Yesterday Bill English again painted a rosy picture of a New Zealand economy growing well compared to the rest of the world.
Unfortunately it’s yet another tall tale from National.
This country desperately needs sustainable economic growth to create jobs and incomes, to give families hope, and to reverse the brain drain.
But after four long years of the John Key government there is still almost zero growth.
New Zealand is not doing well by international standards. Our annual GPD growth is lagging behind Australia, Brazil, Russia, Mexico, Germany, Turkey, Korea, Switzerland, Poland, Norway, Venezuela, Argentina, South Africa, Finland, Austria, Bolivia, Estonia, Iceland, Israel, Chile and many of the Asian economies.
Actually we’re going backwards because yesterday Statistics NZ said exports have plummeted by a horrific 17%. That’s a dire reflection on the government’s lack of a recovery plan, and it’s an indictment on economic development minister Steven Joyce’s $120 million of cuts to the economic development budget.
What about National’s other tired tall tale; the idea that growth will magically ramp up any minute now?
Well we’ve been hearing this nonsense for years. Last year English promised 3.2% growth, but Treasury says it’s probably been less than 1.6%.
Now the finance minister is promising we’ll have 2.6% growth in the next year – and he’ll conjure up billions to get rid of the deficit too.
The reality is Mr English can pick the pockets of every paperboy and papergirl in the country, he can raise the prescription charges, he can force the students out of their training, he can wave goodbye to thousands and thousands more kiwis at the departure lounge, he can cut and cut and cut.
But his tall tales still won’t be true and National will still be a zero government.
Over the next few weeks I will be blogging more on why National’s growth performance is inadequate, why their GDP forecasts are thus rosy and unreliable, why the Zero Budget provides zero hope of any improvement, and what some alternatives might look like.
Most commentators believe that the 2014/2015 surplus will not be possible as the economic growth forecasts are too optimistic. So that might mean more fiscal austerity would be required or Key will have to blame offshore factors for their (domestic policy) failure to achieve their (impress the credit agencies) obsession.
It’s clear that the Christchurch rebuild, when it occurs, will have a similar inflationary impact to think big (that lead to a wage price freeze) on the construction sector. House prices in Christchurch will rise because of migrant worker demand, house prices in Auckland will rise because of shortage of builders – failure of government to facilitate new property growth here first to stimulate the economy (and mitigate finance compamy losses on property development) will come back to haunt them.
Now their course will lead to a larger OCR rise and a higher dollar (to the harm of exporters) when the rebuild gets underway – unless the rebuild is slower and more prolonged than expencted – thus again the growth projections are too optimistic.
Why did they not borrow money to complete (and launch new) residential property developments and then sell the property to pay back the debt long before now? This would have led to lower rents and house prices in the wider market (enabling private foreign debt for home mortgages to fall relative to GDP).
They could have also kept relativity with Oz by returning the company tax rate to 30% (and a higher 33% rate for larger companiues with higher profits on the US progressive model for this taxation) and used this money to finance R and D tax credits, increased research funding, easier compliance for SME, Fast Forward, small business loan insurance, and possbibly some incentives for funds/companies investing in start-ups.
We’re bleeped!
!
New Zealand Govt is short of income as it has given away a giant slice of its tax take to the rich.
Now Nact says it has to sell the assets that bring in significant revenue for a one off windfall to marauding multinationals who will make many times the purchase price in capital appreciation, not by efficiency but by raising both charges to consumers and then capital worth based on new income.
The consumer will loose, the Govt will loose income and the balance of debt will more rapidly deteriorate as profits made will be expatriated.
Nact is silent on this senario.
This is what Keys banker masters put him there for. It is a tribal call.
“sustainable economic growth”
we may need sustainable economic growth but under the monetary and economic system as it stands, such a thing is a pipe dream.
The first law of sustainability:
Population growth and/or growth in the consumption of resources cannot be sustained.
Our current economic system relies completely on ever increasing exponential growth in consumption of resources just to avoid collapse. Population growth provides new consumers to consume more resources and fuel economic growth.
Economic growth cannot be sustained.
