Michael Cullen has released the latest economic and fiscal update, the one Key commented on in today’s papers but which he refused to reveal the details of to the public. Basically, it’s pretty bad news. How Key is responding or, rather, not responding to this first test is even worse news.
Since the Pre-election economic and fiscal update less than two months ago, the Treasury’s forecasts for economic growth in our top 20 trade partners have plummented - for example, next years’ projection has gone from 2.8% to just 1.8%. Commodity prices and export demand is expected to be hit significantly, leading to lower growth and a higher current account deficit. Unemployment is now predicted to hit 5.7% not 5.1% as in the PREFU and wage increases will be lower, perhaps below inflation. Lower tax revenue will see government debt blow out by another $5 billion on top of the so-called ‘decade of deficits’ projected in the PREFU.
The global financial crisis is not National/Act’s fault, just as it wasn’t the Labour-led government’s fault. But they do have a choice as to how they respond. National/Act’s plan seems to be to carry on as if nothing has happened, pushing through the same agenda that they announced months ago without modifications for changed economic situation. It’s worth noting that the cost of National’s tax package additional to Labour’s is about the same size as the increase in projected debt over the same period. In other words, National could prevent this debt blow out by cancelling its tax cuts for the rich. It won’t do so, of course. National should make the creation of useful jobs a priority, as Labour intended to do to keep benefit numbers and crime down, and income and tax revenue up. But it won’t do that, either.
We said it before the election and bears repeating now. It is not just the declared policies of a party that matter but their underlying ideology, the set of principles which shape their response to emerging issues. National might have presented that ‘Nice Mr Key’ facade and some appropriately moderate policies but underneath he is rightwinger leading a conservative party. His response already looks like being a typical conservative response - bury your head in the sand and hope everything turns out OK in the end. That is not the response we need right now.
Key’s ‘no worries, folks’ response to this latest update also makes me wonder if Key really has bitten off more than he can chew. Does he have the strength to disappoint his supporters when it is in the longer-term interests of New Zealand as a whole to do so? Does he have the leadership skills and courage to actively steer New Zealand through these difficult straits or will he grimly stick to the pre-laid course as the storm hits us? So far, he has tried to downplay the issue, he evidently hopes it will just go away. Well, it’s not just going to go away and if Mr Key is not up to the job of confronting it that is not just a problem for him, it is a problem for all of us.
“So far, he has tried to downplay the issue, he evidently hopes it will just go away.”
Can you provide a link to where he said this?
I’d very interested to know where this assumption comes from.
Well, we’ve got this thread, lambasting Key for doing the things he said he was going to do.
Meanwhile, we have yesterday’s thread saying Key better do everything he said he was going to do, otherwise he’s going to disappoint voters.
$1 each way, Steve
Steve
I’m glad you never marked any of my exam papers.
It’s a three hour exam, I’ve just read the instructions, and along you come and grab my script and start marking
Perhaps if he started making decisions you would criticize him for not the right to do so yet or even for trying to influence the Reserve Bank, god forbid!
j. look at today’s papers/
scribe. i want Key to do the sensible thing but that would mean breaking election promises and that would leave many people who voted for him pissed off, which was the point of yesterday’s post. that’s what happens when you over-promise, either you have to do stupid things to deliver or fail to deliver. it’s not my fault Key is in trouble either way, it’s his.
J - here’s an example or two
http://www.stuff.co.nz/vote08/4758996a28435.html
http://www.nbr.co.nz/article/treasury-paints-ugly-picture-economy-37760
I agree that Key and National over-promised - they did so to get into power which they are. Now they gotta carry the can.
John Key isn’t in trouble.Only you think he’s in trouble. You’re not exactly balanced, you are partisan just like those on the right are partisan. You still haven’t worked out how National won this election in the first place. And the man has been in power since Saturday and right now he is working through getting a coalition. And you expect him to be superman and do everything and anything.
if Labour had a chance to govern, we’d still be looking at weeks of negotiations. So in that sense its a blessing National can form a government and so swiftly too.
[lprent: We state that we're not 'balanced' in our About. Perhaps you should read it. Of course we are all partisan, even different authors here are partisan on different things (some of which I disagree with). This is a BLOG site - people express their opinions, but we're reasonably selective about who can write the blogs.
Comments are a different matter. The thing that the moderators really do is make damn sure that everyone can express their opinion, but in a manner that allows other people to do so as well. We don't like trolls and we get bored shitless moderating comments that look like a program could have made them, especially the ones designed to provoke flames.
Thats all in the Policy. The alternative is to have a conformance of skewed opinion such as shows in KB comments section.]
Daveski. to follow your analogy, perhaps now isn’t the best time to have someone doing the test who still has to learn the instructions.
anyway, Key has already said what his answers are.
if he had said ‘we’re working on solutions’ that would be a different matter, and I would be suggesting what those solution should be. but Key has said there is no need to change its existing answers despite the questions changing.
Steve,
Does Key get any slack from voters if he comes out and says “We can’t do X and Y because the books are $5 BILLION worse than I expected? I know I promised X and Y, but it’d be irresponsible to do that in this climate.”
How would the electorate respond? How would you respond?
captcha: property prudence
Surely now that they have the fiscal update it would be a time to formulate, modify or change any plans they had. Now then with the “huge” tax cuts they were promising before the election and the books looking as bad as they do what’s the next course of action. The options i see is a) go back on those cuts and have some fiscal prudence for the time being, which will annoy quite a few people, or, b) take a gamble and spend up large in an attempt to stimulate the economy; however with the books looking the way they do, there has to be some cuts to Kiwisaver, Kiwibank, the Health sector or, maybe even the police, this means there’s going to be some promises broken.
