Weird moment of truth from Key on Breakfast this morning. He admits government debt is low and private debt is high. Why then does he expect Mum ad Dad Kiwis to borrow to buy shares (which they already own) in SoEs. Bill English says it is to pay down that, already low, debt.
This makes it clear the agenda is ideological and driven, like his tax cuts, by a wish to make the wealthiest NZers wealthier and have the rest of us pay for it through increased power prices.
And of course the same thing will happen as with Contact – it became mainly overseas owned.
CORIN DANN: I just want to pick you up on that because there was some criticism about the debt issue. I think it was Professor Bowden from Victoria University who called it spin doctoring, because he argues, in fact New Zealand’s government debt is some of the lowest in the world.
JOHN KEY: It is.
CORIN DANN: So isn’t it the private sector and in particular the big four Australian banks who are the – who are the worry, not the Government’s position?
JOHN KEY: Well I wish it was spin doctoring. You’re right, New Zealand’s government debt as a percentage of GDP relative to the other countries is low, in other words we don’t owe very much. Vis a vis, say – and we’re about 20-odd per cent of GDP. If you go and look at Japan it’s 200 per cent of GDP. But the difference is New Zealand domestic consumers, mum and dad, they owe a lot of money. So on a combined basis we owe 85 per cent…
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And selling state assets will nothing for private debt so this is obviously a play by NACT to give our wealth away to their rich mates both local and (mostly) foreign.
So how does that work then? The governments books are not too bad by international standards, just the private debt is so high.
A couple of things… Thought mums and dads were paying off debt in huge amounts because of the tax cuts – Obviously not.
If assets are sold to mums and das, where are they getting the money from? More borrowing? That’s dumb. Borrow more to buy what you already own, to er, bring down private debt.
Whoever’s writing the script for key, Labour should send him a big christmas gift next year as a way of saying thanks.
Quite right Trevor, mum and dad borrowed money in the 80′s to buy shares, bit if a disaster for many when it all crashed.
Definitely ideology driven to sell of that which we already own.
Electricity generation would surely be the single most important strategic asset we have, selling off some or all of the generators would lead eventually to 100% foreign ownership.
We would be held to ransom by foreign owners by way of electricity prices.
Exactly what happened with some of the lines companies.
Private ownership of major generation in this country is really not an option, private ownership does not guarantee better performance, in fact I suggest exactly the opposite.
How does it work?
Mum and Dad are offered the shares in the SOE’s at a discount. They on-sell these at market value and use the difference to pay down private debt – or maybe not.
It’s an election bribe, stupid!
Hats off to Corin Dann then, for asking the question that other media have avoided. You knew and I knew that the Government Debt was very low at the end of 2008 and is now up around 20%. (Govt borrowing to pay for tax cuts?)
Therefore Key claiming a need to privatise SOEs because of huge Govt Debt, is a lie!
No more soft Paul Henry love & cuddle questions!
Don’t forget what he said in November regarding Standard & Poor – Debt concerns
if your [public] gross debt to GDP or net debt to GDP is less than 30%, then you are in a small group of countries for which the rating agencies have no concerns in that regard. That was absolutely where New Zealand was positioned…..
So the threaten credit downgrade and interest rates hike jonkey alludes to is a lie also.
No one needs to borrow to participate in mixed ownership like you contend Trev. How silly! One uses surplus funds, such as are swilling around in NZ Super and Kiwisaver accounts. This is the means by which thousands of Mums and Dads can participate in minimal mixed ownership WITHOUT borrowing. Gettit!
No ianmac, the liars are repeaters like you.
