Red Alert

Archive for the ‘economic’ Category

Urgently taxing toddlers

Posted by David Cunliffe on May 25th, 2012

The test of urgent legislation is not just what is in the legislation, but what is not. On both counts this National government should be condemned.

It’s the day after the Budget and Parliament is sitting in urgency to debate new tax legislation. The Taxation (Budget Measures) Bill is apparently so important that National have:

Deferred the main Budget Debate;
Removed normal select committee review;
Imposed a retrospective effect.

So what is this tax bill about?

Is it the secret “base broadening measures”; National’s supposed answer to Labour’s future focussed capital gains tax?

Is it the closing of the major loophole by which half of the wealthiest 100 New Zealanders avoid being on the top tax rate?

Is it reinstatement of the Labour Government’s research and development tax credits, the key tool which was stoking our businesses’ engines of innovation?

Er, no, no and no.

The centrepiece of this Bill is picking the pockets of paperboys and papergirls. Urgently taxing toddlers, if you will.

It’s laughable that National’s top economic priority is retrospectively stealing the pocket money of 68,000 kids.

But it’s incredibly sad that this is what government in our beautiful country has come to.

National has wrecked New Zealand’s economy. Just yesterday they unveiled a horrific 17% plunge in exports. But instead of getting a real plan to deliver a brighter future they’re plotting to tax toddlers.

The zero Budget of 2012 is yet another wasted opportunity for a country desperate for change. It’s an insult to ordinary Kiwis who are working harder and longer for less and less. It’s a slap in the face to law abiding families and small business owners who pay their taxes, and who deserve to get ahead instead of being pickpocketed.

New Zealand is losing 1,000 Kiwis every single week. That’s 50,000+ a year.

Unemployment is up by 50,000+ since National took office. The number on benefits is up over 50,000 too.

A zero Budget means zero hope for them, and all New Zealanders.

It also means zero pocket money for paperboys and papergirls.

Tags: Bill English, Budget 2012, John Key, national, Paperboys, Papergirls
Filed under: Budget, Economic Development, economic, economy

30 Comments

Budget prediction

Posted by Darien Fenton on May 16th, 2012

Thanks Paul Krugman (blog) and Josie Pagani (Radio NZ today)

Tags: austerity
Filed under: Budget, economic

8 Comments

Economic development ideas

Posted by David Cunliffe on April 29th, 2012

During the recess I have been working to fill out some ideas around economic development.

These personal views build on caucus discussions and our 2011 manifesto, and take on board feedback from party and business circles as I have been listening and engaging over the last few months.

This oped, published in the Herald on Friday, argues for lifting sustainable economic growth through a more ‘can do’, positive partnership with between government and business. It argues for a clear and credible strategy that integrates economy-wide, sector-driven and regional initiaitives. It warns of the dangers of the kind of one-off ‘deals’ with indvidual corporates now so typical of National.

This speech, delivered today to a meeting hosted by the New Lynn Women’s Branch of the NZLP, goes back to first principles. It argues that, post GFC, the “invisible hand” of neoliberal economics has failed, that New Zealand cannot cut or sell our way out of a hole, and that Labour must therefore present a clear alternative economic approach to the current government based on our own enduring values.

Hope you enjoy them.

Tags: asset sales, economy, jobs, neoliberalism, privatisation
Filed under: Economic Development, Global financial crisis, Investment, asset sales, business, economic, economy, inequality, policy, privatisation

29 Comments

NZ is not for sale

Posted by Chris Hipkins on March 11th, 2012

Today David Shearer released a new Member’s Bill to prevent foreign investors from buying rural land unless they can prove it will bring substantial benefits to New Zealand that would otherwise not occur.

National has botched the handling of the Crafar farms issue. They’ve got it wrong. John Key has tried to brush away criticism by arguing land was sold to overseas investors under Labour too and if we were serious about our opposition we’d change the law. Today David made it very clear we will be doing just that.

Unlike National, Labour is out there listening to New Zealanders, who are increasingly concerned about our country being sold out from under us. John Key was right when he said New Zealanders don’t want to end up tenants in their own land. It’s a shame his actions aren’t living up to that sentiment.

David spells out the case for the Overseas Investment (Owning Our Own Rural Land) Amendment Bill pretty clearly:

“We cannot afford to lose control of our best income-producing assets and become tenants in our own land. Selling our farmland to foreign buyers does not improve our economy. Instead the profits simply flow offshore. We also do not want to see New Zealand farms priced out of the reach of Kiwi farmers who are the best in the world at what they do.