So either option is going to be unpopular and there’s going to be some very unhappy people.
Gc, does it actually matter whether or not we’re a balanced forum. Key has over promised - we didn’t do that by the way. The reality is Key has huge decisions to make; i hope he makes the most sensible decisions and they prove to work but until then i’m going to be watching very closely.
SP, you completely forget to mention that Cullen had this information BEFORE the election. No mention of that, and no criticism of that.
I guess when you own the media you can say what you want, huh?
Don’t worry, I won’t trouble you with my balanced views any longer, I ‘ll proactively ban myself from your bolg so that you can happily avoid dealing with annoying little things like facts.
Have a nice day,
Scribe, Key made many references to the economic downturn during the campaign together with pointed references to Labour wasting years of productivity, etc. The particular percentage points on the detailed analysis will be new to him - the broader issue should not be. Certainly not according to any adherents of the “Key understands money markets so will be a good PM” school.
Still avoiding individual responsibility? Care to respond to my question at http://www.thestandard.org.nz/cuts-three-of-the-same-kind/#comment-104421 ?
We need to address the economic problems really clearly, not with the apparent avoidance SP has pointed out and that you seem to be supporting.
Chess Player. the report came out on the Friday before the election at who knows what time of day. I don’t know if he could have got it out in time for the sixs on Friday but there’s no political news on election day and after that he is limited by having to basically do what the incoming government says - that rules doesn’t extend to releasing documents though and he has only done that after it became clear Key was trying to hide the scle of the problem form the public.
Scribe. I doubt he would be let off by the public even though it’s the right thing to do. like i say, that’s the problem with over-promising.
No this is The Standard so it should be a blog that focuses on left issues and left ideals. However, there comes a point when you need to step back and just give it tie. This is one of those. Another problem seems to be you lot think you represent everyone in this country. That simply is not true. Right now the average person is thinking. Good they went with Act but they also have the Maori party so they’re not extreme and this type of stuff. The average person isn’t going to worry right now. And most of the people who voted National are looking forward to those tax cuts. Of course you lot can choose to donate your tax cuts back to the government. But I don’t see that happening anytime soon.
And once again. Being this is a left blog with left ideas. Why not make blog posts in regards to winning back Auckland. Winning back the provinces which are rather dire for Labour now days. And if not addressed soon are going to become permanent National territory.
[Tane: It's not our job to tell Labour how to win electorates, and it's not our job to take orders from random punters over what we should be writing about.]
[lprent: read this section of the about]
Ginger - I’ve noticed the right start bitching about what the standard is not saying when they’re upset by what it does. Here’s the situation:
Key knew about the finance problem.
He lied about it.
He got caught.
He probably expected the figures wouldn’t come out until the December treasury report which is due mid-December. Coincidentally that’s silly season for news and this kind of thing doesn’t get a lot of traction.
This is typical Key - he’s tried to massage the story for long enough for it to become old news and not figure on people’s radar. It’s all about the “window dressing” in his world…
John Banks is using the financial crisis as an excuse for not doing he doesn’t want to do like public transport and clean water projects, and he also expects the voting public to be happy about it. I wonder if key will use it to get rid of the promises he didn’t really intend to make.
But good on Cullen for releasing the information. Why didn’t Key?
I see the hate filled rightwing news response team is still out in full force on the Stuff website. Lots of rabid anti labour stuff on the Goff response to the Maori/National deal. We need a similiar machine organised by the left. I think that National has done a very good job whipping up anti-Labour sentiment via the internet and the daily papers and it probably was a major factor in Labour losing the election.
EBP: “Don’t scare the horses” is the line, isn’t it?
Is Key able to release the information until he becomes sworn in? Also , why would Charles chauvel say at Backbenchers that Labour had left the accounts on good condition with plenty of money!!!
cocamc - I don’t know what Chauvel said, just what Farrar has relayed in his National Party blog. For all we know he may have been referring to low levels of government debt, which wouldn’t have happened if the Key/Brash tax cuts had come in in 2005.
Rosa - this has made my day
The machine is popular opinion. I think you will find the people spoke on Saturday. It’s not a machine, just like LP will tell you this is not a machine.
In the nicest possible way, stop blaming the media/machines/monsters for losing the election and look closer to home at the messages Labour gave, the campaign they ran, and the decisions they made.
Heck, it would have been a miracle if Labour had gained a fourth term because NZ has a very low boredom threshold. But stop looking to blame democracy in action - honestly, it’s not a good look for the left.
Chess Player - Key had to be an idiot if he didn’t think the economy was getting worse by the week - National should have adjusted their rhetoric appropriately. It wasn’t Cullen’s job to brief Key. Caveat emptor - Key knew what he was getting himself into.
And apparently Key has been told that the long term forecast is pretty dire. And still no game change from Key?
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10542881
Cocamc - Chauvel said this on the current episode of Backbenchers? He said those exact words or are you paraphrasing/reinterpreting…
Gc, Ok, you haven’t really replied to my point. John Keyzill - that’s my gangster name for him - can’t do everything he promised, this means - like i said previously - that he has some really difficult choices to make: pander to the core support or pander to the swing.
Anyway let’s look at the coalition. I think the coalition will work very well for National; however i think it could have a very serious negative affect on the Maori Party - this is something that worries me as i wonder how lop-sided the government will become without a Maori Party.
