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Growing tall tales

Posted by David Cunliffe on May 25th, 2012

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.

GDP

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Filed under: Budget, Economic Development, economy
2 Comments

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.

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Filed under: Budget, Economic Development, economic, economy
30 Comments

Four Years of Failed Promises

Posted by Chris Hipkins on May 24th, 2012

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Filed under: Budget, economy
4 Comments

Reading through National’s Budget spin

Posted by David Cunliffe on May 23rd, 2012

Tomorrow is Budget Day.  Tomorrow we’ll find out whether National actually does have anything resembling a pro-growth agenda, or whether it will all just be cost cutting.

We will also find out who gets what, and whether National will continue its habit of favouring the very wealthy at the expense of the broader community with its unaffordable tax cuts.

New Zealand’s Budget debate will occur against the background of a fierce battle around austerity economics vs growth economics.

Here’s a selection of articles which undermine the zero National Government’s spin on zero Budgets:

  1. The Economist says austerity Budgets in small countries, without fixing the broader international system problems, will simply undermine growth and jobs.
  2. Nobel Prize winning economist Joseph Stiglitz argues European austerity Budgets fail both economic and social fairness tests, and can drive economies into double-dip recession.
  3. The Financial Times balances this by noting small economies cannot simply spend their way out of a mess. Lax fiscal policy in small open economies can result in demand leaking offshore without resolving local structural problems.
  4. Writing in The Guardian, Professor Mariana Mazzucato, says small states can help drive growth and jobs by investing in innovation and skills, reducing risk for private sector commercialisation and growth.
  5. Will Hutton devastates the UK Conservatives’ zero Budget for their ignoring the role of the state in mitigating risk and creating jobs through driving innovation.

Tomorrow, National will argue that New Zealand needs a zero Budget.  Labour believes a zero Budget is what you get when you have zero growth in your economy, and zero plan for delivering the growth that’s needed to create jobs.

Responsible fiscal policy is important – Labour would always be careful and prudent with the state’s finances – but a zero Budget is not the only success test when you’re talking about the finances of a country that real people live in.

The articles show this is a global debate, not a local one.  New Zealanders need to understand the lessons of history, not repeat them.

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Filed under: Budget, Economic Development, economy
31 Comments

Taking a closer look at National’s economic record

Posted by David Clark on May 22nd, 2012

We’re just a couple of days away from Bill English’s fourth budget. Year after year they’ve set low expectations, and failed to meet them. It looks like this budget is going to be more of the same, with John Key already trying to move the goal-posts.

This morning David Parker gave a speech where he clearly set out how a Labour government would be different.

  • We will create jobs by supporting our exporters to expand and earn more.
  • We will help Kiwis to get the education and skills they need to seize the job opportunities of a 21st century economy.
  • We will grow incomes by investing in science and innovation to create more high-wage businesses.
  • We will make it easier for Kiwis to save for their first home and to build a retirement nest egg.

David’s speech points out that we need to significantly change how the New Zealand economy works in order to grow jobs and higher wages. It’s filled with detail (and even graphs!) – I highly recommend you take a read.

We’ve also put together this video to take a look at how National haven’t simply failed to deliver, they’ve also failed to meet their own low standards. I hope you enjoy it. Please share it around.

Filed under: economy, finance
9 Comments

Bold choices for a successful country: Shearer

Posted by Clare Curran on May 4th, 2012

This is the speech David Shearer gave today to the Wellington Employers’ Chamber of Commerce. It worth a read

Labour is prepared to make the fundamental changes needed that National is ignoring.

Filed under: #ownourfuture, David Shearer, economy
29 Comments

Kiwi jobs a priority? Judge for yourselves

Posted by Clare Curran on May 3rd, 2012

Transcript below

(more…)

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Filed under: #ownourfuture, Economic Development, jobs
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.