National just doesn’t seem to get that we can’t sell our way to a brighter future. Four years ago John Key was ambitious for New Zealand. Today he seems content to manage our economic decline. There are alternatives, and Labour is going to be at the forefront of promoting them.

Click here to download a copy of David’s Bill, along with the detailed explanatory note.

Tags: asset sales, Crafar Farms, David Shearer, John Key, Overseas investment
Filed under: #ownourfuture, asset sales, economic, economy

8 Comments

Assets and Elbows

Posted by David Cunliffe on March 1st, 2012

Can the Government tell an asset from an elbow?

Had it thought through the fatal flaws in its partial privatization drive, or has it been taken by surprise? Hat tip to Clayton Cosgrove for bringing SOE sale issues to the fore. Here’s a potted summary of some emerging commercial and economic development implications:

- When the SOE’s are partially privatised they become companies with a partial public shareholding, regulated by commercial law and not the SOE Act. They are no longer SOEs. They no longer have the Crown’s good corporate citizen obigations. Elbow #1.

- That is why the s9 Treaty Clause debate is so fundamental. Iwi are 100% right to be outraged that the Crown’s obligations under the Treaty of Waitangi could be sold down the river (literally). If the Crown’s response is to indemnify the private investor and bear 100% of the ongoing Treaty obligation, then the taxpayer is effectively subsidising the private investor. Clayton nailed this last week. Elbow #2.

- Minority shareholders rights include the ability to invest in future profitable expansion plans. Dilemma for Crown: pony up its 51% of those future capital requirements or face equity dilution below 51% and loss of residual control. The Govt’s response has been to hedge how much it wil initially sell. Does 45% leave it enough of a buffer? For how long? How long is a piece of string? How does this affect its sale proceeds? In a rare moment of frankness Bill English fessed up that those proceeds are only a “guess”. You bet they are. Elbow #3.

- Magically the Government’s new-found forecasts of SOE dividend loss are not, apparenty. These were shamefully omitted from the Pre-Election Economic and Fiscal Update (PREFU) because they were apparently too hard to calculate. They have since been found in a bottom drawer and Lo! they show there will be precious few future divvies, so little loss. Ooops Why would a private investor buy them then? Elbow #4.

- Except Air NZ of course, which will be as cheap as chips after its sad losses last year. Crazy, stupid fire sale. Elbow #5.

- Speaking of which, future takeover threats must now be managed. Minority shareholders have rights. If a future merger or takeover provides them a windfall, they have the right to sell, most likely to foreign corporates or hedge funds (subject to the 10% individual cap, if any). What would the Crown do in the face of such temptation? Could it face legal action from minorities if it blocked such a future sale? How is the public protected from future leveraged asset stripping? Elbow #6.

- Potential cross-shareholding complications arise, as confirmed by the Chair of the Commerce Commission at the Commerce Committee hearing this morning. (I can’t comment on the Committee’s views but can on the issues diiscussed in public hearing). Lets say a foreign energy company bought the maximum allowable shareholding in each of the 3 SOE generators – risks of information pooling, coordination and anti-competitive behaviour would need to be policed by the Commission. At best there would be a lag while consumers suffered and prices rose. The Crown itself would have to be subject to Commission oversight in this regard. Sound complicated? Elbow #7.

Back to the original dilemma: did John Key know about all these issues when he started this privatisation crusade? If so, why was the Government not more transparent about them all before the election – with the public and even with its potential coalition partner?

Oh yeah, I momentarily forgot. It’s politics.

That being the case, lets fight this crazy plan to the last comma.

Tags: Bill English, economy, John Key, privatisation
Filed under: Economic Development, Energy, M?ori, Uncategorized, commerce, economic, economy, privatisation, regulation

13 Comments

The Growth Gap

Posted by David Cunliffe on February 23rd, 2012

In my last post I indicated that I would be doing a series of posts on growth and jobs, reflecting my portfolio work in economic development. Here’s the first – and I want to begin with the Government’s results (or lack of).

By way of context, as a country we need to create and export value in order to pay for imports and good wages. Sustainable economic growth is not at odds with social democracy, but a necessary component of making it work. Growth is not an end in itself but a means to families and communities getting ahead. For modern social democrats, it should occur within a framework that ensures good social and enironmental outcomes.

