In terms of the daily cut and thrust of the House today, Bill English backfired (IMHO). Comparing the New Zeland economy to that of Greece was wrong on every level.
First, there is no comparison. Greece is far and away one of the most indebted countries in the OECD. NZ is in the bottom third or quarter by various measures. Greece has gross crown debt of 115% of GDP. NZ had net crown debt of zero % under Labour in 2008, rising to 5% by election time due to the GFC. NZ gross crown debt today is about 29% .
Second, to the extent that NZ hit troubled waters in the GFC, most of that is on National’s watch. That is not to blame them for the international crisis, but then theycannot blame Labour either – the whole argument is silly and circular, and patently so.
Third, NZ stacks up very well on the other aggregates too: Greek unemployment nearly 11%. NZ now 7.3% NZ under Labour 3.4%.
Fourth, a Minister has no responsibiity for opposition policies anyway, and especially when he is simply making them up, as Mr Speaker confirmed. That is simply outside Speakers Rulings.
So what exactly was Bill English’s point?
Underneath this attempt at deflection is of course a deeper issue: English is desperately trying to convince Kiwis they need to swallow savage service suts in health and education because the alternative is “Greece on steroids”… Really? Or isn’t that just a teensy bit exagerated, Bill?
Of course prudent fiscal managment matters. We have always said so. Labour’s record on this is unimpeachable: Gross debt cut in half, net debt to zero; historic lows in unemployment; higher average growth over the decade than under National; the longest post war expansion on record etc etc etc.
Point is: fiscal prudence is a necessary but not a sufficient condition for a coherent economic strategy for good jobs and living standards and the other things that really matter to ordinary Kiwis. That’s why labour is challenging National at the heart of the economic debate: on jobs and growth. Why we are emphasising the need to close the other deficits in exports, savings, innovation and social issues. On boosting valued added and clean technologies.
See the post below (Building to the Budget) for more detail.
Hey, this is de ja vu-ish.
A few days ago in the UK, David Cameron talked about Greece and Great Britain in the same breath.
Miliband said “the way David Cameron has talked about Greece and Britain in the same breath is frankly economic illiteracy”. [You can google rather than I copy and paste sources here]
Strange. Coincidence? Or someone scripting for the rabid right wingnuts … in which case whether because of Tory timezone difference or jetlag, the comparison with Greece popped up today here?
“NZ had net crown debt of zero %”
Come on David – that is a bit disingenuous…
The Pre-Election Economic and Fiscal update of 2008 forecast net debt jumping to 26% of GDP, plus a decade of deficits…
.. and by December 2008 net debt was forecast to raise to 50% and in permanent deficit?
The June 08 report that you quoted in fact got updated for the Pre-Election Economic and Fiscal update of 2008.. I think you forgot to mention that in this post
If that’s true Gary then all Labour need to do is keep an eye over in that timezone for clues to tomorrow!
On a more serious note – I should say that fiscal prudence does not have anything to do with running surpluses or “balancing the books” e.g. IMF style (and in my opinion too often counter productive) austerity measures. Suspect you already know what I am going to say.
Having unbalanced books where the extra spend is going into productive initiatives with good ROI and part of building strategic economic capabilities – that is fiscally prudent as hell.
Any comparison with Greece needs to bear in mind the tax evasion there, which appears to be rife. Greek swimming pools have acquired EU notoriety.
http://paul.kedrosky.com/archives/2010/05/checking_greek.html
Back in NZ, government has rejected both a capital gains tax and a broad tax on property, leaving the economy with severe distortions and many aggrieved taxpayers.
Reducing the top income tax rate while raising GST has to be one of the most blatant means of ‘legalized tax evasion’ ever seen. English’s justification for it gets thinner each time round.
It would be interesting to calculate how much, collectively, the Cabinet stand to gain from this move, paid for by the rest of NZ.
Perhaps English should be looking to Estonia ( or was it Latvia) who had Ruth Richardson as an economic advisor.
Their situation was as dire as Greece , but without the low interest Euro loans.
I hope that Estonia could get their money back from Richardson
In the years since leaving Parliament in 1994, she has had an extensive international practice as a public policy consultant. She has advised widely on strategies designed to achieve the practice of good governance and the development of high-quality policy frameworks.
http://www.cato.org/events/russianconf2004/speakers.html
“swallow savage service suts in health and education because the alternative is “Greece on steroids”… Really?”