To finish, i am not so ideologically biased that i don’t hope National makes this country better and fairer for everyone. I hope this National/Act/UNF/Maori coalition proves to be the best government we’ve ever seen in NZ; however as a political junkie I don’t see this happening, also I don’t think this is a time to step back and let the government have carte blanche, this is a time to be vigilant and make sure Key makes the best decisions for NZ.
Tigger,
Please focus.
My comments were not about whether Key should have changed his message, which incidentally I think he should have.
My comments were addressed to SP, who knew damn well that Cullen had this information before the election, and deliberately chose not to mention that in his opening comments, thereby essentially being no better that the MSM that he is so fond of riling against.
I’ll leave it to Rave to chip in with a comment about ‘class struggle’ at this point,as he is apt to do when it is most irrelevant, as I have the dinner on the stove….
Helen used to say: “Under promise. Over deliver.” I suspect that John might have that back to front BUT
what better excuse in due course than to blame the ECONOMY stupid, for just cause to cancel or abandon promises. “We are prepared to make the hard decisions that Labour failed to do over the 9 long years…..”
He can do what he promised and he is doing it. He promised tax cuts. We’re getting it. He promised to invest in infrastructure this helps the economy and he will do that. He needs the full treasury reports which he doesn’t yet have and in December you will see a clear budget policy which will unveil everything he is going to do.
Labour inherited surpluses National is inheriting deficits. National has a hard road ahead of them but I think you will see New Zealand come out of this recession in a better shape than Labour could have done. Also Labour didn’t even have a plan to get us out of the recession. All they had was the same idea as National which was reveal a budgetary plan in December in the mini-budget statements that always come out in December after each election. End of story.
As for you Tane. I think you’re wrong. I never said tell Labour what to do in the electorates. But this is the area Labour lost on. Their inability to win back support in provinces and losing support in Auckland and the other cities. That is how Labour lost and no one here has even thought about that. That puts Labour in danger territory for 2011.
http://www.nbr.co.nz/article/treasury-paints-ugly-picture-economy-37760
The problem NZ is facing is a growth problem not a debt problem. Restricting the government spend will actually make the problem worse, not better. This will simply result in further contraction and a resulting downward spiral into depression.
The biggest issue is to make sure the spend is going into productive areas. Leaving more money in the hands of taxpayers is certainly an effective way of “spending” the finances.
Would anyone here recommend the opposite action; i.e. increasing taxes to cover the government position? If your answer is “no” you have gone a long way to answering your own question.
Ianmac, he could do that, but it still comes down to which set of voters does he stab in the back.
If he follows the roundtables advice and has a wee talk with Roger Douglas about ‘what must be done’ he sets himself up for a potential clusterfuck comprising of:
- Disenchanted angry centre voters that believed his centrist, pragmatic anti ACT campaign. Given the low turnout on Saturday, Key cannot lose those voters next time and win.
- an opposition that has already primed the secret agenda message and has it ready to blow
- a media that will run with that narrative because, it’s easy, already primed, and comes with supporting secret tapes, denials on camera, and the fact that this crisis is not a surprise like previous ones have been.
-an international response to the crisis that runs in the opposite direction. Don’t underestimate the power of this. If National cuts social spending at a time when other countries, whose books are in worse shape, are increasing it, that’s the same dynamic Cullen faced about tax cuts.
tsmithfield, I’d recommend canceling tax-cuts (including Labour’s) and using the money to fund more publicly-owned infrastructure and increase skills training allowances so that we can take advantage of the next upswing rather that topping out our productive capacity like we did over the last 9 years. Pumping 80% of your tax cut package into the top 30% of earners and then expecting it to “trickle down” is a stupid way of doing things.
National is confident it will be able to keep its election promises despite Treasury suggesting the outlook is deteriorating and more people might lose their jobs than was projected.
Does Key get any slack from voters if he comes out and says “We can’t do X and Y because the books are $5 BILLION worse than I expected? I know I promised X and Y, but it’d be irresponsible to do that in this climate.”
How would the electorate respond? How would you respond?
NO BACKING OUT!!!!!
There is the element of “don’t scare the horses at the time of a downturn because the loss in confidence makes it worse” ???? Therefore be discrete play the problems low Key but…..
By the way didn’t National fail to gain much in the Party vote even in some city electorates? It was the failure of Labour voters to act rather than National to gain at their expense. I think?
I guess this is why Key is in the driving seat, he doesn’t panic (or get outside of his comfort zone like Cullen was). He says it’s not armageddon. I trust him to make much better decisions than Steve Pierson might.
SP, if John Key would be justified in scrapping tax cuts for the rich because of the updated PREFU numbers, then would he also be justified in selling state assets because of the changed numbers?
Or is he only justified in breaking promises that you happen to agree with?
The best way is to keep with the tax cuts. They have to do that otherwise the electorate really would turn their back. Also with Act as a partner they just can’t get out of tax cuts.So tax cuts and do their eight billion dollar infrastructure plan. Short term that means higher deficits which would actually break their promise not to increase deficits. But really its a sacrifice that I think the electorate would be okay with.
Basically short term bigger deficits, perhaps put education and health expenditure back a year or two. Not sure how well that would go down. Get consumers spending again via the tax cuts. You really want taxpayers to save them. But we are in a recession so more spending would. Through infrastructure regions get some money spent. May ease the crisis but its still in trouble.