The trouble is, despite repeated promises from the current government that economic growth is “just around the corner”, it just hasn’t happened.

After Budget 2011, I posted a graph showing how the economy had actually performed under National compared to the growth forecasts since they came to office. With the latest downgrading of the growth outlook in the recent Budget Policy Statement, I’ve received a few requests for an updated version, so here it is:

Government GDP vs Reality

(sources: Treasury Fiscal and Economic Updates, and Stats NZ GDP series)

What do we see? Well, under National the economy has under-performed each set of growth projections since they came to office by a long way. The sole exception is BEFU 11, which assumed an immediate GDP hit from the Canterbury earthquakes that didn’t eventuate. It raises the question, is the problem with Treasury’s forecasting models or with National’s economic management?

Take a closer look at the 2 oldest sets of projections.

DEFU 08 came out immediate after National become government, at the height of the global economic crisis. It predicted that the economy would now be over 6% larger than it is – that’s $12 billion a year.

BEFU 09 came out with Budget 2009 – this was Treasury’s ‘doomsday’ predictions written at the peak of the Great Recession (although, ironically, it was released after the recession officially ended). BEFU 09 saw a further two questers of recession that didn’t happen and a gradual return to slow growth.

In the jargon of finance, it’s called a “hockey stick” – a graph that always starts by going down in each set of forecasts, but is always predicted to curve up in the future. If ”NZ inc” was a company with accounts like these, the board would be asking hard questions of the managers.

In fact, look where the economy should be now according to that ‘doomsday’ scenario. That’s right, ahead of where it actually is. The recession didn’t get as bad as Treasury thought in BEFU 09 but the recovery under National has been so anaemic that we are now below the level of GDP forecast at the gloomiest period of the Great Recession and falling further behind every day.

Here’s how over-optimistic each set of predictions has proven:

Government Projections Over-optimistic by:

There is a huge mismatch between what Treasury predicts and what National delivers.

So, what needs fixing: Treasury’s forecasting, which serves as the basis for government and opposition policy decisions, or National’s economic growth agenda and “120-point plan” ?

Both are the responsibility of Mssrs Key, English and Joyce.

More on why the Govt’s 120-point ‘laundry list’ is not a real plan, and what a real economic growth plan ought to look like, in future posts.

Tags: economy, Steven Joyce
Filed under: Economic Development, Uncategorized, economic, economy

23 Comments

Total Employment Change from 2008 Reveals Imminent Crisis

Posted by Sua William Sio on February 21st, 2012

Increase in unemployment under National

The Household Labour Force Survey Survey report of the December 2011 Quarter released last week revealed that our unemployment rate slipped slightly to 6.3% from 6.6%. While a rate of 6.3% in itself doesn’t necessarily mean we have reached crisis levels, the focus on the overall unemployment rate does conceal detail about our employment situation that if brought to the surface will shine light on what I believe is an immiment crisis looming in our economic horizon.

Since JohnKey’s National took office in November 2008, 53,000 New Zealanders have joined the unemployment ranks. That’s a 54% increase in the number of people unemployed to a total of 150,000. For these people, National’s promise of a ‘brighter future’ has utterly failed to materialise, especially if you have a mortgage and teenage children you are supporting through school.

While the impact of the recession cannot be ignored, the number of people unemployed has actually increased since the recession officially ended in mid-2009. The official unemployment figures only tell part of the story. Many more people are without work but are not counted as being unemployed. Many are described by the Salvation Army as being “discouraged unemployed”. They would like to work and would accept a job offer if given, but they would not be deemed as actively seeking work because for instance looking for work through a newspaper does not meet the threshold of “actively seeking work”. The number of Kiwis jobless has increased by almost 100,000 under National’s watch to now 261,300 people as of December 2011. In the meantime 59,964 people are receiving the Unemployment Benefit as at December 2011 a fall of 7% from 67,084 as of the December 2010.
So is this it? Is this the brighter future promised to all New Zealanders?

Why The Downgrades Matter

Posted by David Cunliffe on October 3rd, 2011

The public does not need to take our word for it that the current government’s economic policies are not working. There is now even more objective evidence in the form of two important credit rating downgrades delivered on “Black Friday”.