“A few days ago in the UK, David Cameron talked about Greece and Great Britain in the same breath.” – Creepy
Classic NACT tactic of setting up a makeshift appearance of a crisis somewhere in preparation for their pre-fabbed solution.
I want to hear how they would be managing the Greece situation NOW, since they are so insightful.
What I would have taken from the Greece example, if I were Bill English is that in at least one country, the many no longer agree to pay for the excesses of the few, and are letting their government and the rest of the world know about it.
If it wasn’t a manufactured crisis (I’m thinking Chomsky when I used that word ‘manufactured’), then in the financial schemer’s parlance, the opportunities are ripe again to leverage off another crisis.
More money-making opportunities have arisen. The up and down swings of the stockmarkets mean that there should be some good profiteering to be made from trading on margins.
Buy low (think the time of the great sales during early last year), cash up and sell high (think about, say, six months ago pre-Greek crisis) and buy low (about now and coming days …. but be careful you don’t get burnt if you’re trying to spot the next upswing or pick a low).
Speaking of which, sometimes I feel the current PM tugs on our right-left voting sentiments like the finance market trades on the up-downs. I hope I am wrong.
If Bill is keen to stop us going into debt surely he must be interested in protecting the tax base?
By giving tax cuts to those who don’t need them (not)!
@Oliver 5 May 12.20: It would appear Oliver that you have either got your facts wrong or could be deliberately playing with numbers. With respect, you are clearly incorrect.
The Pre-Election Economic and Fiscal Update 2008 forecast by 2013:
- net debt (incl NZSF) at -0.2% (hence my validated statement net debt was reduced to zero under Labour);
- net debt (excl NZSF) at 13.2%
- Gross Sovereign Issued Debt (GSID, which is a misleading indicator of debt) at 24.3%.
The 26% figure you refer to Oliver appears to be the GSID (not net debt) by 2013 under the WORST CASE SCENARIO (ie worse than Treasury forecast). This was NOT A TREASURY FORECAST, but Treasury had at this point had begun factoring in different scenarios indicating what might happen under different circumstances to affect their forecasts as the global economic situation was so unpredictable.
As it turned out, the global financial crisis did track pretty closely to the worst case scenario, so by the December 2008 the debt forecasts did drop. So instead of 24.3% of GSID:
- net debt (incl NZSF) was now 9.9%
- net debt (excl NZSF) was 13.2%
- GSID at 33.1%.
This reflected the dramatic impact of the GFC. Without being picky, it was on the current Government’s watch, but the drivers were largely external.
Oliver you talk about a figure of 50% – are you referring to the ten-year forecast projection of GSID (again, not net debt), which Treasury noted that IN THE ABSENCE OF POLICY CHANGES, could rise as high as 57% of GDP by 2023.
Blinglish seems to think that repeatedly chanting ‘labour’s years of mis-management’ makes it true. The gold fish in the gallery seem to have bought it.
Sigh, Everytime Natinoal get in it costs me directly in the pocket (being an average kiwi), Last time they were in there wre the calls that we need to tighten our belts for teh betterment of the country. Then things did get better under Labour.
But again National are cutting things and costing me and mine in the pocket, there using he same catch cry, weve got to tighten our belts for teh betterment of the country.
I suppose what they mean is that things will get better for middle and lower NZ when Labour are in again.
Sadly, as a labour voter since the 1990’s i cant see Labour getting in again next year. This scares me, as life becomes harder and harder under National governence.
David Jobs and Growth Fundamentals?
I think the first place you need to look is the Reserve Bank Act to give the Governor more tools and scope than just controlling inflation through the OCR.
Every time we get export led growth, OCR gets hiked, the kiwi gets traded up through speculation and short term hot money. This has a deflationary effect by taking dollars out of or productive export sector that in turn reduces internally driven growth and is reflected in negative or at least stagnant job numbers.
How are going to manage the inflationary conundrum of high oil prices and strong commodity prices, once the global demand picks up, under this failed monetarist IMF sponsored regime? We need to be able to keep the dollar at a level that reflects the real value..look at the growth of China and Yuan value.
Waterboy had his 15 minutes of fame in Parliament. Sorry, 2 minutes.
