Red Alert
Posts Tagged ‘economy’
Economic development ideas
Posted by David Cunliffe on April 29th, 2012During 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.
NZTE Focussed; Joyce Not.
Posted by David Cunliffe on March 1st, 2012NZTE 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?
Assets and Elbows
Posted by David Cunliffe on March 1st, 2012Can 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.
Steven Joyce Can’t Count
Posted by David Cunliffe on February 29th, 2012An 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.
The Growth Gap
Posted by David Cunliffe on February 23rd, 2012In 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.
Feeding our kids
Posted by David Cunliffe on February 6th, 2012$4.28 is less than I paid for the latte I just drank.
That is how much Craig and Carla Bradley can spend to feed each of their kids each day.
After rent, power, petrol and bugger all else.
Thank you to Simon Collins for his excellent reality check on inequality in Auckland in today’s Herald – see Trevor’s post below.
Equally sobering: a “comfortable” family – Anita and Nigel’s – on $150k (an MP’s salary) is close to the top 10% of NZ households.
Fact is, we live in a poor and divided country.
So our constituency is not just the so-called ‘underclass’; it is most New Zealanders.
No-one wants to be poor.
Every Kiwi kid deserves good fresh food, a few treats and trips to the beach.
Being poor is grinding and demoralising.
It takes all your time; and your gut turns when your kids go without.
Most parents strive to do their utmost.
There is unbelievable sacrifice and heroism all around us.
But most people don’t see the point in politics – they are too busy just living.
Despite this, a gap this big between the 1% and the rest cannot stand. It never has…
The change we want is that of Mickey Savage and the New Deal.
Not extremism, or racism; or God forbid, another ‘Great’ War.
So we must be relevant to New Zealanders’ daily struggles:
Feeding our kids; caring for our sick and old;
Making sure there are good schools and jobs for our young;
Looking after our living earth;
Seeking out those doing good stuff in our communities and working with them.
Humble enough to know we don’t have all the answers, because no-one does…
…and going on anyway.
TINA’s back
Posted by Darien Fenton on October 21st, 2011Since Labour announced its Work and Wages Policy, there’s been the editorials repeating the “TINA” (There is no Alternative) lines of yesteryear and arguing for trickle down. Then there’s those who have an in-built opposition to anything that might improve the lot of working people, and an aversion to those dreadful organisations called “unions” – the 370,000 New Zealanders who are part of today’s unions.
This is old National at their worse. It’s they who haven’t changed and who are out of touch. They need to catch up with the reality of work and wages for most New Zealanders and they need to tune into the debate that’s happening around the world about the failure of the orthodoxy of the last 20 years.
When Labour introduced the Employment Relations Act (ERA) in 2000, we heard the same rubbish from some National MPs who are now Ministers and others best forgotten. The ERA was going to be the end of the world, while today, most will concede that it was very modest regulation indeed.
Eleven years ago, this is what Jenny Shipley, Max Bradford, Gerry Brownlee and Richard Prebble said in Parliament.
Rt Hon. JENNY SHIPLEY (Leader of the Opposition): Welcome to Jurassic Park. This is a step backwards for New Zealand…… Taking New Zealand back to ideas that most people thought were extinct is no way to forge the future for this country. I do give notice here that the Government would have been far better to build on the strengths of the Employment Contracts Act, rather than destroy them and try to reintroduce some notions that most people thought had seriously gone 50 years ago, or more.
Hon. MAX BRADFORD (NZ National): … why is the Labour-Alliance Government digging up all the old processes, the old institutions, the old dinosaurs of the past in order to get it? One of the reasons that the Employment Contracts Act was introduced in 1991 was the old system under the industrial relations legislation, the Labour Relations Act, was not working. Yet here we have a grand march backwards into the past to try to assert—because that is all it is; an assertion—that somehow or other employment relationships will improve, growth will improve, and we will get more jobs out of this approach to industrial relations……. there are people who are waiting to leave this country because it will be too difficult under this legislation to employ people and to invest.
