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Posts Tagged ‘Fran O’Sullivan’

The credibility cut

Posted by on May 29th, 2012

John Key has a problem.

In four long years National has failed to meet almost every economic target it has set for itself.

New Zealand’s economy is shattered. Unemployment is up sharply. 1,000 Kiwis are leaving every week for Australia. Exported goods have just collapsed by a horrific 17%. Now, apparently, students, the sick and the elderly are going to have their pockets picked by the government too.

Yet while some writers have always seen through the spin – economists Bernard Hickey and Gareth Morgan deserve particular mention – Key has kept much of the commentariat on-side by endlessly promising he has a plan for sustained economic growth.

Well no more, because the prime minister’s had a long-overdue credibility cut.

Historians will say Budget 2012 marked a watershed for this National government. They’ll say it’s when John Key lost his cheerleaders in the press; when opinion leaders began to concede National never had any economic literacy, any vision, or any plan. The scribes will write Key off as a typical National prime minister who burdened the poorest and most vulnerable with new taxes, and who slashed every public service he could, for no deeper reason than to fund tax cuts and special deals for the rich. They’ll record how, just like Rob Muldoon, Key lumbered the next Labour government with a destroyed economy and how every New Zealander was the loser from National’s economic vandalism.

Of course I don’t agree with everything the commentators are writing now. Far from it. But what’s changed is they are really testing Key’s spin and reporting their findings unvarnished – and I applaud the country’s journalists for their professionalism.

Take a look for yourself:

  1. “The major problem is that there is no clear economic growth agenda”, Fran O’Sullivan, New Zealand Herald.
  2. “The Budget delivered yesterday by the Minister of Finance, Bill English, had a distinctly underwhelming feel”, New Zealand Herald editorial.
  3. “It was billed as a Zero Budget, and that’s what we got”, Tim Hunter, Fairfax.
  4. “The Budget is contradictory. Fiscal policy will subtract from demand and from growth not just next year but for the next four years”, Brian Fallow, New Zealand Herald.
  5. “As far as ambitious measures to growth the economy, this Budget is a little light”, Corin Dann, TVNZ.
  6. “A fiscal surplus is not a growth strategy. While the Budget does allocate more money to science and innovation, the restraint on spending has meant the Government is unable to make the kind of quantum leap in industry assistance that would have justified the amalgamation of several Government departments into the new ‘super’ economic development ministry”,  John Armstrong, New Zealand Herald.
  7. “The figures are essentially meaningless… It is still forecasting growth of more than 3 per cent by early 2014. Growth has not been that high for four years and is now at a meagre 1.1 per cent. The growth rate is crucial. A single percentage point under the required rate and a $200 million surplus can be a $2 billion deficit before you can say ‘Standard & Poors’. On such flimsy foundations is the central political component of this Budget built”, John Armstrong, New Zealand Herald.
  8. “In the face of the negative realities – which are causing misery in households up and down the country – what English had to offer was a series of tweakings and Peter-to-Paul transfers that plugged a few holes here, and scratched an ideological itch there”, Gordon Campbell, Scoop.
  9. “There has been much speculation over the last 12 months on the merits of a capital gains tax and the anomaly that its absence presents from a tax policy perspective. New Zealand is unique among OECD countries in this regard… if there was ever a time to introduce a CGT it is now”, Greg Thompson, National Business Review.
  10. “Bill English’s fourth Budget pinches the pennies, raids nearly every piggy bank and even plunders the Government’s rainy-day fund. No-one, it seems, is safe – even kids with an after-school job have been frisked for extra revenue to help fill Government coffers”, Tracey Watkins, Fairfax.

So all in all it’s a thumbs-down for Key.

Please tell us what Budget 2012 has meant for your family.

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Filed under: Budget, Economic Development, economy
35 Comments

Fran’s hoping for too much

Posted by on November 10th, 2010

 Don’t always agree with Fran O’Sullivan but her analysis this morning gets to the core of the choice we are facing in Economic Development.

Is John Key preparing to inspire New Zealand to make the leap from a consumption-led economy to one driven by a smart investment ethos?

A bit like Singapore, perhaps, with its strong focus on using domestic savings to fuel growth via the Government-initiated investment and savings funds which have provided much of the cash that has propelled the development of its companies in the past couple of decades.

and :-

So far there is little questioning – at least in public – of why the country has to wait until the oilfields are proven before taking a leaf out of Norway’s – or preferably Singapore’s – book to increase sovereign wealth.

The purists will inevitably chime in that the Government should retire its own debt before setting up another investment vehicle.

This is the kind of thinking that led Finance Minister Bill English to slash transfers to the NZ Superannuation Fund which is supposed to help offset the bigger burden super will impose on Government accounts in future years.

Super Fund boss Adrian Orr has already earmarked some of the fund for what is arguably a nation-building purpose by investing in various New Zealand entities like Shell’s downstream business and Auckland International Airport shares when each looked likely to be sold abroad.

Orr now wants to invest in New Zealand farms. The fund is also expected to co-invest with Fonterra in expanding its farms business overseas.

But the problem is that the fund is set up with an over-arching purpose of offsetting superannuation costs – not to help grow the economy by providing strategic investment capital.