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Filed under: Economic Development, Global financial crisis, Investment, asset sales, business, economic, economy, inequality, policy, privatisation
29 Comments

Sticking up for your city

Posted by Clare Curran on April 22nd, 2012

It’s one of the main jobs of any member of parliament to stick up for your patch. You are elected by a constituency and they want and expect you to defend them and promote their rights. I don’t think constituents expect to get a better deal than anyone else in the grand scheme of things, but they don’t want to be treated with contempt and disrespect.

I don’t think it’s any surprise to anyone that I’ve come out fighting over the extraordinary, but probably predictable decision by Kiwirail to put the Hillside workshops up for sale. In Saturday’s Otago Daily Times I was quite forthright in expressing my views. I used some rather unladylike language and had to ring my mum the day before to warn her.

I stand by what I said. I think the government (and Kiwirail) have pissed on Dunedin. I think many Dunedin-ites agree. Saturday’s ODT editorial seems to agree too though in more polite terms.

I think that the only way we’re going to sort things is for Dunedin people to take control ourselves. And to have a future Labour government backing rail.

I’ll do my best to help find a buyer for Hillside. I’ll continue to take the fight to parliament and I’ll remain a thorn in the side of this government and the local National List MP Michael Woodhouse who has seriously let down the people of Dunedin in the pursuit of his own career. I’ll advocate for the need for and the importance of this industry to remain in public hands, and indeed to just bloody remain in our country.

When I took this job on I understood that there are times when sticking up for your city is more important than towing toeing a party line that you don’t agree with and which is going to hurt your city. It’s a judgement to be rarely exercised. Sometimes the greater good is more important than a local issue. But every MP should have the right and the responsibility to stand up for their city. This was one of those times. Woodhouse didn’t even think about it.

He blocked a select committee hearing on the petition signed last year by nearly 14,000 people (mostly from Dunedin) calling on the government to save the Hillside and Woburn (Hutt) workshops. He has never been held accountable for refusing to allow the people of Dunedin, the Hillside workers and their union to have a say before a parliamentary committee. He should be.

His government is negligent, disingenuous and downright liars about their responsibilities for Kiwirail and its decision and their knowledge of those decisions. As my colleague David Parker has said; if the KiwiRail board had made the same announcement without telling a Labour government, the board would have been sacked. It is just nonsense and untrue for shareholding Ministers to say they didn’t know Kiwirail’s direction and decisions. And it is very clear that they don’t oppose Kiwirail’s decision to sell Hillside.

There’s more at stake than the nearly 130 jobs, the loss of wages, taxes, skills and the more than 137 year history of a competent and valued rail manufacturing plant to the city of Dunedin. There are more than 70 engineering businesses clustered around Hillside. It’s the backbone of our city. It’s becoming more high tech. It’s a hugely important part of our local and regional economy.

This government doesn’t give a stuff. They allowed (and encouraged) it to be run down and now it’s being sold because Kiwirail says it’s not viable. Kiwirail deliberately made it unviable.

I ask you this. How is that that contracts have been handed to the Chinese to build rail wagons that are dubious in quality, when those same wagons could have been built here? They may have cost a bit more, but the workmanship would have been assured, the maintenance would have been less and have been more easily accomplished, and the people who built the wagons would have been earning decent wages and paying taxes in the New Zealand economy.

Kiwirail, and the government, has blocked any independent scrutiny of the dodgy process in awarding those contracts to China North Rail and the quality issues associated with the Chinese wagons. It’s time for some sunlight on both.

It is not false economy to manufacture in your own country. It’s our productive economy. I’d stand up for manufacturing jobs any day against paying for more pokie machines that create immeasurable social harm and are part of a mates deal to an organisation that will profit, might create a few more service economy jobs, but is unlikely add much more real value to our economy.

And I reckon that’s worth sticking up for.

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Filed under: John Key, Manufacturing, Rail, asset sales, economy, infrastructure, jobs
29 Comments

NZ – the new low wage frontier?