Hon. RICHARD PREBBLE (Leader—ACT NZ):…. Who do the Alliance, the Labour Party, and the Greens think they are fooling? This bill is compulsory unionism by the back door. We know what the consequences will be. It is well known that the country’s port unions have already been meeting. They have already agreed that they will be asking for a collective agreement. When this bill comes into effect on 1 August, they will be making a demand to every single port in the country for a collective agreement—in other words, a national award. They are prepared to go on strike to get it. It is already well known that the North Island freezing works sheds—the unions—have already met. They have already agreed on their collective agreement, and the moment this law comes into effect they intend to exercise industrial muscle to get that agreement.
GERRY BROWNLEE (NZ National—Ilam): …… This bill, dressed up as a herald of integrity and individual choice in industrial relations, is nothing more than another step on the long march backward that this Labour-Alliance Government is determined to inflict on New Zealand. This bill rips out any element of trust and mutual respect from industrial relations in this country. It is based on the premise that the employer is always wrong. It is based on the premise that there is an intrinsic, irreconcilable difference between employers and employees. Always it is the employer who is the guilty party, regardless of the circumstances. This bill is the most unbalanced legislation that could ever have been introduced in the industrial relations area.
Eleven years ago, according to the National Party, employment law change was going to be the end of the world. Did the world end? No, of course it didn’t. In fact we had good growth, low unemployment, no debt and an improving social outlook.
Thank goodness there are some real thinkers contributing to the modern conversation about how we build a better and fairer economy and society.
Here’s a good piece on wages from Bill Rosenberg today.
Doing Things Differently
Posted by Grant Robertson on October 12th, 2011In the wake of the double downgrade, the debt blowout, and further afield the Occupy Wall Street movement, one thing keeps coming through for me. If we want to improve our lot economically, if we want to address the growing inequality in our society, we have to do things differently.
An interesting contribution to that debate in New Zealand is coming from Gareth Morgan and Susan Guthrie. Their latest piece appeared in the NZ Herald on-line today.
Morgan and Guthrie highlight the obsession with property speculation, the reliance on commodity prices to keep us afloat, a narrowly based economy and monetary policy and a tax system that fuels the worst of speculative behaviour. These are not new messages from Gareth, but there is more reasonance as we look at a global and national economy defiantly not recovering and staggering (or is that muddling) through the year. He puts it this way
There is a naive single dimension to our economic policy – we either raise or reduce the budget deficit or we raise or reduce interest rates. That’s the sum total of the intellectual capital being applied to managing our economy. That it could be so bereft for so long has led to the persistence of our “structural imbalance”. There is a chronic need for policy enlightenment and a sweeping aside of a simplistic policy orthodoxy that has been rigidly paid homage to for 30 years now.
Now, of course I don’t agree with all of their prescription, but the idea that we have to change the way we think about our economy is the core message, and it is one that Labour has heard and taken on board. We are offering a different way of doing things both from where the current government is, and where we have been.
Monetary Policy. Labour has already announced that we need to change monetary policy to address the structural issues in the economy, including the volatility of the dollar that makes life difficult for exporters and high interest rates that discourage investment in productive parts of the economy. While curbing inflation remains important, having that as the single focus is not working for us. Our policy is to broaden the objectives of the Reserve Bank beyond just controlling inflation to look other issues, such as employment and to support more aggressive interventions to deal with currency speculation.
Fairer Tax System. As noted we are going to introduce a Capital Gains Tax to ensure we tax income in all its forms and start to move toward investment in our productive economy. We also are going to return the top tax rate to 39c over $150,000, the first $5000 tax free and taking the GST of fresh fruit and vegetables
Procurement/Overseas Investment. Labour is going to make important changes to focus to support our own economy. This means new rules on government procurement, that will be compliant with our international ageements, but will require a process that gives Kiwi firms a fair go and will look at a wider set of criteria for awarding contracts including the impact on the domestic economy. We want overseas investment but as announced in 2010 we will put stricter controls on purchases of farm land, monopoly infrastructure, so that we keep control of our assets (and of course there will be no asset sales!).