Key’s speech said he would rather partially privatise SOEs (not sell assets, another lie that is being told, partial privatisation of SOES is not selling assets) to pay for new infrastructure (schools, roads, hospiotals etc) rather than borrow for this; and not because we have too much debt. Although borrowing $300million per week for the next five years with little growth will push out that debt/GDP ratio.
ianmac- govt debt was very low in 08, view the in totality the legacy left not cherry picking as many here do?? Take out NZS and other specified funds and debt was not that low, and add on contigent liabilities and the $10b on student debt that is counted as an asset + the poor substainable GDP growth that we experienced in 99-08-growth by immigration, building (leaky homes 7 schools) and dairy. Also overseas govt debt from 99-08 actually increased under Labour http://www.rbnz.govt.nz/statistics/extfin/e3/download.html,
add in continual current account deficits, NZ was not left in a great position in 08.
But given that I am confused as to where M&D’s are to get the money to buy these assets, also how selling $10b enables us to increase state assets by $30+b. Sounds like a formula to more current account deficits as dividends and the like are shipped off. And to only cover 8 months of deficits, some may say a bit short term strategy. Whislt this may leave a sour taste to many, and a retreading of Labs previous policies( which had some valid reason in the 80′s) but we are not in the same dire financial position.. yet !!!
Perhaps it would help people stop thinking that partial privatisation was about paying down debt if Key et al stopped blathering about debt every time they mention asset sales. Any confusion seems quite deliberately generated by them.
As to paying for new infrastructure, the idea is that we’ll sell income-generating infrastructure so we can buy non-income-generating infrastructure? I thought Key was meant to be some kind of financial whizz-kid?
Not all media have avoided this and its starting to gain momentum..here is a splendid example. Key-gambles-on-privatisation. Great move by the grotesquely overconfident Key. He has created a lie about the New Zealand economy in order to soften voters into allowing state SOE sales, however just as they become aware of this, they may also wake up to the reality that the Nats – through the offices of John key and Gerry Brownlie, have already snuck around behind the backs of New Zealand this xmas to line up a sale of solid energy to the Qinghua Group joint venture. And if anything will terrify NZ into swinging left, its a deep fear of becoming owned by China… We have the crafar family to thank for that.
Fisiani – you let the cat out of the bag. So Key’s plan is to sell to the international companies that run most of the Kiwisaver accounts and to the super (Cullen) fund which winds down in a couple of decades. Why then did English say it was to Kiwi Mums and Dads.
And I agree Key will be calling for the return of Paul Henry. Key might just lose his smiling assassin title to this guy.
Trev – you missed off a bit which would provide context – in that the rating agencies look at ht eentire public and private debt and that combined will have a negative consequence on the ratings.
In addition there is the small matter of the $300m being borrowed per week to fund all the spending promises of your Government (Cullen trying to buy the votes thru WFF Interest free loans etc) which are now proving to be unaffordable.
How much will public debt climb as a consequence of the spending rampage that Cullen did during his nine years as finance minister?
Well, it’s the most important that we have now but telecommunications is actually the most important as Egypt and the rest of the Arab world are presently showing.
And exactly what happened after the sale and deregulation of Telecom. Total loss for the country is in the $10 to $20 billion dollar range.
Why would we buy what we already own? These assets sales will only benefit the offshore corporations that end up owning them. They will not benefit NZ as all other assets sales from the 1980s through the 2000s shows.
Or we could do the rational thing and reverse the tax cuts for the rich that NACT put through that caused that $300/week borrowing.
The right like to think of themselves as financial whiz-kids but, when you really get into what they propose such as asset sales, they always come across as completely stupid and ignorant morons.
An observation. I am a part of the cutesy Mum and Dad club of New Zealand Inc. I like the majority of us have been quite content to have one family house, help our children through tertiary study, (though they are still saddled with massive debt because our combined incomes put us beyond student allowance entitlement (and that’s another f..king beef.) Neither have we mortgaged to buy a boat and flash car / people mover.
I understand that it is the immensely greedy lot who, by borrowing against their first home, chased their extra 2 to three properties (rentals to earn them easy money) who are now in hoc.
Well sorry but tough. If they are in hoc to the money lenders so be it… And of course there are many non-property owning Mums and Dads who are also being saddled by the greed of others.
So, remind me again, why are we being asked to bail out the Private Debt…?
What I find amazing is this is it, the great plan to rocket out of the recession, sell stuff.