Posted by Darien Fenton on April 18th, 2012

Fran O’Sullivan reported at the weekend about “New Zealand envy” from Australian businesses :

…the frank admiration across the Tasman for English’s economic policies is something that has not been displayed by Australian power-brokers since this country was in the grip of Rogernomics and Bill Birch’s labour market reforms.

Bad comparison Fran. Who in their right mind would want to own up to admiring the dreadful Bill Birch’s Employment Contracts Act or the damage inflicted by Roger Douglas?

And then today the Dom Post reports that Australian firms are moving jobs to New Zealand, attracted by our low wages and more “flexible” labour rights.

Hundreds of Australian jobs have been shifted to New Zealand as producers there try to avoid the impact of high wages, a soaring dollar and restrictive labour laws.

Supermarket giant Woolworths is the latest to transfer jobs across the Tasman, shifting 40 contact centre jobs to Auckland this week.

Imperial Tobacco has also said it will move cigarette manufacturing from Sydney to New Zealand.

As David Parker says, there are record numbers of Kiwis leaving for Australia. They are not going so they can work in call centres or cigarette-making factories.

“National made closing the wage gap a key election pledge in 2008. It now wants to attract investment to New Zealand on the basis of cheap wages.

Heinz Wattie has already ditched 300 jobs across Australia and supposedly was bringing them to New Zealand.

But not for good New Zealand jobs. These days, a Heinz Watties worker is just as likely to end up being employed by Allied Workforce – a temporary labour hire contractor, and be paid minimum wage – doing the same job directly employed and unionised workers used to do for a whole lot less.

Perhaps the brighter future we were promised involves rolling ciggies for Australia?

It certainly seems to involve low wages.

Filed under: Australia, economy, jobs
21 Comments

The Undergraduate Brain Drain?

Posted by Grant Robertson on April 15th, 2012

Interesting article today quoting Sir Peter Gluckman on a possible new element to the brain drain; students undertaking their undergraduate studies overseas.

In the absence of any real data on this its hard to say if there has been a spike in students going overseas to undertake undergraduate studies. Anecdotally there has been an increased presence of Australian universities holding recruitment sessions at some schools. Just how many students are taking them up is a piece of information worth knowing, and I welcome Sir Peter looking into it.

One thing is for sure and that is that Australian universities are now operating in an environment where targeting New Zealand students makes sense. They have had a number of funding increases in recent budgets and are operating in an uncapped environment when it comes to enrolments. Add to that the ease with which New Zealand students can enrol and be treated as domestic students in terms of fees, and the incentives are there on both sides.

All of which makes Steven Joyce’s comments in this story just bizzare. He says

Joyce said the election promise had not been about stopping the brain drain, but increasing the success of the New Zealand economy so more people felt they could be successful here.

”It doesn’t apply to undergraduates, it applies to people earning high incomes in New Zealand,” he said.

First off it is simply untrue to say National did not campaign on stopping the brain drain. Take a look at the billboards Mr Joyce, that is exactly what they promised. And the opposite has occured.

Moreover his laissez faire attitude to the departure of undergraduate students is bizarre. They are the future earners of high incomes! We have a hard enough time keeping our best and brightest here without waving them goodbye at 18.

Regardless of the accuracy of the claim of undergraduate flight, we do need to take another look at how we invest in the tertiary sector to ensure that we are getting the best outcomes for students and for New Zealand as a whole. There does need to be a focus on both ensuring equity of access and developing world class institutions. More from me on that soon. But in short we also need to see the sector as a key part of our economic growth agenda, not some drain on the country;s finances.

When I listen to Steven Joyce I sometimes feel that the whole tertiary education thing is a bit of nuisance to him, (eg his moves to “dampen demand” and the budgeted decline in tertiary funding) rather than the opportunity for economic and social progress that it should be.

Filed under: Tertiary education, economy
18 Comments

Treasury asleep at the wheel?

Posted by David Clark on April 11th, 2012

The Auditor General (AG) recently raised serious concerns about the Treasury’s handling of the Crown Retail Deposit Guarantee Scheme. 

Questions raised by the AG’s critique need urgent and focused attention.