And there is more to come in terms of innovation and economic development, to build on the R and D Tax Credits, Youth Employment. And more to come in Savings, where we really can build a basis for creating the pool of resources to invest in our own companies, just as Kiwisaver funds have done with Scott Technology.
This post is too long already, so I will come back to some of the social policy issues Morgan and Guthrie raise, but for now I am confident that Labour has a different vision on offer this year. Some of it is policy we have done before, but a lot of it is thinking differently, because as they say a definition of madness is doing the same thing over and over and expecting a different result.
John Key and that stadium shot
Posted by Chris Hipkins on August 19th, 2011Remember that video clip of John Key standing in the Westpac Stadium in Wellington before the last election lamenting the number of New Zealanders who leave every year to move to Australia? Well, he’d need a bigger stadium for this year’s campaign video.
After 3 years of John Key’s government, the number of people leaving NZ to move to Australia is at its highest level in 10 years. 46,436 people jumped the Tasman for good in the 12 months to July. By contrast, only 14,807 made the jump back the other way.
Remember what John Key said in his 2008 campaign opening speech?
“Do you want more of the same? The same directionless economy? The same political games and distractions? The same loose management of your money? The same excuses, buck-passing, and the same failure to deliver real results?”
Let’s compare the 9 years of Labour government with 3 years under National. Under Labour we had record low unemployment, more people in the workforce than ever before, more people in tertiary education than ever before. Under National unemployment has sky rocketed and tertiary education funding has been slashed.
As for political games and distractions? This from a PM who walked out of Question Time to avoid answering questions from the Leader of the Opposition. The same PM who backed Rodney Hide, then Don Brash, and has now done a dodgy deal with John Banks in Epsom. The same PM who paid PR firms to get him on Letterman. The same PM who won’t be interviewed on Morning Report but will happily take patsy questions on The Edge…
But of course the state of the economy isn’t National’s fault. Their failure to deliver any meaningful financial relief to those on middle and low incomes isn’t their fault. Youth unemployment isn’t their fault (and in less than a week it’s gone from being John Key’s biggest issue to being a problem that’s ‘overstated’). Now, what was that about “buck-passing”?
Lies, Damned Lies and … Steven Joyce.
Posted by David Cunliffe on July 19th, 2011Our 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.
What others are saying
Posted by Chris Hipkins on July 16th, 2011It’s been a good week for Labour. We’ve put forward a bold policy agenda that will protect our valuable state assets whilst also setting us on the path towards a brighter future. It’s ambitious and highlights the contrast between Labour’s visionary approach and National’s total lack of a plan.
John Armstrong’s column in the NZ Herald notes that Labour’s policy is driven by a desire to do the right thing and get the economy moving again, unlike National’s approach of trying not to scare the horses by doing nothing:
National concedes that Labour’s promotion of the tax was always going to get the tick of approval from some economists, think tanks and academics. National did not count on that endorsement being so strong. The endorsement has come from across the political spectrum, thereby making Goff’s push for the tax look less political and motivated more by what might be in the national interest.
