John Key has a problem.
In four long years National has failed to meet almost every economic target it has set for itself.
New Zealand’s economy is shattered. Unemployment is up sharply. 1,000 Kiwis are leaving every week for Australia. Exported goods have just collapsed by a horrific 17%. Now, apparently, students, the sick and the elderly are going to have their pockets picked by the government too.
Yet while some writers have always seen through the spin – economists Bernard Hickey and Gareth Morgan deserve particular mention – Key has kept much of the commentariat on-side by endlessly promising he has a plan for sustained economic growth.
Well no more, because the prime minister’s had a long-overdue credibility cut.
Historians will say Budget 2012 marked a watershed for this National government. They’ll say it’s when John Key lost his cheerleaders in the press; when opinion leaders began to concede National never had any economic literacy, any vision, or any plan. The scribes will write Key off as a typical National prime minister who burdened the poorest and most vulnerable with new taxes, and who slashed every public service he could, for no deeper reason than to fund tax cuts and special deals for the rich. They’ll record how, just like Rob Muldoon, Key lumbered the next Labour government with a destroyed economy and how every New Zealander was the loser from National’s economic vandalism.
Of course I don’t agree with everything the commentators are writing now. Far from it. But what’s changed is they are really testing Key’s spin and reporting their findings unvarnished – and I applaud the country’s journalists for their professionalism.
Take a look for yourself:
- “The major problem is that there is no clear economic growth agenda”, Fran O’Sullivan, New Zealand Herald.
- “The Budget delivered yesterday by the Minister of Finance, Bill English, had a distinctly underwhelming feel”, New Zealand Herald editorial.
- “It was billed as a Zero Budget, and that’s what we got”, Tim Hunter, Fairfax.
- “The Budget is contradictory. Fiscal policy will subtract from demand and from growth not just next year but for the next four years”, Brian Fallow, New Zealand Herald.
- “As far as ambitious measures to growth the economy, this Budget is a little light”, Corin Dann, TVNZ.
- “A fiscal surplus is not a growth strategy. While the Budget does allocate more money to science and innovation, the restraint on spending has meant the Government is unable to make the kind of quantum leap in industry assistance that would have justified the amalgamation of several Government departments into the new ‘super’ economic development ministry”, John Armstrong, New Zealand Herald.
- “The figures are essentially meaningless… It is still forecasting growth of more than 3 per cent by early 2014. Growth has not been that high for four years and is now at a meagre 1.1 per cent. The growth rate is crucial. A single percentage point under the required rate and a $200 million surplus can be a $2 billion deficit before you can say ‘Standard & Poors’. On such flimsy foundations is the central political component of this Budget built”, John Armstrong, New Zealand Herald.
- “In the face of the negative realities – which are causing misery in households up and down the country – what English had to offer was a series of tweakings and Peter-to-Paul transfers that plugged a few holes here, and scratched an ideological itch there”, Gordon Campbell, Scoop.
- “There has been much speculation over the last 12 months on the merits of a capital gains tax and the anomaly that its absence presents from a tax policy perspective. New Zealand is unique among OECD countries in this regard… if there was ever a time to introduce a CGT it is now”, Greg Thompson, National Business Review.
- “Bill English’s fourth Budget pinches the pennies, raids nearly every piggy bank and even plunders the Government’s rainy-day fund. No-one, it seems, is safe – even kids with an after-school job have been frisked for extra revenue to help fill Government coffers”, Tracey Watkins, Fairfax.
So all in all it’s a thumbs-down for Key.
Please tell us what Budget 2012 has meant for your family.
The Budget has meant nothing!
! Literally 
!
Don’t forget Rod Oram:
http://podcast.radionz.co.nz/ntn/ntn-20120529-1107-business_with_rod_oram-048.mp3
Ackshally, I don’t agree with any of those propositions . . . . .
My eldest daughter starts Intermediate next year and I dreading what these intended cuts will do to her education. Why do the Nacts place zero importance on education ? They are treating the Countries future with contempt. And what also appalled me was Key’s comment that he wasn’t concerned with the numbers of people fleeing to Australia, I sem to recall they campaigned hard that they would reverse this .. Our did I misunderstand our dear leader ??
Is that exports have decreased by 17% or that we’ve got 17% less for the same amount?