This could be spun by the left as being wrong wrong wrong but really they need to please their electorate and ease the crisis we’re in. Something Labour too would have needed to do. Its not pretty being in a crisis. But that is the cards National were given. I’d like to see a fiscal plan and I think we’ll see something in December.
But this was going to be a problem regardless of who was in office. But basically they need to keep the infrastructure and tax promise and everything else could potentially be postponed. But we’ll see what Key does November and December. We certainly won’t see anything till the coalition is signed up and we won’t see anything till Key returns from Apec. Apec is critical, his best chance to talk with other leaders and discuss what they’re doing in the economic crisis we are currently in.
Iammac - National increase its votes in the provinces from North to South. They won the party vote in Palmerston North (just). They also won the party vote in Invercargill and Nelson. Something they did not do in 2005. In Auckland their party vote increased on the North Shore, they won the party vote in West Auckland. South Auckland, Labour voters didn’t turn u in the numbers they did in 2005. Hamilton went blue and National did extremely well picking up numerous Hamilton voters. In Wellington they increased their party vote but still went Labour. Christchurch once again increased but still went Labour and finally Dunedin once again was red for Labour but National picked up votes there.
GC: “With Act as a parther they just can’t get out of tax cuts.”
What I don’t understand is how, with Act as a partner, they can get away with their spend package.
Timewarp: Perhaps they said to Act we’ll cut taxes but you have to let us keep spending. But really we don’t know. Act wants huge spending cuts. National has promised increased spending and yet making savings in Public Services. I don’t think we’ll know the details till the Policy Budget in December.
Come on all you righties you know that if Helen was still in power she would have solved this problem already. She would have stared into the cameras of the waiting media and without any doubt or lack of confidence told the New Zealand people, “There is no problem”.
Just look at the excellent leadership the Helen demonstrated over the past nine years and if you doubt just wait because you know Key is nothing more than a Money Trader.
[Now I think I've gotten the hang of posting on The Standard]
Gc, the problem I have isn’t with the tax cuts but where the cuts are actually going. I have a feeling you probably agree with the ‘trickle down’ theory; however the people that are truly going to feel the brunt of this recession are those earning under 30,000. The money going to those under that amount - poor people - still stimulates the economy, almost every dollar goes back into the economy in fact and it all filters back to the top. If I go and buy veges the money goes to the owner of the store, which pays for more product and employees wages, who in turn spend their wages buying food, entertainment - whatever - and the whole process happens again. Pumping 80% of your tax cut package into the top 30% of earners isn’t a magic fix to the economy, all it does is concentrate the wealth - and power - for those who already have disposable incomes. In order for the tax cuts to work those who receive the most benefit from the cuts need to spend almost every penny of their cuts to truly stimulate the economy otherwise it doesn’t go anywhere, and it looks more like the crumbs off the table rather than a trickle down.
GC:
Great recipe.
Cut taxes and increase spending.
= deficit and debt
Although we know ole Rog isn’t adverse to those!
Add in Vinsin’s very good comments relating to the other side of the equation.
Another labour govt comes to an end and another dose of scorched earth left behind for the grown ups to repair. You must all be very proud…
Oh yeah sorry bb, you know, about that um - international financial crisis and all that, yeah that was me, sorry. Well me and Steve Pierson and Dr Cullen. So yeah, oops, oh god this is so embarrassing…
Is that the international financial crisis that Cullen said was a US problem and would not affect us? And the underlying reasons for our own crisis is rooted in causes that pre date the credit crunch.. Why are we always broke when labour get punted?
This is like the party you have when mum and dad go away for the weekend and you promise to just have a couple of mates over.. Lo and behold they come home, the goldfish are dead, there are muddy footprints on mum and dads bedroom ceiling the carpet is wrecked and the neighbours don’t speak to you for six months.
The party is over.
Go to your room, the adults are fixing things.
Funny, others have said the same thing about the incoming govt, and that we’re going to have to clean up your mess when you leave just like last time.
Suppose it depends what you consider to be a mess.
What examples can you give of “scorched earth” that you adults are “fixing”?
Barnsleybill. Cullen was talking about our banking and the financial structure being quite sound. Confirmed by Don Brash. The Economy however is at risk and Cullen and others warned of the Economy gloom impending. ” Hence Jobs,Jobs, Jobs.”
gayon epsinner has been bleating all over teeveeone about it
wah wah wah
10 years of deficits for a start.
captcha.. fourskinner!
If you don’t like deficits why are you so willing to go with a National government that’s going to increase deficit and debt? Sounds like you’re not being so mature mr adult. Perhaps grandfather is confused by this scary world of inter-webs, game-stations, baggy pants and that hippity hop music made by those new kids on the blocks?
Outgoing finance minister Michael Cullen is already being accused of undermining the new government.
He has released figures showing the government books getting worse, but he did it without treasury knowing and when the economic forecasts hadn’t been completed.
you got a link for that Doug? Where you hear that?
Vinsin
http://tvnz.co.nz/view/page/1318360/2307936
ginger
emphasis mine.
I disagree, though I’m not an economist, so take thais for what it’s worth.
The idea behind counter cyclical spending is that the private sector spending has dried up. Therefore the government needs to provide the demand to keep the econony ticking over. Tax cuts that are diverted to savings are wasted. They are part of the problem. When times get tough, the individual, quite sensibly, cuts back on spending and reduces debt, but because everyone is doing this at the same time, the economy slows down due to the reduced spending.
That’s why the shape of the stimulus package is so important. In the US a short while ago they just wrote everyone a check. Which is stupid because most people just threw it at their credit card debt which was a very sensible thing for them to do as individuals, but meant that the stimulus gained for those tax payers dollars was close to zip.
