labour.org.nz | Facebook | Twitter | Red Alert Radio

Red Alert

Posts Tagged ‘Standard and Poors’

Explaining is losing- Key on Standard and Poor’s

Posted by on October 10th, 2011

Here is John Key at his Post Cabinet press conference trying to explain his claim in Parliament that Standard and Poors had said there was a much higher chance that there would be a credit downgrade if Labour was in office.

So, lets get this right. John Key gets an email from someone he won’t name who says he was at a meeting with some Standard and Poor’s people and they said something that this annonymous person ‘inferred’ meant that a Labour led government would mean a greater chance of a downgrade.

Up against this is Kyran Curry a named person from Standard and Poors who was at the meeting, on the record in the New Zealand Herald.

Standard and Poor’s sovereign rating analyst Kyran Curry, who attended the meeting in Auckland, said that would not have happened. “In Auckland last month, I might have talked about the importance of the Government maintaining a strong fiscal position in the medium term but I would never have touched on individual parties. “It is something we just don’t do,” Mr Curry said. “We don’t rate political parties. We rate Governments.”

John Key came to Parliament and gave everyone (including as you can hear in the video the Press Gallery journalists) the impression that this was a direct quote about what Standard and Poors said. Judge for yourself, here is what John Key said in Parliament

‘When Standard and Poor’s was giving a meeting in New Zealand about month ago, what it did say was that there was about a 30% chance that we would be downgraded. That is what happens when one is on a negative outlook. It did go on to say, though, that if there was a change of Government, that downgrade would be much more likely

This not true, and John Key knows it. Standard and Poors did not “say” anything, someone who John Key won’t name thinks that is what they might have meant. There is a big difference. As John Pagani said on radio earlier today one of the things that frustrates Labour MPs about John Key is that the public don’t see or hear some of the things he does in Parliament. This time he has been caught out.

And lest anyone forget, this was all part of the strategy of obfuscation and buck passing in response to the fact that we did get downgraded on John Key’s watch, the first time since 1998.

Tags: , ,
Filed under: economy, parliament
39 Comments

Keeping the ratings agencies happy

Posted by on October 3rd, 2011

Governments quite often set the criteria by which they want their policies or budgets to be judged. In his Budget speech in May this year John Key was very clear about how he judged his Budget to be a success- the accolades of Standard and Poor’s. So how should we judge the Government’s success, given the double downgrade?

Tags: , ,
Filed under: Budget, economy
24 Comments

S&P: National on negative watch (part II)

Posted by on November 23rd, 2010

Part one of this post showed that S&P placed NZ on negative watch because of the savings gap, the huge (mainly private) net international debt and our under-diversified export profile (and consequent vulnerability).  It all adds up to lenders perceiving potentially greater risks and seeking compensation through higher interest rates.

How did the Government react to the news?  Did it front the issues and explain its “plan”?  Not in your life.

Alex Tarrant at interest.co.nz did a great job of covering John Key’s rather bizarre, meandering post-Cabinet press conference here.  Interest.co.nz’s coverage if the political debate is here.

Mr Key manages to contradict himself three ways in two paragraphs:

“Nothing has changed from our point of view, in fact if anything, our position looks stronger from our point of view (really?)…

We accept that we’ve had to take the earthquake on our balance sheet, accept tax revenues have been a bit weaker this year than we had anticipated…(corporate was 22.4% below 2010 forecasts, gst 15.8% below!)”

So… nothing has changed, we are stronger, but we are weaker.  Classic.   He must have been eyeballing three different journos and guessing they wanted three different answers, so why not try to please all of them at once?

The coup de grace is his attempt to pass it all off as Ireland’s fault.  True, the Irish are in a bit of a bog, but lets assume S & P can tell the difference between the land of the long white cloud and the emerald isle. 

Back in the real world, one thing is for sure, S&P won’t be amused if Messrs Key and English try to talk their way out rather than addressing the fundamental issues: how about trying to grow savings, diversify and lift exports, and reduce private international debt?  Who knows, they could even turn it into a plan?

Tags: , , , ,
Filed under: bank, business, economic, economy, international, Investment, monetary policy, Tax, Uncategorized
37 Comments

S&P: National on negative watch (part I)

Posted by on November 23rd, 2010

National’s counter-spin on yesterday’s placement by Standard and Poor’s of New Zealand’s sovereign credit rating on negative watch shows increasing desperation, the latest of a torrent of bad economic news.  I comment in two parts: the announcement and the counter-spin.

First the announcement’s overview:

  • “We perceive New Zealand’s projected widening external imbalances and the country’s weakened fiscal flexibility as increasing risk to the sovereign.
  • New Zealand’s vulnerability to external shocks, stemming from its open and relatively undiversified economy, also raises risks to the country’s economic recovery and credit quality.”

The S&P Report’s rationale makes the drivers even clearer:

  • widening external imbalances
  • weakened fiscal position
  • under-diversified economy
  • high external liabilities
  • a return to high current account deficits averaging 5.9% of GDP over the next three years.
  • and crucially, that “net external liabilities … predominantly reflect dependance by households on foreign capital to fund consumption and property investments”

In other words: New Zealand does not save enough, it has too much private debt, and that debt was used to fund the wrong things (property speculation not real business investment).  New Zealand’s exports are under-diversified and New Zealand will continue structural bleeding on our external accounts after the immediate recession.

The logical repsonse to these problems should be;

  • strong action to close the savings deficit (if possible by building good household saving behaviour)
  • diversify and increase exports (presumably moving beyond a narrow range of bulk commodities)
  • managing the fiscal position to encourage sustainable growth, employment and healthy tax revenues without blowing the fiscal deficit.
  • ensuring monetary policy supports the direction of reform rather than acting against it.

It obviously should NOT include:

  • borrowing more for tax cuts to upper income earners that neither create powerful stimulus nor correct the underlying imbalances
  • reinforcing exisitng bulk commodity exports while reducing investment in innovation and R&D to divesify and add value to the export base
  • cutting back Kiwisaver; cancelling prefunding for the NZ Super Fund; and taking two years to set up a Savings Working Group (and even then proscribing a range of strong policy options)
  • pretending monetary settings are ideal when exporters face extreme currency volatility

Bill English and John Key declared S&P lifting their previous negative outlook as a” verdict’ on Budget 2009.

They should be straight-up enough to accept that S&P has now reversed its verdict.

After 18 months of National Government policies National can have only itself to blame.

In part II of this post we’ll check whther their rhetoric matches this reality.

Tags: , , , , ,
Filed under: bank, Budget, business, debt, economic, economy, finance, international, Investment, IRD, monetary policy, Tax
15 Comments

Standard and Poors say Key English policies gone from stable to negative

Posted by on November 22nd, 2010

While it is great that the $NZ has dropped a cent the news that our borrowing costs look like going up is bad news.

This is on the back of  Standard and Poors putting us on negative watch.

Further confirmation that international agencies understand that the Key/English government has no plan and that they have been fiddling as the  current account deficit balloons.

Their decision to cut Kiwisaver and to target the tax cuts to their high income mates have made the situation worse than doing nothing would have.

This is now recognised by the credit agencies – Kiwis will too over time.

Tags:
Filed under: economy
31 Comments