was simply reflecting on the difference between the notions of ‘giving’ and ‘taking’.
Reducing a tax rate is a reduction in taking, not a gift to those from whom you’re extracting less.
So over the next five years, we’ll see 33bn dollars of new state assets created through Government investment. However, the Government wants to see at most $10bn worth of existing state assets. How this can come to any less than a $23bn gain or a reduced net debt position (which is basically what happened (rightly) with Labour is beyond me.
If anything, it’s mortgaging less than half of the family homes’ equity to invest in developing your business, to pay off your original mortgage.
My next question, Trevor, is what Labour would do? We already know that the increased taxation for higher income earners (of which very few pay actual tax) will not be enough to cover the proposed $5000 tax-free bracket (funding issues aside, a pretty sensible idea). But we’ve also been told we’ll see GST off fresh fruit and vegetables, and nothing about how Labour would pay off our national debt (which I hope you plan on doing).
So instead of analogies, can we hear some actual responses in the form of why Labour has a better way of doing things?
Selling off large stakes in SOE’s returning favourable dividends to build “assets” like motorways seems a pretty woeful long term investment strategy to me.
Tidy language or stay on Kiwiblog. Trevor
Aw Trev – not quite the case. More like a student buying a Million dollar house, and not having the money to afford the operating expenses let alone the mortgage. So yes, sell the house, but retain the equity and use that equity to purchase something affordable and practical with a mortgage that is affordable. Helps to get out of debt sooner.
Sadly it was Labour that put the student into the position of the house being unaffordable with false promises in the first place.
Try again Trev.
No Monty – nil net government debt in Labour’s last year in government. Try again.
Sadly the PM deliberately let people people public debt was a problem when it is private debt causing the problems. He implie dit but didnt actually say it so can sleep nights. Sorry, monty et al, public and private debt is quite different and this is naughty spin. Let the issue rise and fall on clear and precise definitions and terms, not grey and muddiable.
It concerns me that the Nats consider such muddying is necessary if it is a fool proof plan.
The PMs backlground is stock and currency so it is natural he will look their and to his former colleagues, bosses, experts to find an answer but we need wider vision than that particularly when the last two major crashes in the last 30 years involved
a. stock market
b. banks
Was he coparing us to Ireland’s failures when pushing his financial hub ( an imitation of ireland() and this was only in December.
“Key told the Business Herald he had “got the numbers” to get the legislation passed and Inland Revenue and the Treasury had signed off that it would not affect the tax base.
Key is confident New Zealand will be able to attract financial funds to place their back office administration here saying a chief executive of one of the world’s most powerful banks had told him: “If you are prepared to zero-rate foreign funds that are not invested in NZ, we’re going to move $2.5 billion of funds here in two years because you’re 50 per cent cheaper than Australia.”
How many jobs will this create, what product and self perpetuating industry will this produce in NZ for short and long term growth? None. Certain ypes will swoop in and set up pseudo offices and create and grow their paper values. The financial industry is an invisible industry insofar as it make sheaps of money on paper but the reality…
“Paul Volcker, the legendary former head of the Federal Reserve, has said: “I wish someone would give me one shred of neutral evidence that financial innovation has led to economic growth – one shred of evidence” – they spend millions on lobbying etc because it works, and the PM is evidence of this method working.
@Trevor Mallard I think it is dreadfully ironic that you censor me for quoting language that Michael Cullen used himself.
Edwin, you’re no Michael Cullen.
OK trev – Labour increased spending on average by $2.8b per year for each of the last five years of the their administration. The cumulative increase in spending was $14b. Labour also was the government when the tradeables went into recession in 2005 at the time when the rest of the world was booming. Those spending promises were unsustainable and drove the whole economy into recession fully in 2008. National inherited the worst set of books as the pre-election financial reports made clear. Cullen did not care he knew the election was lost. Those spending promises are politically untenable to reverse as Cullen knew.
The GFC has hit NZ hard, and National now need to work the economy out of that debt. Trev – Part of the reason your party continues to poll so badly is that the country recognises that the position NZ is in is because of the flippant spending by your government, no matter how much you try an paint it any other way. Of course Key / English are showing great restraint, while your crew continue with the same popularist policies of envy of the rich and spend as much as you can.
Enjoy your time in opposition Trev, I am not sure you will ever be in a Labour led government again.
Whaleoil said that Labour’s approach to housing was keynesian.
Well I certainly hope it is.
The best growth spending that our government can do to stimulate the economy during this recession is investment in new housing in Auckland. We know new supply is needed and the private sector is not providing it.
Jobs for the building sector while they need more work resulting in income tax, company tax and GST revenue to government. It largely pays for itself – the economic return is far greater than the debt holding cost and the housing can be sold onto the market to repay the debt.
Not to do this for incorrect ideological reasons is simply stupid.
One great side benefit, the new housing keeps house values lower and thus holds down foreign debt financing mortgages – so this debt falls relative to GDP growth – win win.
PS Anyone yet realise why we have no foreign debt crisis – even at 85% of GDP – most of it is mortgaged against homes and farmland – people paying the money back from wage income or farm income. Otherwise SOE’s and business paying the loan interest from profits. The small public debt owed offshore is meaningless given it arose out of a recent global recession and is not endemic. And foreign credit agency unable to pick the difference between our debt profile and a country with a large foreign borrowed public debt, must have also been doing work auditing AIG and co pre crash … . And why Shonkey would still have contacts with these people is really interesting …
@ Monty
Stop blaming everyone else- you KNOW, deep down, that what the National Government has said (spun) and done fiscally since it took office has been so wrong for NZ at best, and possibly, if we carry on with their selfish/private sector only agenda -disasterous. I could be sitting on islands in the middle of the Pacific Ocean that have been run down, bankrupted and sold!
I need to begin Waka -making classes.