Take collective wealth and privitase it, put it in fewer hands.
I’m a bit broke, I’m going to have a garage sale, the JonKey economic plan.
This is all Key has got? that and his cycle-way!
There is no economic transformation plan; just a another big rip off.
We are doomed!
Corin, a sleeper agent? well done lad, not so many (if any) cuddles for ‘smile and wave’ on Monday morning anymore from this breakfast presenter. Be interesting to see if any pressure goes on TVNZ management or Dann over the coming weeks, as happened with Fairfax when JK’s infamous “I’d like to see wages fall” remark was made to a Kerikeri business audience (prior to ’08 election) and was subsequently reported in the local BOI paper, “The Chronicle”.
The PM has indeed been tumbled here.
key is clearly showing how out of touch he is with modern day NZ.
Privatisation one day, and not keen on mondayising public holidays that fall on weekends the next.
Labour, even according to the tory herald, is picking upo support on both fronts. Makes a mockery of hooton’s latest edicts of nothingness.
Kiwisaver funds and the Cullen Superannuation fund will buy the 49% stake in the state assets being sold – oh the irony!
Oh and @Bastard, telecommunications rely on electricity to work, not that I’d expect you to understand that.
they always come across as completely stupid and ignorant morons.
Where’s Clare Curren to kick up a stick about aggressive political rhetoric when you need her?
So Susan- those who are able to benefit the most from kiwisaver- higher income earners (thanks to Lab) will double dip and the rest who have limited or no ability to benefit from kiwisaver miss out again. Pity Lab did not have the physical attributes to allow ALL to benefit from Kiwisaver both in returns and tax subsidies. Note to Phil re the many not the few speach, actions speak louder than words !!
Yes Herodotus this is New Zealand and we are not a communist country, sad I know.
BTW all NZ’ers ARE able to benefit from Kiwisaver both in returns and tax subsidies.
Susan- with a low wage and limited wage increases and what was relatively high interest rates when Kiwisaver was introduced 10.4% floating Sept 08 and still at the then peak house bubble (still awaiting the burst) how were many to afford 4% gross, and then we got the decission that you could not take a pay increase instead of kiwiwsaver (descriminting against the 65+ workers who were made ineligible) many cannot take this up. Then the higher income earners get the greastest $ benefit from coy contributions and maxing govt subsuidies. So these same people are the intended ones to gain from partial sale of state owned asset and what happens to those not wishing or unable to be part of the lucky few?
Some could say that this assists in widening the gap rich:poor
Aussie has comp pensions and no one comments regarding that being a red aligned state., So for me comp super is not a road to communism.
Lets face it Key is not cooked yet; they will be padding out the sale options and building the spin that will be unleashed in full frontal colour blue.
I can see the crosby textor election imagery now, Key with a back drop of the southern hydro lakes talking about an opportunity to share in our wealth for everyone.
Just watch those annomynous election donations roll into the coffers, to pay for the ads, bet a few orginate across the tasman and even some towards the east china sea.
The great rip off is underway again.
Context shows that it wasn’t mere political rhetoric. Privatisation really is bad for the country as has been shown by the privatisations carried out since the 1980s. Continuing such policies, as the NACTs have stated that they want to do, shows stupidity (doing the same thing and expecting a different result) and ignorance (the inability to learn from past mistakes).
No they can’t, quite a few people quite simply cannot afford to go into Kiwisaver.
Today he said, in response to employment figures that there are a lot of external factors impacting on NZ’s economy which the government cant control but it’s ok cos we have the World Cup later in the year which will breath life into the economy.
The first comment is true and makes a lie of blaming Labour for the current malaise. We WOULD be GREECE if Cullen hadnt run surpluses AND thank Goodness the former PM had the foresight to get behind the NZRU bid for the World Cup.
“But the difference is New Zealand domestic consumers, mum and dad, they owe a lot of money”
SOOOOOOO his answer is for them to buy shares rather than pay down their debt?