Over on Stuff, Andrea Vance argues that Labour has taken the lead:
…Labour has seized the moment. There comes a tide in the affairs of politics and this time Goff, Cunliffe et al have caught it…pitched against an asset selloff, a CGT looks to many like the lesser of two evils…
On TV3’s The Nation Colin James says that Key and National have “miscued”:
They’ve attacked things that aren’t in it, and attacked things that are in it that they said aren’t in it, and John Key talked about it being a ‘dagger through the heart of the economy’ and I thought Russell Norman in Parliament was able to skewer him on that, he quoted the OECD, he quoted the Treasury, he quoted Australia, and I think National just miscued, it didn’t handle it nearly as well…
Earlier in the week, Rob Salmond posted an interesting piece on Pundit correcting some of Key’s mythical claims:
If John Key is determined to measure a person’s welcome in New Zealand only through tax rates, then the conclusion is clear. High income earners are more “welcome” here than in any of the country Mr Key aspires us to be like… The CGT discussion so far has been a bit surreal. Labour starts a debate about tax policy, traditionally a strong area for National and ACT. In response, National becomes a fact-free zone and ACT retreats into an internecine war over the appropriate degree of their race-baiting.
Blogger Idiot/Savant at No Right Turn, often critical of Labour for not being bold enough, nails it:
The numbers stack up. This is not a spendthrift plan to just keep on borrowing. Instead, its a cautious, sensible, fiscally conservative plan to balance the government’s books by closing a serious tax loophole. And we don’t have to sell anything to do it. Labour is now presenting a clear alternative to the government’s policies: either we can sell the family silver and see the profits go offshore, while trying to cut our way out of recession – or we can pay off our debts and support our government services by making the wealthy pay their fair share. Put like that, its really a no-brainer.
Meanwhile Fran O’Sullivan questions whether John Key has the gravitas to deal with the challenges we face:
All New Zealanders know Key has fulfilled his childhood dream by becoming Prime Minister of our small nation. But does he really have serious aspirations for his prime ministership? Or even New Zealand?
One gets the feeling that Key and his Ministers quite like their ministerial BMWs and have forgotten why they’re allowed to ride around in them. We certainly don’t hear them talking about being “ambitious for New Zealand” very much these days.
Budget FAQs #5: Growth Hockey Stick
Posted by David Cunliffe on May 19th, 2011The 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.
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.
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
Budget FAQs #4: National’s Growth Gap
Posted by David Cunliffe on May 19th, 2011GDP 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
Budget FAQs #3: Kiwisaver
Posted by David Cunliffe on May 12th, 2011Yesterday 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).
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Budget FAQs
Posted by David Cunliffe on May 11th, 2011Some 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.
The car washer dudes are back
Posted by Darien Fenton on March 29th, 2011Don’t know about you, but I’ve noticed a lot more car window washers on intersections lately. My local one is back after not seeing him for years, because they mostly disappeared during the nine years of almost full employment under a Labour-led government.
But they’re back. They’re part of New Zealand’s informal economy, where in hard times, people are forced to make a living in whatever way they can because they cannot find jobs or are unable to start businesses in the formal economy. These are part of the working poor who are working very hard but who are not recognised, recorded, protected or regulated by the government.
There’s no question that New Zealand does have an informal (or underground) economy. The question is how big is it and is it growing?
Unfortunately, we have no idea about the size of the underground economy in New Zealand because people working in the informal economy are not registered as businesses or employees and they do not pay taxes.
But think about the workers that you see around the place. There’s the flower and strawberry sellers on the side of the road. There’s those who do jobs “under the table” to top up their meagre income or unemployment benefit. There’s those who work from home and even in garages as sub-sub-sub contractors making things, sewing or putting things together, there’s those who mow the lawns, do a bit of catering on the side and there’s the street vendors selling jewellery, fake watches and sunglasses in the streets.
Increasing poverty and the growing gap between rich and poor is one of the underlying reasons for the growth of the informal economy – even in first world countries.
It is is poverty that forces people to take up unattractive jobs in the informal economy and the low incomes that such jobs yield create a vicious cycle of poverty.
It’s not good for our economy or society either. No taxes paid, no ACC levies funded, no health and safety, no minimum wage, no other protections.
It’s almost like the car washers are a barometer of the state of our ecconomy and the well-being of New Zealanders. If it is, then we’re in big trouble.
Sadly, with a government with no plan for jobs, I fear I’m going to see a lot more of my local car window washer.