Likewise if you cut taxes mostly for the better off, they will use it to reduce debt in higher proportion than the poorer citizens who will use it to live on. So the government gets better bang for it’s buck by stimulating demand from the bottom and getting money to those who are most likely to spend it.
It’s interesting to see lots of righties talking in Keynesian terms though. Funny how that happens. Back when the economy was running at full steam and Cullen was running down debt and preparing the government books to weather these storms the righties were all crying for tax cuts. Admit you were wrong any time you like fellas cause otherwise you can’t talk about needing tax cuts now for a stimulus. Them’s the rulz.
Tim Ellis is excluded ’cause he’s already explained that he just believes in tax cuts and it’s uncivil to fault a man’s religion, however stupid in theory and evil in practice.
“he has only done that after it became clear Key was trying to hide the scale of the problem from the public.”
What the? Firstly why would JK hide it as it’s the mess Labour left and he could have painted it that way.
Secondly even the Treasury have come out tiday and said it was surprised this old data was released and it not accurate now.
Losing must be hard but you need to suck it up boy and move on.
[why is the financial meltdown Labour's fault? And why is increasing debt going to make things better? Key did try to hide the statement, he refused to tell journalists the details. Treasury has not called the data old, it was only produced by them on Friday, they're saying there's more work being done on the figures. We can expect the figures to continue getting worse. Do yo think that will prod Key into changing any of his plans? SP]
I think tax cuts are vitally important for another reason.
Many businesses will really be struggling over the next few years and will not be able to afford much in the way of wage rises. Tax cuts are a way of making up for the stagnation in salary growth, especially as things get tougher.
The other thing is that tax cuts can actually have the counter-intuitive effect of increasing tax revenue through stimulating the economy and thereby generating more taxable income. Removing tax-cuts or increasing taxes in this environment I believe will end up in a downward spiral that will further reduce the tax base below the level generated through the tax-cut scenario. What a guy!!!
BTW Treasury is not at all impressed with Cullen releasing the financial data at this stage. Apparently there is Government bonds currently being generated and the release of the financial information at this stage could increase the cost of borrowing on these to the government (i.e. us). Therefore, some could regard Cullen as guilty of economic sabotage.
[it's not for Treasury to decide when elected officials may or may not release information. SP]
This crap could not be more lame. Not only did Cullen trivalise the transfer conventions by releasing these preliminary projections but you guys have seized on them as some kind of proof that National is wrong-headed. In fact, Cullen would have used these numbers to kill the 2009 tax cuts. He’s a complete loose cannon right now - and you guys are doing yourselves no lasting good by pretending that this error by Cullen is anything but just flailing. Hey, he’s a backbencher now. Get used to it.
[what 2009 tax cuts would he have cut? there are no 2009 cuts in the current legislation. Cullen is still Finance Minister he still gets to decide issues like releasing a report, he just has to follow the directions of National on major issues. Do you think the final figures are going to magically be heaps better? SP]
agresearch going to lay off 25 staff immediately
thats what I call progress
SP “it’s not for Treasury to decide when elected officials may or may not release information.”
Well according to English, Cullen had breached the convention that caretaker governments should consult the incoming government before making such a move. Not the only time in recent history that Labour has breached standing conventions, demonstrating their continuing high degree of arrogance and sense of entitlement.
Anyway, Cullen’s job is to act in the interest of New Zealanders, not in the interest of his own petty politics. Very petulant and immature IMO. Cost us all extra $ in the process.
It’s a theory that has some validity tsmithfield.
The concern I have is that the NZ economy in large part is vulnerable at the current time because it has been so consumer-driven. Encouraging consumption is not primarily what we need to do. If tax-cut money was saved (or used to reduce debt) by the general population, or invested by entrepreneurs, then it would have some long-term value. But recent history has shown that a lot of consumer cash goes into property and cars. And regardless, savings and other long-term strategies while needed won’t help the current circumstances.
I would suggest that at the bottom-end of the socio-economic scale, tax-cuts would be used just to maintain current levels of consumption at the increased costs. Probably zero sum net gain. At the other end the risk adverse will simply bank it (or buy bonds) and the risk-takers will purchase assets at bargain prices, often speculatively.
In the long-term export-led growth is required, but in the meantime some government stimulus appears appropriate.
Infrastructure investment seems the logical approach to me. You still get the flow-through effects you were suggesting from tax cuts - in fact probably more so as all the money is spent, and it creates demand through a supply chain. But you guarantee generation of long-term value from the cash if the infrastructure investment choices are considered and appropriate (ie not fibre to every premise). Whereas tax-cut based consumption may effectively be just another bubble (albeit one buried within a recession).
With John Key heading off to Apec don’t you think it would be wise for him to have a look at the books before he goes? I’ve got to say this is the lamest bullshit i’ve ever heard. How dishonest of someone to give the new government the books when they’re trying to race through a coalition so Key can be at Apec (i hope my sarcasm is coming through loud and clear here). Are you kidding me? Does anyone really think this is undermining the government, this is called briefing the government. If Keyzill wants to be Prime Minister at Apec then he needs to look at the books; otherwise Apec would be a waste of time. Does anyone not get that?
“Cullen’s job is to act in the interest of New Zealanders, not in the interest of his own petty politics” yes exactly, he could’ve held onto the books until after apec and made John look like a doosh - too late i fear - or he could do the best thing for the country and brief Key so he can start making some strategies and plans to get this economy up and running. Even if the figures are only drafts it’s a good way for Key to get a fuller understanding of what’s going on. So, sorry but all you people saying this is “arrogant” are dead wrong it’s called being prudent.