Key yesterday dropped a rather strong hint that the Government would announce new policies to increase the savings rate in next year’s Budget.

English made a start in that direction in his May 20 Budget when he unveiled a tax-go-round that put more money in the pockets of working New Zealanders and reduced the tax rates on various savings vehicles.

Many Kiwis are now retiring personal debt at a faster clip.

But the Government is in a classic Catch-22. Does it continue to inject a large fiscal impulse into the economy by borrowing up large to fund Government spending (including the major construction projects) and middle-class tax cuts?

Or does it begin cutting Government spending faster so it gets on top of its burgeoning deficit?

This is not an easy decision – particularly as there is now considerable evidence that not enough of the additional money the Government has borrowed to fuel the fiscal stimulus is being spat back into the economy via growth-fuelling consumption.

At some point the question will have to be asked: is there any point in borrowing more to fund tax cuts if taxpayers simply use the extra to retire personal debt?

Maybe we would be better off tipping some of those “cuts” into a Government investment vehicle to provide extra capital for our companies to help fund their growth and create jobs.

I don’t think Key has the balls to veto English’s objections and run with it – happy to be proven wrong.

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Filed under: economy, jobs, national, productivity
18 Comments

Critical infrastructure yes?

Posted by on March 4th, 2010

Two recent pieces of interest in the NZ Herald. Fran O’Sullivan’s piece yesterday titled: Failures make us look third world. About, yes you’ve guessed it, Telecom’s XT network failures and Transpower’s outage in Auckland.

She’s concerned that these outages were:

to put it kindly, more like what you might expect to occur in South America or parts of Southeast Asia

and then says:

Infrastructure failures do occur. But in Telecom’s case the excuses tendered by chief executive Paul Reynolds (who either doesn’t know what caused the failures or is simply using confusion to obfuscate what critics claim is the failure to scale up the XT network fast enough to meet escalating demand) verge on a Monty Python skit.

The absurdity of Transpower needing to call in police assistance to protect its workers when they went on to an irate farmer’s land to fix the electricity transmission company’s pylon was also bizarre.

Both these failures exposed the fragility of some of the nation’s critical infrastructure: Telecom does not have a back-up network for its XT service which will automatically kick in when failures occur.

And she hopes that the Govt’s national infrastructure plan will address the issues. But is concerned that it won’t go far enough. And I agree.

The second piece just updated on the Herald website is somewhat horrifying.

Telecom is giving out rival 2degrees’ services to key hospital staff on XT as backup in case the network, which has failed four times since December, goes down.

The Herald reports that this is what’s happening in the Canterbury DHB. Otago Southland DHB is reviewing its contract with Telecom and in the Hutt Valley, north of Wellington, Telecom began transferring clinical hospital staff to a reliable network after four outages that could have jeopardised emergency responses.

Capital and Coast, Blenheim’s Wairau Hospital and Hawkes Bay DHBs have either moved to pagers or are reassessing their contracts with Telecom.

So tell me that a functioning mobile network is not critical infrastructure?

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Filed under: comms & IT, infrastructure
6 Comments

Back to the 90s?

Posted by on June 8th, 2009

The end of free local phone calls. Foreign ownership of  Telecom. Scrapping the Kiwi Share, which currently requires government approval for any shareholder to acquire more than a 10% stake in our major telco. No it’s not the Labour opposition scaremongering. It’s proposals contained in a Cabinet paper, prepared by Bill English, posted on the MED website, which says Treasury will lead a review of the Kiwi Share. It’s creating some consternation out there. And when you look across the Tasman and ponder what happened when the Howard Government sold it’s majority in Telstra offshore, you have to wonder  why you would want to create a monster on our shores.

I raise this because it is becoming pretty clear that the National Government is intent on a creeping dilution of our regulatory framework and our regulatory body the Commerce Commission and it’s time we started talking about it.

The previous Labour Government put a lot of effort into strengthening our regulatory framework after the devastation of  the 1990s. In 2008, reforms to strengthen our legislation were supported by the National opposition.

Now it seems, in 2009 we are seeing some worrying signs of a weakening of that position and a shift towards the right wing approach to regulation.

In an opinion piece in the NZ Herald on 18 March, Fran O’Sullivan raised questions around the resignation of Paula Rebstock as the chair of the Commerce Commission and what the new approach to regulation would be.

She said “The Rebstock resignation does provide an opportunity for reform. But it is important to make sure it is soundly based. Not simply to suit the commercial objectives of individual companies.”

The concern I’m hearing is that we could be moving into a policy vacuum in regulation. One very worrying sign is the government’s silence on the reinstatement of the Telecommunications Commissioner. This is an extraordinarily important position at a time when stability and knowledge is required in a fast changing sector with huge reforms underway.

The telecommunications industry makes up just 3% of our GDP but this is growing and is one of the fastest growing industries in this country, as well as across the world. This is a time for strong leadership and for a transparent and robust regulatory approach. Labour understood this. It seems National doesn’t.

And I challenge this government to tell the New Zealand people why they’ve waited nearly six months to tell us what they’re going to do about the Telecommunications Commissioner position?

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Filed under: comms & IT, regulation
3 Comments