Economy Stuck in a Rut
Posted by David Cunliffe on March 24th, 2011Near-zero gross domestic product (GDP) figures for the December 2010 quarter prove how badly the New Zealand economy is stuck in a rut.
Treasury and the Reserve Bank had both forecast zero growth for the quarter. I have taken the view that was about right and that minor variation either side would not change the story.
It doesn’t. Today’s 0.2% is within a shade of that, and is still subject to revision.
The big picture is that the economy is going nowhere because National has no plan.
A breakdown of the statistics is instructive – wholesale trade is down, retail is down, accommodation and restaurants are down, confirming the message that businesses in New Zealand towns and cities have been giving us — that for them 2010 was even worse than 2009.
Cost of living pressures were also clear. Goods and services purchased by Kiwi households are almost flat even though prices rose 2.3 percent in the December quarter alone. This shows Kiwi families are hard hit by the rising cost of living and are having to tighten their belts month by month.
There is no good news on the external side either. Imports rose faster than exports, and the fastest-rising export, raw logs, effectively represents exporting Kiwi processing jobs along with the timber.
Kiwi families and firms are borrowing more than ever before to stay afloat, and the Reserve Bank says this will continue until 2013.
Bill English is presiding over an old-fashioned slump, and clearly has no idea what to do about it.
Last week he wanted to put the whole cost of the earthquake on the country’s credit card, but Prime Minister John Key rolled him a few days later when announcing a zero budget this year.
Economics 101 says that savage budget cuts in the middle of a deep recession will only put more people out of work, undermine confidence, reduce demand and drive down tax flows.
This isn’t a plan. It’s a recipe for continuing economic failure.
The Great Broadband Sell-off
Posted by David Cunliffe on March 18th, 2011Yesterday’s FEC hearings on the Telco Amendment Bill were remarkable.
By the end of the day it was starkly obvious that the Bill hands a gold-plated license-to-kill to Telecom under the guise of ‘structural separation’. No-one, not even Govt members, could deny that.
Don’t take my word for it: check out the Commerce Commission submission, or (bipartisan) Internet New Zealand’s, or Vector’s, or TelstraClear’s – all here.
The Bill seeks to lock in a “regulatory holiday” by preventing the Commerce Commission from exercising its current oversight for 10 YEARS. NO other country in the world has done that, and it would be illegal in Europe. It may be in breach of NZ’s WTO obligations here.
Despite that Telecom had the gall to ask for longer! And to weaken the purpose clause of the Telco Act to boot! Have they lost their PR mind? Do they want to channel the ghost of abuses past?
Fair trading “equivalence of inputs” rules between the network owner (Telecom) and wholesale competitors would be watered down so much as to be unenforceable. Arms-length trading rules currently in Telecom’s Operational Separation Undertakings become “optional”.
And so on. It’s so patently obvious it is not even worth repeating all the examples.
No wonder Steven Joyce wanted the hearings over in indecent haste.
The result of this great leap backwards to the 1990’s will be much higher prices and less choice for consumers for a decade. YOU will pay for this sleazy deal.
So WHY has the National Government done this?
Roger Douglas summed it up – it is a “legislative subsidy”: National is ‘selling the law”.
In plain speaking, National in the last election over-promised ultra-fast broadband to 75% of Kiwis for $1.5 billion. But rather than being a clean subsidy there were massive strings attached, requiring a commercial return through the hopelessly conflicted Crown Fibre Holdings. The numbers just did not add up.
Hence no rollout for 2½ years, and Steven Joyce is worried about his reputation.
But instead of fronting the problem honestly and getting the whole industry to be part of the solution while building a vibrant competitive market, National has done a side-deal with the incumbent telco that leaves everyone else worse off and the market beggared beyond belief.
That will set back innovation, chill investment and deliver less broadband at higher prices than necessary for a decade to come.
As if Kiwis aren’t facing enough price rises without paying too much for their broadband as well.