First the history.  The scheme was put in place in a matter of hours – designed and announced the same day.  At the peak of the Global Financial Crisis it ensured there wasn’t a run on financial institutions.  The Auditor General found that it achieved its initial goals and that the economy was stabilised.

But, appearing before the select committee, the AG revealed under questioning the extent of Treasury’s failure to effectively monitor the scheme in the early months.  Risk to the taxpayer waxed unobserved by the official watchdog.  The risk profile of South Canterbury Finance’s loan book, for example, grew rapidly in the early months of 2009.  Within 4 months of the scheme’s introduction, South Canterbury’s deposit base had increased by 25%.   Treasury failed to proactively monitor the growth in risk to the taxpayer.  It did not request regular reports it was entitled to request from the Reserve Bank. 

In her recent appearance before the Finance and Expenditure Select Committee (FEC), the Auditor General said she also found no evidence to suggest the Treasury had asked itself whether further intervention was necessary to protect taxpayer interests.

The scheme ultimately looks set to cost the taxpayer in excess of $1 Billion.  Some of this may have been necessary to ensure New Zealand survived the financial crisis.  However, without further investigation it is not clear just how much of the $1 Billion was avoidable cost to the taxpayer.

Under questioning by David Parker, FEC Committee Chair Todd McClay made it clear he wasn’t about to take a lead on holding Treasury to account.

Treasury failed to effectively monitor the growth in risk to the taxpayer.  In fact, it didn’t make any provision for payouts under the scheme until June 2009.  When asked whether Treasury’s practices had changed sufficient to be sure that they could ask themselves the right questions today, the Auditor General was not able to offer necessary reassurance.

The parliamentary Finance and Expenditure Committee has the job of asking Treasury the tough questions.  When hundreds of millions of taxpayer dollars are at stake, thorough investigation is demanded.  The people of New Zealand need to be assured Treasury has learned from any mistakes.  To that end, Labour members will be drafting terms of reference for an inquiry into Treasury’s handling of the Crown Retail Deposits Guarantee scheme.

In my experience, people at Treasury have broad shoulders and will welcome rigorous inquiry.

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Filed under: Global financial crisis, Uncategorized, economy
8 Comments

Deck chairs

Posted by David Clark on March 19th, 2012

The Inland Revenue Department’s tax policy work programme was released by Hon Peter Dunne on the weekend. 

Reading through the Minister’s related speech, I couldn’t help wondering about the symbolism of its delivery just one month short of the Titanic’s 100th anniversary.

According to its own publicity, the IRD tax policy work programme places emphasis on achieving efficiency and fairness in the system.  Worthy objectives indeed.  And much of the work in the programme is worthy – plugging holes, and trimming sails to align with competitors - where it is to our advantage so to do. 

But significant change appears to have been ruled out once more. A Capital Gains Tax that would push investment towards the productive sector, for example, will not be considered.  The current tax system watches on as the Government shuffles deck chairs and sails towards a $12 Billion deficit.  This is crazy.  If you don’t change anything, nothing will change.

Our current tax system is in need of a serious overhaul.  The tax policy work programme looks a bit like an exercise regime for a thoroughbred nearing a big race – light and steady.  This would be fine if we owned a thoroughbred.  We don’t.  The Minister is refusing to admit his existentially-challenged Clydesdale needs anything more than a good make-over and a stiff crack of his whip.

The fiscal hole is getting bigger and the Government has no credible plan to address it. In my earlier post, I asked how the Minister of Finance could continue to credibly claim tax changes implemented under his watch were ‘broadly revenue neutral’ – when the Government’s own officials say otherwise.  IRD officials have said that 2.5 percentage points of a 4% drop in revenue were due to Government policy changes. 

We need jobs and a plan to address the structural issues that underlie our current account deficit. Tinkering with finer points in the tax system and changing who owns what through asset sales doesn’t begin to address the serious issues facing our economy.  New Zealand debt is set to continue climbing under National.