I have written an op-ed for the Herald on why the “Ratings Ref” yellow carded NZ. Standard and Poors and Fitch agree on what is fundamentally wrong. They say:

First “very high external imbalances, accompanied by high household and agriculture sector debt” (S&P). These are mainly house and farm mortgages borrowed through the banks from foreign lenders to fuel our property obsession.
- That’s not a new problem and it has levelled off a bit with the recession. But it is at historically high levels and makes New Zealand “an outlier among peers” according to Fitch.
Second, “dependence on commodity income” says S&P. Despite record milk prices we are still not paying our way in the world. The current account deficit is a long term issue. But it will worsen to 6.9% of GDP while the Net International Investment Deficit (NIID) will grow from 78% to 85% over the next five years.
Third “emerging fiscal pressures associated with (our) aging population” (S&P), including health and superannuation. Suspending the NZ Super Fund pre funding hasn’t helped.

The reaction from Bill English on Q & A yesterday was uttlerly inadequate. He maintains the government will keep on doing what it is doing. As if that has done any good so far – $37 billion extra debt, 47,000 more unemployed and 3.6% lower GDP now than when they were elected.

Here is the Government’s spin, and some perspective on it:

“We have worked hard to control government spending and succeeded”. The problem is that some $37 billion of debt has been added since the National Government took office – some $18 billion in this year alone. While nobody blames any government for earthquakes – and the ratings agencies recognise that both sides of the political spectrum are exercising fiscal restraint, this is not enough to avoid a downgrade. The agencies’ arenot swayed by the prospect of liquidating $5 billion of SOE assets.
“We are better placed than some other countries”. Being “better placed” than Iceland, Greece or Portugal is cold comfort. Nor is it sufficient, in the face of paralysis in the US and chaos in Europe, to take refuge in Chinese and Australian expansion. The risks of a slowdown in both economies are significant, and s the ratings agencies demand New Zealand takes responsibility for its own future.
“We are still on track for surplus in 2014-15. So she’ll be right”. As if. The precise timing of short term fiscal balance is not the issue that has worried the ratings agencies. The long term deterioration driven by poor savings performance, weak exports and the mountain of real estate debt is. Clutching at such irrelevant straws only highlights the absence of better ideas.

Proof of the bankruptcy of National’s ideas is in this sobering fact: only one quarter of OECD countries have been downgraded by Fitch in the last three years. The last time this happened to NZ was in 1998. It is nonsense to say we are riding the waves better than most. To the contrary New Zealand is highly exposed, and saddled with a government that has no plan.

Labour has the policies and the political courage to make a difference and to do what is needed: capital gains tax, strong saving policy, monetary reform and strategic economic development. It is vital that we implement them before it is too late.

Be in no doubt: what happened on Friday is a very serious development that will have repercussions for many years. I will write further on what this means for the average Kiwi family.

Tags: Bill English, Budget, economy, Ratings
Filed under: #ownourfuture, Budget, Capital Gains Tax, Global financial crisis, Investment, Tax, Uncategorized, debt, economic, economy, finance

29 Comments

Govt bypasses huge West Auckland town centre

Posted by Phil Twyford on August 9th, 2011

We haven’t learned how to do big urban development projects very well in New Zealand. We lack property developers committed to good urban design. We lack the capital markets to fund big projects. Neither central government nor most councils have learned how to unleash the creative potential of the private sector when it comes to big urban developments.

Solving these problems has become more urgent now we have a unified Auckland that aspires to building a world class city. Which is why the circumstances around the new Westgate development in Auckland’s north-west are particularly unfortunate. Two government agencies, Transport Agency NZ and Transpower, have been obstructing a new town centre development tipped to generate 10,000 jobs and increase the country’s GDP by $2 bn a year by 2051.

The development borders on the Te Atatu electorate where I am based. Those jobs and the impressive planned new town centre, will be a huge benefit not only to the people of Massey but all of the West.

I am amazed how NZTA has refused to build motorway ramps to service the northern end of the new town centre even though the Council has offered to pay for them. NZTA is stuck in the mindset that the new Hobsonville motorway and extension to Kumeu opened with fanfare on the weekend is fundamentally a bypass to allow people from the north to get to the airport more quickly, and bugger the idea that it should support the huge new commercial hub being built at Westgate.

Transpower has also been a nightmare for the development to deal with. The high voltage power cable obviously has to be underground but they have sheeted home the full cost to the development, causing numerous delays while refusing to sign a contract that gives certainty. Meanwhile the cost has gone from $5 m to around $20 m.