But they did have a vision and a plan – to enrich the already wealthy and screw everybody else. It’s true that they don’t have any economic literacy but that’s not surprising – neither do most economists. Money is a tool used to cause distribution of the physical and human resources that make up the economy but it is not the economy itself (this is why the government can print money, why private institutions shouldn’t and why charging of interest need to be banned) as most economists seem to think it is.
@Draco. Fair cop should have read “value of exported goods”
@Peter. The schools cuts are a disaster and they have middle NZ screaming. Hence the piecemeal climb down today.
@Peter
“Why do the Nacts place zero importance on education ?”
It really beggers belief doesn’t it. At this point the Government’s education policy appears to be to save money by spending children.
In regards to the rest of the budget it looks penny pinching, myopic and dystopian. It also lacks any over-arching vision, appearing to be a sort of a back to the future, 1990s Treasury re-run.
Further to this the National Government seem to be putting all their eggs in the ‘surplus by 2015′ basket. With the current low growth in the economy and nothing in the budget to stimulate any growth – the Easter bunny won’t be putting eggs in the basket anytime soon.
The cuts to student allowances are very retrogressive. Given that most well-off students aren’t eligible for allowances until they’re 24 anyway, they get to use them for graduate study (after a nice little OE in London of course), whereas the poor are shut out of graduate study once they’ve made it through their bachelors degree.
Draco, the 17 percent relates to April 2012 versus April 2011 as per the StatsNZ media release. StatsNZ was clear it was driven by weaker commodity prices in overseas markets for our primary industry products.
I pointed this out on an earlier post by David but he and Labour continue to put their spin on it that it was an annual reduction and that it is driven by Government failure.
Again, I ask you David, how would Labour have prevented in-market prices for NZ primary production commodities in overseas markets from reducing in price, when they key drivers are global supply and demand imbalances.
Some people can also read through your “spin” David. But to be honest, most politicians of both sides of the house speak BS most of the time to gain votes – it is rather sad.
@K1W1 Apr 2011- Apr 2012 is a year on year comparison. Of course there is a price compnoent and of course we do not control world commodity prices. But what Govt is responsible for is the overall NZ strategy for dealing with volatile markets. Lesson #1: Don’t put all your cows in one basket.
John Key has no credibility with the Labour party and their supporters, how very unexpected. David please inform me of what the polls say with regards to NZ preferred Prime Minister?
Why do the Nacts place zero importance on education ?
Actually they don’t. They place it very high on their personal list of priorities. That is why private (read elite) schools are exempt from these draconian cuts to education and teacher ratios.
They handed over some $35 million dollars of tax-payers money to private schools about 2 years ago. That was over and above the subsidy I believe these schools get on an annual basis. Therefore shouldn’t they be subject to the same cuts to teachers and services as the state-run schools? Good grief no! These schools are the ones their own kids (or grandkids) attend. No way are they going to compromise their little darlings’ schooling.
The govt’s hypocrisy on this issue is staggering beyond belief. Yet the MSM continues to say nothing – presumably in the mistaken belief that the children of politicians are ‘out of bounds’. On an individual basis I agree, but this is a collective situation and there is no need for any reference to the children concerned – or their respective pollie parents – to be mentioned.
Last sentence should read … there is no need for any reference to the children concerned or their respective pollie parents.
Why does the editing function cease at about 3 mins instead of the full 5 mins. it is supposed to be?
David, with that comment it is not clear if you are refering to a month comparision or an annual comparision.
http://www.stats.govt.nz/browse_for_stats/industry_sectors/imports_and_exports/OverseasMerchandiseTrade_MRApr12.aspx
The 17 percent relates to the month of April – only. It is a year on year comparision of a single month. StatsNZ note that April 2011 had the highest export value on record.
Nice metaphor, and I do agree with the notion of a diversified economy being important, of course. However, the volatile markets did not only impact dairy export returns.
The private sector has driven the increase in investment in the dairy industry, at their risk. The forecast drop in the payout for next season should present an interesting shock…
Would you suggest the Govt has a role to limit expansion of the NZ milk supply?
David, perhaps you could elaborate on how you, if you were in Govt, would create a NZ strategy to deal with ‘volatile markets’. It was not that long ago that Labour had 9 successive years to ensure all the cows were not in one basket.
Furthermore, Labour did allow for the creation of Fonterra – has this lead to more cows in the basket than there would have otherwise been?
David please inform me of what the polls say with regards to NZ preferred Prime Minister?