On the matter of economic policy and tax settings: no amount of deck-chair shuffling will change things - if the ship remains set on the same course.

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Filed under: Capital Gains Tax, Tax, economy
12 Comments

Dear Liza

Posted by David Clark on March 17th, 2012

The Government has continued to spout the line that its tax ’switch’ in 2010 was ‘broadly revenue neutral’.

This is an outrageous claim.  It was nowhere near revenue neutral.

According to the IRD’s 2011 Briefing to the Incoming Minister (BIM), Government tax-take dropped from 35.1% of GDP to 31% of GDP during National’s first term.  In a time of high borrowing, and a projected $12 Billion deficit, a drop in the tax base of more than 10% is plain irresponsible. Falling revenue means we don’t have the funds to support our schools and hospitals.  Either that, or we have to borrow to fund them.  This ain’t good.

The ‘broadly revenue neutral’ claim has been relegated to the status of a bad joke by the honesty of the Government’s own tax officials.  In their 2011 BIM, officials made clear that only about 1.5% could be blamed on the Global Financial Crisis.  About 2.5 percentage points of its 4% revenue drop can be directly explained by Government policy changes (ie the 2010 tax package).

To use the phrase ‘broadly revenue neutral’ in this context beggars belief.  It is an abuse of the English language.

How ‘broad’ can ‘broad’ get before it the Finance Minister will admit it is simply *not* revenue neutral?

Blaming the hole in the accounts on the Canterbury earthquakes or the Global Financial Crisis is no longer a credible excuse for the $12 billion deficit.

Though not widely reported, this drop in tax-take is big stuff.  It is likely to have wider consequences.  Sadly, it fits with the picture of a government bereft of a credible plan for managing our economy.

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Filed under: Tax, economy
41 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.

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Filed under: #ownourfuture, asset sales, economic, economy
8 Comments

So what has Michael Woodhouse got to say?

Posted by Clare Curran on March 7th, 2012

Last year nearly 14,000 (mostly Dunedin) people signed a petition to parliament. It demanded the Government take immediate action to ensure KiwiRail did not reduce its workforce at the Hillside and Woburn rail engineering workshops and called for the state-owned enterprise to commit to building rolling stock instead of outsourcing contracts to China.

The petition was put before the Transport and Industrial Relations Select Committee.

A report was called for from Kiwirail. But no report was ever sought from those who brought the petition to parliament, despite their repeated pleas.

Over a number of months,Labour members of the committee pressed for the petitioners representatives to have a say before the committee, but to no avail. The RMTU union representing the Hillside workers wrote to the committee. They were ignored.

I asked questions of the chair of the committee in the House as to whether the petitioner would have the chance to appear and put their case, but received evasive answers.

The final report of the committee was tabled yesterday in parliament. It contained a minority report from Labour strongly protesting at the refusal of the committee to allow the workers and those opposed to giving Kiwi jobs and contracts to the Chinese to have a say.

Dunedin-based List MP Michael Woodhouse sat on that committee until parliament dissolved late last year. He sought the cloak of committee confidentiality to protect him from commenting on his views.

I think it’s time to ask him whether he supported the right of the Hillside workers, their union and all of those who signd that petition to put their case to a parliamentary select committee.

When you sign a petition you should have that expectation. Especially if there has been considerable public interest in the issue. Which there has been.

The ODT story today sums it up. It is an erosion of democracy and an utter disgrace and Michael Woodhouse should front up and tell the nearly 14,000 people why he blocked their right to have a say.

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Filed under: Rail, economy, jobs
20 Comments

NZTE Focussed; Joyce Not.

Posted by David Cunliffe on March 1st, 2012

NZTE has just presented a stellar annual report to the Commerce Select Committee. The new CEO Peter Chrisp and Chair John Mayson deserve credit.

Costs are down, focus is up, strategy is sharper. Performance measures are more rigorous.

NZTE’s emerging success gives the lie, however, to Bill English’s comment that there is nothing to be done about economic growth “it is what it is”.