The developer NZRPG are the only NZ-owned firm who do these big retail developments. They have spent more than five years putting together the plans in conjunction with the Council, not just plonking a new mall out there but designing a town centre based on good urban design principles. They have put $228 m of their own money into it. The least the Government could do is act supportive.

That is why I have written to John Key asking him to intervene and tell NZTA and Transpower to pull their heads in. After all, it is in his electorate.

In Question Time today Steven Joyce said NZTA was in talks with the developer and progress was being made on the question of the ramps. About bloody time after five years of obstruction.

Tags: John Key, motorway, NZTA, Westgate
Filed under: Auckland, economic, infrastructure, roads

23 Comments

Lies, Damned Lies and … Steven Joyce.

Posted by David Cunliffe on July 19th, 2011

Our opponents have been tied all in knots as they attempt to rebut the obvious – that Labour’s CGT is an idea whose time has come.

First the leader of the National Party, John Key, shrilly claimed it would be a “dagger through the heart” of western capitalism – or as Bomber Bradbury put it “aliens were coming to eat our pets”.

Then Bill English said it was a good idea in theory – but wasn’t comprehensive enough.

So with tweedles dee and dumb at cross-purposes, they called in the “cavalry” on Sunday – a Steven Joyce press release with some bodgied numbers from his Beehive hacks.

It tried very hard to construct a strawman and then shoot it down. Trouble was, the strawman bore no resemblance to Labour’s policy.

First, Mr Joyce alleged that our tax plan had not replaced the capital value of the non-sale of SOEs: “You see Labour done a big lie, and said it is a choice of asset sales or their tax package. But they have not calculated for any increased borrowing through no sales”.

John Armstrong made the same mistake in his Herald column: ”In May’s Budget, National cunningly “booked” the money from its planned post-election sell-off of such shares even though the money has yet to be realised. Some of that “money” has been set aside for $900 million in capital spending. Labour has exacted revenge for this trickery by simply ignoring it” .

Sorry John, our numbers do incorporate the asset sales revenue because it’s in National’s net debt track and our net debt track is based on theirs. Not getting that revenue is essentially the sole reason why our net debt track is above National’s in the first few years.

Second Mr Joyce tried the line that we had not modelled in the cost of interest on debt. Wrong again. Interest costs are fully included.

Third, he argued we would achieve “$0″ on our tax avoidance crackdown. Wrong again: IRD says there is $3.5 bn in colleectable tax debt (of $5.5 bn total); and over $300m p.a. in avoidance through trust structures; as well as -$500m on the $200 bn invested in property. Bill English says there is $5 back for every extra $1 in IRD tax collection. IRD says 30:1. It all makes our provosion that rises over 5 years up to $300m look pretty modest.

Three strikes and your credibility is out, Steven.

Tags: Bill English, Budget, economy, Steven Joyce
Filed under: Budget, Capital Gains Tax, asset sales, debt, economic, economy, finance

37 Comments

Abandoning provincial New Zealand

Posted by Grant Robertson on July 17th, 2011

DSCF0294 How many times have you passed through Taihape? Have you stopped? Was it for more than just a cup of coffee at the most excellent Brown Sugar Cafe? Yesterday I spent several hours in Taihape with Labour’s candidate for the Rangitikei electorate Josie Pagani.

Like a lot of other provincial towns I have visited in the last couple of years, Taihape is struggling. There is a string of empty shops on the main street, and one of the local business people I met with yesterday told me he thought another half a dozen would close by the end of the year. Taihape folk know there has been a global recession, but they feel let down.

Exhibit A is the local hospital. Refurbished a few years back, operating as a first point of contact for medical emergencies, rest home, maternity wing. In short a small town hospital that gave people confidence, and also helped hold the community together, particularly a community with an ageing population. Then last year, without any consultation, the hospital was effectively closed down. There is still the maternity bit, and a some day stay capacity for elderly patients, but the rest is gone.

Its putting real pressure on the community. We were told the story of someone who badly cut their hand. He knew it was bad, and that he needed treatment. He began to drive to the nearest hospital in Palmerston North. He nearly made it, but passed out half an hour from his destination. Fourtunately he had rung ahead to a relative who came and got him. Old people have been scattered across the North Island, breaking down community and family connections. Other stories include someone ringing the emergency number that is now on the door of the hospital only to be told by the operator in Auckland to go to Taihape Hospital.