Susan did you not go to school and learn to read proper? That is tragic. You are missing out on so much… like the gradual downward trend of National’s polling figures which look set to continue ad infinitum. Oops sorry, that’s a big word for a poor reader.
Good post David. I fully agree that the budget is a watershed – the point at which large numbers of people are beginning to realise that they are personally and directly affected by the cut backs.
Rough year ahead for Mr Key. But I don’t expect to see him fronting up much; he tends to avoid negative situations.
The problem is most people think we would be even worse off under Labour.
Unfortuantely the economic outlook will get worse, more unemployment more social spending cuts more poverty, more people moving to Australia.
Friends told me yesterday that they are leaving for OZ, he is an electronics technician, losing another skilled worker and great family because they see little opportunity or hope here.
30plus percentage rate rise in socialist Auckland. Anyone for a socialist central govt?
Allyson tell the truth
It was NACT moving the rate system from land value to capital value as part of the super city restructure that has allowed up to a 30% increase for some business’s. Nothing to do with the centre right Auckland city council and the working class can kiss my a-ss Ive got the big city Mayor job at last Len Brown.
You wll find most people are fleeing NZ from the provinces to Australia.
Hi Richie. I was referring to domestic homes.
I really do not want to pay for another layer of socialism. Kiwis know the safety net of welfarism is now so huge and encompssing we just need to cut it adrift. Oh yes and peeps dont like Trade Unionists. Anyone for more socialism?
It’s still a result of the legislation that this government, headed by Rodney Hide, pushed through.
I suspect that the National Strategy is to do or not do all those things at this time, so that next year or more likely the year after they can show huge improvements leading up to the next election.
Starve the peasants now so that they will become so grateful when we give ‘em some crusts in 2014.
I see the Tories blew $5mill on a RWC piss up, well they actually blew $10m, but let’s not get petty about it. Now they want to rob the paper boy? And asset stip the old elderly? What happened to ‘show me the money’, John?
@ Anne (29/5, 7.41) – Pref PM polls still have Key ahead, but latest I have seen show the lead narrowing, and National/allies slipping below the combined Labour/Green total.
David the preferred PM poll question seems to be unique to NZ. I think it dates from Muldoons time.
Most other countries have an approve/disapprove question, rather than one which all ways gives the current PM the lead
Allyson – so was I no home owner is going to get a 30% rate increase in Auckland.
Socialism = social investment which creates a true rising tide of equality, economic growth and opportunity…look at Brazil.
This Key National government is about coporate welfare handouts and pay offs, from sky city to the Road Transport lobby and large Co2 polluters. They are paralyzed by vested interests that won’t allow them to lead this country out of the corrupt mire that international banksters and big business put us in. Is crony capitalism more your cup of tea?
“Anyone for a socialist central govt?”
Seconded
K NZ: It’s good to see that you’re in favour of extending discrimination of children with more well-off parents past the parental income testing until 24 for uni students. And here I was thinking Labour supporters were supposed to be about fairness.
Dan: I was hit by the 24 rule when it first came in. The bottom line is that there is only so much to go around – and fairness dictates that it should go to the least well-off in terms of background. What is your view of fairness then? And I wasn’t saying that those from well-off families should not get it after 24 – I was stating the consequences of the change, which you cannot deny are retrogressive.
Lastly, are you implying I am a Labour supporter and that all Labour supporters think alike?
Stuart McCutcheon’s article in the Herald is scary:
“The most effective way to benefit financially from international students is to increase the number of international students while simultaneously reducing the number of New Zealanders in the university. This explains a key difference between New Zealand and Australia.
While it is true, as the minister notes, that Australian universities have larger numbers of international students, they also have proportionally fewer domestic students.”
deplorable stupidity aside(allyson), the statement “2012 is when the national govt lost it’s cheerleaders” is wishful thinking…..
One only has to watch(if you can stand it) mark sainsbury waving the flag as hard as he can to know that the apparent swing away from utter obsequiousness is only a red herring…a perfect example was his craven capitulation to hekia perata’s rehearsed spin lines on the incompetence displayed for all to see in the budget…
when it counts, the poodles will be on board the “sparkles” express without a backward glance….
I think John Key is doing very well as a prime minister. i voted for him at the 2011 General Election. So stop treating him the way New Zealanders treat English Rugby Referee Wayne Barnes OK!!!