And NZTE’s focussed success contrasts with the haphazard approach taken by Economic Development Minister Joyce’s to doing shady deals with individual corporates.

None of media (Canwest); Casinos (SkyCity) international film giants (Warner Bros) feature within NZTE’s strategy for target clients.

So if they are not prioirities for the experts, why is their Minister treating them so?

Likewise on FDI, NZTE is focussed on high-spillover investment that adds value to NZ, NOT selling farmland or assets that already exist. So why are National politicians doing the opposite?

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Filed under: Economic Development, Films, Investment, international
23 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.

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Filed under: Economic Development, Energy, M?ori, Uncategorized, commerce, economic, economy, privatisation, regulation
13 Comments

Steven Joyce Can’t Count

Posted by David Cunliffe on February 29th, 2012

An embarrassing slip occurred by Steven Joyce in the House today.

When I asked in a supplementary to his own patsy question by how many billion the current account defict was forecast to deteriorate over the next four years, he said “less than 5″ and said he based the estimate on the PREFU (Treasury’s pre-election fiscal update).

The actual number in the PREFU is down to $17.6 billion. Nowhere close to sub $5 bn. He then blamed the earthquake for the deterioration. In fact, the PREFU forecasts estimate only a quarter of the deterioration as eathquake related.

Mr Joyce has not corrected the errors – which is required under standing orders at the earliest opportuity.

His problem is that reducing the current account deficit is one of the most basic goals of economic development policy. Not knowingthe headline numbers is embarrasssing. Just making it up is downright risky.

This is the same minister busily negotiating “deals” with corporates, casinos and media moguls. I wonder how many Kiwis would trust his financial nous if he keeps fluffing the numbers?

Bill English is smiling inside.

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Filed under: Economic Development, economy, trade
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Youth NEETs change since 2008

Posted by Sua William Sio on February 26th, 2012
Youth NEETs

Youth NEETs

Despite the foodhardy belief by some that all is well with New Zealand employment under National, if they would just pull their heads out of John Key’s armpits for a second and took seriously that our unemployment rate from Dec 2008 to Dec 2011 has doubled, and these are NOT just numbers but REAL people with families to support, then perhaps they might get a sense of the looming employment crisis that I’m talking about. Take note of the job losses so far announced with MFAT, Air NZ, and a host of other companies that have laid off workers in the last few months.

What should also compoud our collective concern is the increasing numbers of Youth Not in Employment, Education or Training. As of December 2011 they numbered 83,000 as highlighted in the graph above.

Some might be providing homecare to family members but I suspect the vast majority are drifting doing nothing. These are our future leaders – now mostly at risk. Without work, without skills and without the hope for a better future, what will be the chances of them slipping into drugs, alchoholism, crime and benefit dependency? If these trends continue to worsen, what is there to stop it from becoming a ticking time bomb making New Zealand susceptible to the kinds of riots we’ve witnessed on TV occuring in Europe and the likes.

The NZ Institute who released proposals last year of reducing youth disadvantage estimated that the cost of youth unemployment, youth incarceration, youth on the sole parent benefit and taxes forgone, is around $900 million per year. Youth Not in Employment, Education or Training is not only a tragic waste of talent and potential, but we also all carry the cost.

We should also be worried that Maori & Pasefika youth make up a large number of NEETS. While the 6.3% unemployment rate in NZ is worrying, its not at the crisis levels of the PIGS. But the 6.3% unemployment rate hides the fact that for some parts of New Zealand unemployment truly is at crisis levels. I’ve shown int the graph below the figures by HLFS showing 43.3% of Pasifika 15-19 year olds are unemployed. That’s a shocking figure, right up there with the worst youth unemployment rates of Europe.

Pasifika & Maori Youth Unemployment

Pasifika & Maori Youth Unemployment

Filed under: M?ori, Pacific issues, Unemployment, community, economy, employment, inequality, jobs, poverty, redundancy, social development, workers rights, workforce, youth
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