Its not just the hospital. This is a town, actually a region, crying out for some support to get economic development going. The people we spoke to yesterday weren’t the type who want the government to do everything for them, but they do want a government that gets its hands dirty helping to give people a start and some support, not sitting on the sidelines hoping the market will provide.

We finished the day at the school. It is brilliant. It is an area school that came about from one of Trevor’s school reviews, and it had some hefty investment behind it. Its modern, and a real community facility. As one local said yesterday, its building was the last time it felt like someone “gave a shit about us”.

I know Labour has not been traditionally popular in parts of provincial New Zealand, but actually when the people stop and think about the Labour approach of getting alongside communities vs National’s abandonment, there is a case for a re-think.

Tags: health cuts, regional development, Taihape
Filed under: economic, health, rural

7 Comments

The Standard on tax policy

Posted by Trevor Mallard on July 7th, 2011

I’m in a weird position. I know what is in next week’s package. But I can’t confirm or deny either the big planks or the details.

But watching the debate is fascinating. R0b at the Standard has done summary of media views and has some opinions of his own.

Very tempted to use a classic Yes Minister quote but will resist and do an unusual thing and quote the whole post :-

Notice how a single announcement (not even officially made) from the opposition Labour Party has generated more interest, excitement and reaction than the last (Sub-Zero) budget? More excitement, in fact, than anything the National government has done in the last three wasted years?

The Herald editorial heaps praise on Goff for a policy that is says is courageous and “not only would a capital gains tax be hugely beneficial to the economy but the time for its introduction is right.”

Press gallery leader Guyon Espiner says “most New Zealanders do not have an investment property and if Labour can argue this properly they should be able to carry this argument”.

Fellow press gallery heavyweight John Armstrong reckons that “Goff goes for broke with huge gamble”. Got that right. But – what – you thought Labour was just going to sleepwalk to defeat? Hell no.

Poor John Key reckons that a capital gains tax will send NZ “screaming backwards”. He’s quite the expert on that I guess. In the same piece Key predicts that the CGT will raise only “$700 million a year, after 15 years”. Unfortunately for the PM the recent Tax Working Group report put the figure at more than $4 billion a year (the 2009 report from the Victoria University of Wellington Tax Working Group agrees). Perhaps Nice Mr Key should check his sums. Or even wait a week and see precisely what form Labour’s policy will take.

Danyl at DimPost nails it with characteristic economy – “National wants to finance the rebuilding of Christchurch via asset sales; Labour via a tax on property speculation”.

Everybody’s favourite Tory mouthpiece DPF was strangely muted in his criticism at Kiwiblog. Perhaps that’s because he recalls saying, just last year that “… I think the time is right to now take a serious look at capital gains tax”.

For a take out of left field, Rob Carr at Political Dumpground argues that even if the CGT causes a property market implosion, that might be a Good Thing.

John Hartevelt at Stuff reckons that that this is “Labour’s big policy play”. Key’s good buddy Duncan Garner reckons the CGT is a “bold and courageous move”. And so on, and so on.

Labour have started setting out a bold, fair and plausible policy framework for the election. No asset sales. A tax system for the many not the few. $15 minimum wage. Children at the centre of social policy. R&D tax credits. Keep ACC and Pharmac. GST off fresh food. Strengthen KiwiSaver and the Cullen fund. All good stuff!

And the Nats? A budget almost universally panned as lacking in vision, they are simply recycling meaningless promises from one budget to the next. And news yesterday that the government’s “new” $17 billion infrastructure plan in fact contains no new plans at all, just re-announcements of old ones (which were mostly Labour’s anyway).

In short, Labour has a plan, National has a record of three wasted years. Labour have taken hold of the political agenda. Now they have to keep it for the next 5 months.

Tags: the standard
Filed under: Labour Party, Tax, asset sales, economic, national

24 Comments

Key advising Cameron ?

Posted by Trevor Mallard on May 28th, 2011

Seems like Tories spend on themselves in the UK the same way as Key and team do here. Despite savage (30%) cuts in public services they still spend a fortune doing up their digs. And they try and hide it too.

The Guardian reports:-

David Cameron spent £680,000 of taxpayers’ cash on Downing Street

Tags: perks
Filed under: #OpenLabourNZ, economic, national

13 Comments

Budget FAQs #5: Growth Hockey Stick

Posted by David Cunliffe on May 19th, 2011

The New Zealand economy has failed to fire under National. As a result successive rosy Treasury forecasts have been revised downwards. The starkest example is between last year’s May Budget and December Half Year Update.