Mr Cunniliffe,
I know you are an intelligent man, yet you seem to have a large blind spot when it comes to the concept of “sustainable growth”.
Sustainable growth, as Mike has stated nicely, is an oxymoron.
It is mathematically impossible to have perpetual growth in a finite space. This is not a matter of opinion, it is a simple fact.
New Zealand is a relatively small land mass. There is a limit to our growth.
Growth at any % rate is by definition exponential. Even growth at a nice “low” rate of 2% has a doubling time of 35 years, well within the lifetime of one human being.
When will Labour have the balls to admit the math of our economic system does not work and look at how we can restructure our monetary system to one which can cope with zero growth, or heavens forbid, even a contraction of our population? And do this without mass unemployment and the misery it brings?
When you stop using the words “sustainable” and “growth” together and show you understand the arithmetic of exponential growth, then I could take Labour seriously.
Until then I cannot.
May I suggest you start here, with an easy to understand lecture by an old college professor on how exponential growth works. It’s actually pretty entertaining:
http://www.albartlett.org/presentations/arithmetic_population_energy.html
The sell off of State Assets is just a short cut for a Government who has failed to balance it’s books.
The tax cuts for the wealthy have put a drain on the country’s resources and current account deficits.
Unfortunately the sale of these State Assets is going to further drain the lifeblood out of this economy, which has already been squeezed by previous Governments and Roger Douglas’s asset sales of the 1980′s.
We will be tennants in our own country.
Mikes76
Exponential must lead to overshoot which it has in many areas. Growth even at 0.001% cannot be a long term trend let alone growth be a policy aim with any sanity attached.
What part of exponential doesn’t key understand.
There is a great future ahead with negative growth if we manage that for all and not just for the big players. Trickle down has been a dead idea for many years.
Redistribution and lowering of demand are our main immediate problems. Planning for and establishing local food supply is paramount for our needs long term.
In spite of the hollowing out of our economy through injection of foreign money and control, we continue to follow a path to nowhere.
It is apparent that smoke and mirrors, slogans, myths and lies of present Nact administration are all just time fillers while consolidation of private assets for multinationals and bankers continue.
The exports fall and income also drops but no balancing of imports and creation of private debt.
The Transnationals are free to ramp up our imbalance as they are too big to slow or own the foot that controls the brake.
Do we leave it until the pain and damage is so widespread that revolt is unavoidable.
Growth is not an answer. Servicing our needs with inshore services and goods is a viable aim.
One of our favourite exports is money. We have so much we just give it away.
Banks create money with a paper entry which becomes profit which attracts further interest. A sacred gravy train for the apparently untouchable few. Key’s tribe.
At least 3 billion a year goes to OZ from here and that drains our wealth as well as creates a debt for NZ.
So do we sell our assets to service part of this and make our debt worse [ our assets creat ongoing income ] or look at what else makes better sense.
http://en.wikipedia.org/wiki/Reserve_Bank_of_New_Zealand
NZ operates on a fractional reserve system which creates massive debt internally as well as unearned profit for the few which is expatriated to form external National debt. An antiquated system which is unbridled with fiat money.
http://positivemoney.org.nz/
We give away money but can’t afford to pay for education it appears.
I agree with everything you have pointed out John W. I would take it a step further.
National and Act see NZ continuing to use a fiat monetary system which operates with a fractional reserve (although as far as I can tell we don’t actually have a reserve requirement, it can be zero). However, and this is where I have a big problem with Labour, THEY DO TOO!!
I like the ideas in Positive Money, but they do not see the solution as having zero interest.
It is because interest is charged at a % rate that our system requires growth at a % rate.
So the solution has to be taken a step further; it must be an interest free system.
This has actually been tried in the past, in societies for hundreds of years, and every time we use an interest free demurrage system it leads to low or zero unemployment, and a flourishing of culture and society.
Check out my explanation here (first video is how our current system works, second video is how an alternative could work, third is Q&A).
http://www.youtube.com/watch?v=1fYxyU1WjSg
Check out this online eBook which explains how an alternative could work and some implications of it and some historic examples:
http://issuu.com/margritkennedy/docs/bue_eng_interest