Vinsin “yes exactly, he could’ve held onto the books until after apec and made John look like a doosh”
No Vinsin, Treasury had already shown Key the same set of books that Cullen released. So, Cullen had no reason to do what he did other than for petty politics. No reason whatsoever.
tsf, No reason whatsoever. How about transparency? How about informing the population? How about greater government accountability? I’m sorry but there’s more practical reasons for releasing the papers rather than just “petty politics” or is this an example of the Labour conspiracy against John Key?
I’m not an economics expert either. And really you try looking up tax cuts and several economists will say several different things. Is it the best time to have tax cuts.Maybe or maybe not. Basically it rather depends if you swing to the right or left.
http://national.org.nz/files/2008/ECONOMY/Tax_Policy_Paper.pdf - National’s tax policy. Yes Higher incomes do receive more from tax cuts. But low income people do get a decent tax cut. But once again you either like tax cuts or you don’t Remember without the crisis higher incomes would have got a bigger tax cut. And one doesn’t know what Act’s plans are in regards to tax cuts. They may want the tax cuts to be bigger and high income earners to get more.
The other big thing is the infrastructure plan which National promised to speed up. I’m guessing there will be some announcement of a stimulus plan in December when the policy budget is announced.
Where I do agree with SP, that Key probably needed to say more. But right now Labour are still the caretakers. The Coalition still needs to be processed and a Cabinet needs to be decided. Further to that John Key needs to get to APEC. Basically many world leaders will be there so he needs to go.
In regards to Cullen breaking conventions. It is a trend that Labour did, such conventions are likely to continue to be broken by National. Not a good thing to see but one must remember they’re only conventions.
Agree with the conversation about growing exports. Its the only way to go, its the only way to increase productivity. But that area is long term. Labour should have done more in this area. Labour were sound in many areas but I think they allowed productivity levels to fall too much and they seemed to be enjoying the short term benefits for an ecomonic high without investing in the future.
For several years the economy was growing well. This was thanks to a good housing market, a lower dollar that increased exports. In turn commodity prices rose. These commodity prices rose and meant good returns for New Zealand businesses even as the dollar rose sharply. However, when commodity prices rise that means inevitably oil also rises. This combined with higher food commodity prices meant food prices domestically rose. That and the housing market caused high inflation meaning interest rates needed to go up. Eventually interest rates were too high and that caused the dollar to rise too far. Meaning exporters were struggling but the domestic market was held up thanks to the cheap prices for imports. Thus for the latter years of the economic high it was the domestic market and not exports benefiting. Also increased government expenditure also meant too much activity was public and not private. That doesn’t bode well.
Eventually interest rates were so high, incomes did not rise enough and housing so high.That it could no longer be sustained. This saw lower house prices, less money due to the increased price of food. The economy was starting to slow down. We probably could have soft-landed. However, then the problems in the United States emerged. Meaning whatever soft-landing New Zealand was going to have is now quickly turning into a hard-landing.
For all the negatives people say about the National Party. One thing they are rather well at. Is getting out of crises. The late 80s saw a massive stock market crash. In 1990 National gained office. And while they hurt many with the budgets from Ruth Richardson. National was able to slowly grow surpluses. Once again during the Asian crisis, National still in power was able to grow a surplus. (Though remember Shipley most stupidly cut Super).
Hopefully National is once again able to ride out an economic low, but this time without hurting people. There are still some of those hard righters. Notably Act and some National insiders. But I don’t feel John Key is one of those. And thus I’m hopeful and put trust in Key that he can get out of the mess short-term. And long-term improve our economy so the growth comes from exporting and not public and domestic growth.
As for what Labour would have done. Well we just don’t know. But the way I see. Yes there are some differences between Labour and National. One believes in more public goods, while the latter believes in letting private run things. One is a party for unions, the other for business. But really underneath it all. There isn’t much difference.
“In 1990 National gained office. And while they hurt many with the budgets from Ruth Richardson. National was able to slowly grow surpluses. Once again during the Asian crisis, National still in power was able to grow a surplus. (Though remember Shipley most stupidly cut Super).”
As you say, opinions differ. Many think that Richardson’s slashing of benefits and ‘market rents’ for state housing caused the recession to deepen. NZ was also hit harder by the Asian crisis than other affected economies. Other Nations tried other routes, with better results. NZ essentially missed the nineties boom and that is where our income disparities with Australia for example, really took off.
Labour were sound in many areas but I think they allowed productivity levels to fall too much and they seemed to be enjoying the short term benefits for an ecomonic high without investing in the future.
Not sure what you mean by this in concrete terms. Labour paid off massive amounts of debt, set up the Cullen fund and kiwisaver, is spending more on Education and research and so on. None of which is short term stuff in the way, that say, umm, tax cuts, is.
Productivity is something that the government doesn’t have a lot of control over as far as I understand it. What is needed is business investment, but kiwis seem to prefer dividends, boats, and houses, meh.
gc, please start using commas and punctuating your sentences more. I’m not bagging you as the comment has some interesting points in it, it’s just very hard to assimilate and understand the information with so many fragmented sentences.
“But really underneath it all. There isn’t much difference.” This is just one example of many.
“But the way I see.” is another, remember every sentence must have a subject, a noun and an action.
Anyways this is a link to a fairly good grammar site which you should check out.
http://chompchomp.com/menu.htm
Who, and when?