My other half, seeing me on the Labour website, told me I should be a politician; I’m so married to politics. Then we agreed that if I was ever within cooee of Rodney Hide or Roger Douglas, I, I, I would probably get thrown out by the Speaker. I was thinking of something far more drastic! But then there would be trips to Wellington… I love Wellington. Art Gallery, rellies, Katherine Mansfield…my hero … I can’t tell you who. You’d get a swelled head!
15 minutes of fame???, ive never been to parliament.
One thing about Rodney Hide and Rodger Douglas, they are our elders, so do reserve some respect for that.
Off the field and far from the roar and mayhem of battle, I’d drink a hearty toast with him as I would any fellow man. But on the field of battle…
http://www.3news.co.nz/Michael-Cullen-National-will-drive-nation-into-debt-for-tax-cuts/tabid/423/articleID/48587/Default.aspx
http://www.nzherald.co.nz/politics/news/article.cfm?c_id=280&objectid=10574341&pnum=0
David so we had net nil debt how does this corrospond with this link that Crown debt was 20% at the time of this article. And did not under Michael Cullen have a presribed limit of 17.5% ( I was unable to find a link for the actual ceiling)
I am unsure why this is in moderation?
Jum
Have you joined the Katherine Mansfield Society? I helped them set up in late 2008. They would welcome your membership, google to find their website.
@Jum – You’d have my vote, mate
@waterboy – you should get a mention – HEY TREVOR, WORK WATERBOY INTO A REMARK IN THE HOUSE!!!!!!
Tracey
Yes. Love the daily diary entries. One of the most professional websites I’ve seen. Well done you.
@Richard Shaw. onto that – Reserve Bank Act review is a definite. Have endorsed new macroprudential tools adn will review other complementary measures.
@HEroduts. I have had experts recheck the debt numbers above. they are rock solid.
@ Herodotus:
Perhaps the MSM isn’t telling the whole truth.
@David
Thanks, that has made my day
“NZ had net crown debt of zero % under Labour in 2008, rising to 5% by election time due to the GFC. NZ gross crown debt today is about 29% .”
This statement is typical of politics and a well schooled individual in the art of language. We have here a subtle change in context that many readers/listerners (Re radio & TV) would not pick up on. All we would hear is Lab = nil debt, Nat = 29%. BUT you have crossed over from Net to gross.
The links I linked to previously can still be correct and your statement can still hold true, as items like Student Loans ($10-$11b) require a source of funds to loan thus creating a debt $10b, yet we have an asset (Student loan) = $10b, thus netting out to be nil net debt. And interest is covered by operating surplus or funds sourced from Financing.
DTB I wiould be surprised if in this case MSM is not telling the story, as we can see from my initial comment above how easily a well skilled individual can alter what is being conveyed, and how BOTH can be correct!!
Debt’s one important measure, but its not as important as income per capita.
In other words, why be concerned if a country owes multiple $B debt if its income statement is so good that the debt pales into insignificance.
Let’s keep our eye on how to grow income per capita and not simply decreasing debt. (Yes, very clear that you are on to this, DC).
@Herodotus – I was explicit in the definition of net and gross crown debt when I used each. Others in this thread, and the MOF, havebeen much less rigorous. As i said above, all the data i have used has been double checked, and that is my last comment on that matter
Much more important, as loota says just above is gettting incomes up. That means getting our economy on a sustainable path – fixing the external deficit, the savings deficit and the innovation deficit.
@Herodotus – I was explicit in the definition of net and gross crown debt when I used each. Others in this thread, and the MOF, havebeen much less rigorous. As i said above, all the data i have used has been double checked, and that is my last comment on that matter
Much more important, as loota says just above is gettting incomes up. That means getting our economy on a sustainable path – fixing the external deficit, the savings deficit and the innovation deficit.
David re net debt, gross incl/exc NZSF, ACC etc. There is some scope by ALL to cherry pick their data for their own means and still everyone to be hand on heart stictly correct. And for many who have limited contact with economics and finance, the terms for them are interchangable and mean all the same thing.
Re improving Lab a suggestion pick a term incl/excl whatever and continue to refer to that definition. For those with some basic knowledge we can see thru those who change from one def to another within the same context. Those who cannot we can never educate into the variations, and they will go more on the “feel” of the speaker.
As also stated I do know that your fingures are valid and totally correct, BUT so are other variations of the same theme depending what term we all cherry pick from.
But thank you anyway David for your regular input. Anyway Parliament is over for a week get out and enjoy.