The assertion that selling assets will reduce the private debt (by implication) is not only disingenuous it is borderline fraudulent, then pretend mums and dads will buy in (even though the reforms required to prevent another 1987 and 2007 type stock market crash are far from in place) and then add more emotion by suggesting that we need to sell the assets to pay for the schools. Bill expected of $1.5B. My company can save this country at least half that amount with a proven process. BUT that industry and others resist it because it cuts their own source of income.
I KNOW for a fact that the Recladding/repairing of leaking schools is largely a rort, and certain sections of the Building Industry, including the surveyors purporting to be independant, have been gearing up their business toward “schools” work for a few years.
The recent example from BOINZ is only one of many I hear about every week in my job.
The company I work for has a proven plan for addressing the alleged $1.5B bill for schools and we believe with good evidence we can at least halve it. The department of Building and HOusing and the MInister know about us, our work, our science and our evidence, yet they have adopted the old model which doesnt work and feathers the nest of people put in charge of diagnosis.
Dear Members,
To Fully Remediate or Partially Remediate—The importance of an independent reviewer
The Ministry of Education is experiencing problems with their building stock, with both old and newer schools in bad shape, and in some cases leaky buildings. About 160 schools, two thirds of them in Auckland have been identified as having leaky buildings.
The cost implications are significant and require prudent process and management to appropriately address the issue and provide a cost effective quality result.
BOINZ has been made aware of at least one school situation where the process appears less than robust. It involves the department engaging consultants to audit potential defective buildings for Weathertightness issues. The consultant then engaged an independent cladding testing contractor to test for preservative levels. This testing was done against the wrong standard and thus rated the building conservatively(high risk) when in fact the building is low risk. On this basis the consultants report recommended all the cladding be removed and replaced at a cost of over $2m and work is already underway. This report was peer reviewed by another staff member within the same consultancy but there was no evidence of any third party review outside the consultant’s practice. In terms of dollar values invested here we would expect to see a third party review of any report involving such a substantive figure.
The original architect, main contractors and project management team have expressed their concerns to the Council BCA, the Minister and BOINZ and advise tests they are undertaking to the appropriate standard show compliance and there are only very isolated areas of weathertight concern which could have been dealt with independently and at a minimal cost.
There is obviously a large amount of money being invested in repair work by the Ministry all over the country. It is paramount that any investment in the future of the building stock involved here delivers the best results. It is also essential that any money invested in repairs and upgrading is approved on the basis of clear evidence that there is in fact a need for expensive repairs. It is critical that any investment in repairs is based on replacement products and systems that are fit for purpose and will stand the test of time.
So what is the Building Officials Institute of New Zealand’s position in relation to remedial consultancy. It is simple and ethical. In our view all remediation consultancies over $50,000 should be independently reviewed by third parties. This is necessary to ensure repair figures are accurate, guarantees a quality result and allows customer peace of mind.
If you have similar stories please let us know, as we want to ensure any weathertight remedial work is carried out in an ethical and professional manner that reflects well on the construction industry.
Does any one really think that NACT will stop at selling a minority shareholding.
Where is Labour on this. From the public commentary Labour is non existent.
Me too isms from Goff are not helping.
Why not really do something. Repudiate the whole “free trade ‘ more market neo-liberal mess.
No tax on incomes up to $10K. CGT. Financial transactions tax, RBA, See the Green new deal for ideas.
Wake up and have the guts to do things properly.
This article highlights the labour party’s recent lack of economic fundamentals, logic and financial common sense. Soon, in the future, the majority of our SOE power companies will require MAJOR repairs. The government will not be in a state to pay for this, no matter what party it is under. What the government is trying to do is to secure our sovereign debt while improving the competitiveness of our power companies under a SEMI-market structure which is historically proven to work unlike a full market structure such as america which is a scam. The only negative which is a large one is loss of dividends to the government. This is a large loss but necessary to secure our future power companies, government credit rating and overall economic wellbeing. This must be taken into account and labour needs to stop politicking at the obvious and smell the roses if it is to earn my support.