“The tax cuts will be north of $50 for those on the average wage”
captcha ‘afforded his’
Oh the irony
How do you do the italic?? is that those xthml codes I see just above where I’m typing this? I notice them but afraid to say I still don’t understand them lol.
Your first point - Richardson’s budget cuts did do severe damage i this regard. Thankfully by 1993 you saw a better National government and from there they were rather stable and able to slowly grow surpluses. Shipley was kinda mad. I always liked her but who cuts people’s super and expect people to be happy about it.
Second point - Yes Labour put in good work in regards to infrastructure spending, debt levels, the Cullen fund and Kiwisaver. As for Education and Healh. Both National in the nineties and Labour 1999-2008 both increased spending on health and education. There is a lot of bureaucracy and i don’t believe either spent well in these two areas. We seem to pump so much into health and yet it barely seems to improve. I think Cullen could have put in the tax cuts earlier and differently. Those on the left see tax cuts as benefiting the rich. Really with tax cuts, all get a slice but if you are able to earn more money you are going to be able to get a bigger tax cut. You also pay more tax in the first place. Labour I feel really missed the boat in delivering tax cuts and they should have done it where low income earners could benefit just as well as the higher income people. this would have been by slashing the thresholds for low income. They did some of this in 2008 and that was really thanks to National who pressed on them to do something about tax cuts.
Also while paying off debt is good. Labour should have done something to prevent the country facing 10 years of deficits. That can’t be blamed on the crisis and an area where Labour should have watched itself.
—
Labour was good in that their stable government and little intervention in the market probably pro-longed the economic boom.But arguably that much of the country’s growth was off the back of domestic spending and housing market meant long-term export industry didn’t grow as much as they could have. The boom happened because the dollar was very low, interest rates were low and commodity prices were rising. Labour didn’t make that happen but I’ll give them props for being a stable government which ultimately helped the economy.
Vinsin: Yes I was waiting for someone to comment on my grammar. Its more a matter of typing things out and not having a chance to read through it to check that its readable. Also difficult when you have four minutes or so to edit.
[lprent: for the tags try Here.
I'll try an experiment for the editing, shifting from 5 to 8 minutes. The reason that it was set at the level it was was because of the interesting effects of changing comments when other people were answering them. But I suspect most people will have figured all that out since I put them in.]
gc:
Something to remember about the 10 years of deficit. IIRC Treasury simply project out based on current economic circumstances. They do not (correctly, because it would be at least partly speculative) allow for cyclical factors. That is how, given the impact of the current global economic crisis, we went from forecasts of 10 years of surplus to 10 years of deficit. The forecasts are useful, and I’m not attempting to downplay the current problems, but it should be recognised that they do not factor in future cyclical growth as the global economy recovers.
What I would like to know from you is, how should Labour have avoided us facing these deficits?
It’s a genuine question - because we really need some solutions applied, and anything valid a year ago may have some validity now.
I really think you (and tsmithsfield) are pushing the tax cuts bandwagon a little far though. Thankfully debt has been retired over the last 9 years, so that deficits are not as painful as they would have been. Which is why Key can recklessly blow up the government level of spending and get away with it in the short-to-mid-term.
Ironically though, in the last 5 yrs or so there has been a mounting call for tax cuts and accusations that excess surpluses were being retained. It’s only that discipline that has us in some reasonable shape. The tax cut mantra has got up its own head of steam without any rationale behind it.
I do personally believe taxes should come down over the long-term. I also believe that fundamentally the only way that can sustainably happen while maintaing a certain level of services, particularly in a world where costs are increasing rapidly, is structural improvement in the economy and growth. At the moment growth is not happening - and a myopic view on personal tax is unhealthy as regardless of stimulus, etc it doesn’t change the economy structurally.
What I would like to know from you is, how should Labour have avoided us facing these deficits?
It’s a genuine question - because we really need some solutions applied, and anything valid a year ago may have some validity now.
Been more conservative in regards to spending. Yes I know that is not the way to answer this but I’m no economic expert. It just seems strange to me Cullen for years would smile with glee at how high the surpluses were and surplus forecasts looked good for years. Only for the latter two years for that to change. To answer your question. I can’t. I wish I knew more about economics worked, but the fact most economists don’t agree within themselves tells me that the average person can’t either.
That would also be like asking you if Labour was in government what within their policy outlines from the election would have helped to lessen the economic crisis. Could you answer that?
If you can more power to you. But these are difficult questions and thus difficult to answer.
This is speculative, but perhaps Cullen always intended to reduce tax once the fiscal position improved.
Goverment spending has been another mantra of this campaign without any substance or policy behind it. I would like to know GC: where should spending be reduced?
I know the likes of the hip-hop tour and Housing NZ Turangi retreats got headlines and set the notion of waste in the public psyche, and yes in the first respect at least this was wasted money, but those really are infintesimally meaningless amounts in the wider picture.
I am incredulous at the Nats’ statements on this area of spending. And I use the broad collective term deliberately, because during the campaign Key was the oracle for all policy; dead fish, road tolls and fat-handed Samoans to one side. But a number of National parliamentarians DID speak on Health, and hospital waiting lists. IIRC one middle-bencher said something a week or so back like “how hard will it be to call in the DHB CEO’s and ask them to review waiting lists?” If they do so, based on various public issuances they will be asking the CEO’s to reduce waiting lists, use existing resources, and cap if not reduce some spending. Meanwhile the CEO’s will point to the rising costs the entire economy has been subject to, and simultaneous wage pressures. Make no mistake this is a huge issue - both the broad media, and very specificallly National, have made comments about the need to retain our health professionals. But no policy on how to do that either.