2010 GDP Track Revision

Implications: The growth upturn “hockey stick” just keeps getting pushed out into the future. The so-called GST tax switch had no discernable positive impact on growth. And the same rosy forecasts will be embedded in today’s Budget. On this track record Budget 2011 growth projections will not be worth the paper they are written on.

When the 2009 growth projections are added the picture gets even more interesting. As this graph shows the actual GDP growth track has been so bad that it is back down to the proections made by Treasury during the darkest days of the 2008/9 global financial crisis.

2009-2010 GDP Track

In other words, despite the international crisis having passed 18 months ago and NZ receiving record prices for our agricultrual commodities, our economy has performed so badly that it is back down to the track Treasury predicted during the darkest days of the crisis. Quite simply, whatever the Govt has been doing is not working.

In a future post we will decompose the relative impact on debt of this under-performance and otehr factors like earthquakes.

There is no coherent plan from National on how to manage debt reduction alongside needed investments in economic and export development, closing the savings gap, repairing the damage to middle New Zealand, and giving all Kiwis hope and confidence for the future.

Labour has an integrated economic strategy that will achive that withi a fully costed programme that will reduce net debt over a 10 year economic cycle. You can see the direction we are heading in set out in a recent speech I gave to Business NZ here.

For the wonks among you, here is the underlying data – all the Government’s own numbers.

	GDP per capita, 95/96 dollars
	Actual	Half Year Update 2009	Budget 2010	Half Year Update 2010
30/12/2008	7,805
30/03/2009	7,700
30/06/2009	7,683	7,683
30/09/2009	7,677	7,694
30/12/2009	7,716	7,721	7,716
30/03/2010	7,741	7,741	7,758
30/06/2010	7,734	7,768	7,802	7,734
30/09/2010	7,701	7,795	7,909	7,747
30/12/2010	7,694	7,830	7,883	7,799
30/03/2011		7,873	7,928	7,859
30/06/2011		7,916	7,973	7,904
30/09/2011		7,967	8,026	7,948
30/12/2011		8,027	8,088	8,010
30/03/2012		8,055	8,118	8,039
30/06/2012		8,091	8,156	8,085

Sources: Budget relevant documents and Statistics NZ series

Tags: Bill English, Budget, economy, Tax, tax cuts
Filed under: Budget, Cost of Living, Global financial crisis, Inflation, Investment, Tax, business, debt, economic, economy, finance, jobs, monetary policy

14 Comments

Budget FAQs #4: National’s Growth Gap

Posted by David Cunliffe on May 19th, 2011

GDP growth has been so poor that the National government’s predictions have continually been downsized. The gap is huge – 505 underperformance in 2010 alone, achieving only 1.5% actual on 3.0% predicted.

This underperfromance is a key factor – alongside fiscally irresponsible and economically useless tax cuts – driving the awful budget deficit New Zealand now faces.

in response to requests on my Facebook page, here are the underlying numbers.

Quarterly GDP growth	Q1 2010	Q2 2010	Q3 2010	2010 annual growth
Budget 2010 forecast (BEFU additional information, p 3)	0.8	0.8	1.6	3.0
Stats NZ actual	0.7	0.1	-0.2	1.5

Average annual percentage change, real wages	Year to Q1 2011
HYEFU 2010 forecast (HYEFU additional information), p 6	-0.9
Stats NZ data	-1.2

Source: Parliamentary Library

Tags: Bill English, Budget, economy, Tax
Filed under: Budget, Investment, Tax, Uncategorized, debt, economic, economy, finance

4 Comments

Budget FAQs #3: Kiwisaver

Posted by David Cunliffe on May 12th, 2011

Yesterday Mr Key announced National’s intentions to cut Kiwisaver costs by:

Reducing (likely by half) the member tax credit, currenlty $20 per week or $1024 per kiwisaver per year.
Reversing National’s earlier move to reduce the default contribution rate from 2% to 4% by returning to it to 4%, but apparently with no increase in Crown contributions.
Requiring a small increase in matching employer contributions, although unclear how much or with what if any employer tax credit chnage.
Details to come in the Budget but not to take effect until after the Budget (trying the spin that it is not another “broken promise” even though it is in a pre -election Budget and possibly legislation!)