All this broad sloganeering without considered policy detail that acknowledges the various logical dependencies is going to come seriously unstuck.
To answer your question. I don’t believe there is any government mechanism that given the environment will completely stop some economic decline and an increase in unemployment. However, referencing my comments above, the best approach I can see to limit these impacts would be to invest wisely in key and core infrastructure. This would have several effects: it would stimulate demand and employment during the recession, it would do so more sustainability than tax-cut fuelled consumption, it would deliver long-term structural benefits, and it would better position the economy for faster, larger growth on the other side of the cycle by utilising that infrastructure.
Labour actually had some worthwhile policy being developed around that very concept. Limited and imperfect, but headed in an appropriate direction in my opinion.
I also think some of the ‘SwanBelly’ recommendations from Messrs Skilling and Weldon are worthwhile of consideration. http://blog.nzx.com/wp-content/uploads/2008/11/swan-dive-or-belly-flop-versiontwo1.pdf. They also advocate infrastructure investment, and I’ve been a long-time believer in compulsory super saving despite the rejection at referedum in 1996(?). RIP, Winston Peters - that should have been your enduring legacy to the country.
Nice statement. Impressed that you’re able to talk about subject. As for cutting spending. Surely it needs to be long-term and cutting of waste. But not the headline stuff. And once again not the best way to reply.
Anyway you mention infrastructure spending. Now since National is now in office and then had a broad policy of spending six million dollars in infrastructure. Now I know you’re not very impressed with their broadband policy. But the other infrastructure spending surely is the right idea.
So it was wrong for Cullen to release the report eh? does that mean Key would have censored it?
I fully support him releasing it, as they said on the news, it underlines how things were right at the end of his time as minister of finance. These days people are quite willing to entirely re write history with a few clicks of a mouse, I hold absolutely no grudges against him for leaving this for use in objective comparison, when one day this might be possible.
Vinsin “No reason whatsoever. How about transparency? How about informing the population? How about greater government accountability? I’m sorry but there’s more practical reasons for releasing the papers rather than just “petty politics”
No, it was a totally irresponsible act of economic sabotage. Cullen doesn’t seem to care that his little act of pique is costing taxpayers more money. All I can say is I am glad he’ll be gone soon.
From the Dom Post: http://www.stuff.co.nz/vote08/4760329a28435.html
“Their release appears to have caused a stir in the Treasury - which immediately issued a statement saying it had not intended the documents to be made public.
One of the concerns appears to be that the information may have been market-sensitive, as it came out immediately after a government bond tender had closed.”
Mike
I’m not surprised JK wanted to hide the scale of the problem. he was only voted into power because Kiwi’s were bored with HK and MC and they had this strange notion that one of the people responsible for the financial Tsunami about to hit us was the right guy to fix the mess.
He could only get elected because the corporate and internationally owned mass media kept the Kiwi’s thoroughly zombified and ignorant of the extend of the collapse around the world and it’s connection to the Wall street hustler we now have elected in the highest office of the land.
I’m sure that he would really like to keep it that way for as long as possible and Cullen one last time should were his loyalty lies and that is with the New Zealand population.
When JK goes to the G20 next week, this is what he is going to come back with:
The announcement that to stabilise and reverse the depression heading our way we must give what ever financial independence we had left to submit to more financial control by an unelected, unaccountable foreign body who for our own good will regulate the international financial world.
It is known as the New World Order and it’s game over for our independent New Zealand.
The Wall street/City of London bankers will rule the world through their control of our money supplie and our democratically elected leaders will be, like in the US, no more than window dressing to keep the punters under the illusion that they still live in a Democracy.
Does JK feel bad about relinquishing the power vested in him by the dumbass Kiwi population? Are you kidding?
Why do you think he bought his Hawaii condo after he talked with his Banking buddies in London in October 2007. It’s when they gave him his orders and told him to prepare for an escape since it was all going to shit in the next couple of years.
tsmithfield
Read my previous comment.
Why are we not allowed to know what is going on with what is allegedly our money. If there is something to worry about do we not have the right to know since we have to elect our leaders based on how informed we are? Don’t we need to know how we got in this mess, who are responsible for we can keep them from powerful positions since they have shown us they are incompetent or perhaps worse, complicit in the biggest rip off of the working and middle class people the world over?
The Dominican post by the way is owned by Fairfax which is owned for 10 % by Murdoch. Nuff said.
I’ve had it up to here with pundits and journalists telling us that we don’t need to know important information because our “elected” leaders and the unelected, unaccountable international banking world know what is best for us and what’s more I really don’t understand people who agree with said pundits even though they are the ones getting screwed by these same assholes telling them they don’t need to know because they would panic.
Hell, if there is something to panic about I really think we all need to know because it’s our asses getting burned not Rich Prick’s and his banking mates.
Dont expect Key to do anything about the economy……hes going to be too busy flying around the world doing a meet and greet.
We should count ourselves lucky really that he will be keeping his hands off the day to day running of the country cause hes so not up to it.
NATIONAL = SLOGANS
Please stop telling lies travellerev. John Key was not responsible for this financial tsunami, any more than Helen Clark played a role in the holocaust. You know this is wrong, and I don’t know why you keep repeating it.
Calling New Zealanders “stupid” is not a good way to improve the way New Zealanders see you. This “New Zealanders suck” campaign you are running is q