Commentators have warned about undermining confidence in the scheme. Among many, good commentary by Bernard Hickey here, Vernon Small here and The Standard here.

Here are some reasons the Government should think twice about changes which weaken confidence in Kiwisaver and do not contain real measures to grow the scheme:

Its changes are regressive – tougher on low and middle income earners because they have a reduced matching contribution on the first $1000 per year they invest.

It is a double whammy for low and middle income earners: cutting the tax credit and increasing the contribution rate at at a time when cost of living pressures are acute.

It is a confusing policy u-turn for Kiwisavers without reasonable explanation, having had their default contribution rate reduced to 2% by this Government not two years ago, and now the reverse. The logic they used to reduce the default (reducing contribution costs to families and businesses was supposedly inportant – but apparently now is not).
(more…)

Tags: Budget, economy, John Key
Filed under: Budget, debt, economic, economy, kiwisaver

56 Comments

Budget FAQs #2

Posted by David Cunliffe on May 12th, 2011

There were some ridiculous false claims by John Key yesterday on Labour’s economic record. We rebutted those in a press release and the Q and A is also on the Labour website here. Picked up by The Standard here.

Filed under: Budget, Uncategorized, economic, economy, finance

3 Comments

Budget FAQs

Posted by David Cunliffe on May 11th, 2011

Some quick answers to a couple of good questions about debt and Kiwisaver from recent Facebook inquiries:

Q: Has NZ’s debt really cimbed from $300 m per week to $380 m per week? Why?

A: The difference between $300 m and $380 m is the fact that NZDMO is in the market issuing more debt securities than it needs beacuse demand is good and prices low. In other words it is bringing forward next years borrowing, and that is all. Of the $300m about half is rollover of exisitng debt. So next year it can say it reduced the borrowing, beacuse it will have pre-borrowed some of what it needs already.

Q: How much will the cuts to Kiwisaver Key announceed today save? $40m a year ?

A: Kiwisaver cost savings are unknown untill policy is made clear in the Budget. The Member Tax Credit costs about $880 m per year. Half that would be ($440m pa) would be ”saved” to Govt if MTC halved to $10 per week. But that ’saving’ but would have to be offset against lower private savings from weaker incentices. That is a problem beacuse private debt is huge – in fact 90% of NZ’s total international debt is private. Govt debt is only 10% of the problem.

Q: Is it true that Dr Cullen’s books in 2008 showed a fiscal surplus in 2008?

A: Yes Dr Cullen’s 2008 books showed a net debt (incl NZSF assets) to GDP ratio surplus of 7.6% In other words we were in positive CREDIT, though the GFC meant a forecast net deficit up to around 2% of GDP. Gross debt to GDP is ow 34%and climbing under National. It is hard to believe that National still gripes and tries to shift blame. Time they manned up and took some responisbility for their own choices – like $23 Billion of tax cuts over 4 years in Budgets 2009 and 2010.

Q: Are our incomes catching up with Australia like National promised?

A: No, we are going backwards. When National took office in 2008 the gap was about 30% of GDP per capita It was 34.7% and growing last time I checked.

Bottom line – NZ’s problems are serious and need serious fixes, but don’t buy the panic line that it is only public debt that matters. Responsible fiscal management, including reducing debt across the cycle, is essential- but it is not the ONLY thing that matters. We have to grow jobs, exports and savings at the same time as reducing debt. And we have to build a country that is fair, caring and ready to take on the world, not slide into two NZs – one for the haves and another for the have nots.

PS happy to take your budget questions – message me on http://www.facebook.com/david.cunliffe.labour.

Tags: Bill English, Budget, economy, Facebook, Tax
Filed under: Budget, Cost of Living, Tax, Uncategorized, debt, economic, economy, finance, inequality, saving

16 Comments

Red Alert

Red Alert

Archive for the ‘economic’ Category

Urgently taxing toddlers

Budget prediction

Economic development ideas

NZ is not for sale

Assets and Elbows

The Growth Gap

Why The Downgrades Matter

Govt bypasses huge West Auckland town centre

Lies, Damned Lies and … Steven Joyce.

Abandoning provincial New Zealand

The Standard on tax policy

Key advising Cameron ?

Budget FAQs #5: Growth Hockey Stick

Budget FAQs #4: National’s Growth Gap

Budget FAQs #3: Kiwisaver

Budget FAQs #2

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