The Pre-election Fiscal Update projects that gross debt will rise from 17.4% today to 24.3% of GDP in five years. Fortunately, we are facing these tough economic times starting from a solid position due the the Government’s policy of running surpluses and paying down debt, rather than slashing taxes. 24.3% debt is right at the upper edge of even National’s comfort zone but it won’t be disastrous. We shouldn’t choose to increase our debt to such a level but we can deal with it when economic conditions force it on us.
The same goes for unemployment. It is projected to rise to 5% but the rise is coming of a very low base and, because low unemployment is self-reinforcing, the rise will not be as bad as it has been during other economic crises.
These are the rainy days. Fortunately, we’ve acted wisely during the good times. We face the storm in much better condition than countries like Australia who allowed their banks to become exposed to risk on the international credit market, run higher unemployment policies, and undercut their tax base.
“We face the storm in much better condition than countries like Australia who allowed their banks to become exposed to risk on the international credit market, run higher unemployment policies, and undercut their tax base.”
Sorry to be so r0b with you - but have you got a link for that ?
Sorry to be so r0b with you - but have you got a link for that ?
You say that like it’s a bad thing!
I don’t have a link for SP’s claims, but I have some standard links re the economy being well positioned for the current crisis. See for example this: Treasury summary:
Or how about Reserve Bank Governor Allan Bollard in January this year:
Though it is very early days even new policies like KiwiSaver are starting to show their potential in this respect:
Labour led governments have been good managers of the economy (thanks Dr Cullen!).
Ok, so it’s raining ? Are there any tinned nuts on the shelf or are they are in Wellington ? Do we at least have any Wellington boots ? Perhaps David Parker might have some ideas ?
HS. we are well-positioned, some other countries including Australia are not.. surely you’ve heard about their bank issues and how they’re having to dip into their fiscal reserves to try to pump up their economy which is falling fast by contrast, our economy is recovering.
He he - no r0b it’s not a bad thing to ask for the data behind opinion.
Interesting piece here in the SMH where it’s argued that it’s a multifaceted bubble that’s deflating.
http://www.smh.com.au
here
Steve P.
Dead cats do bounce - don’t be folled simply because some twat who is outside of his comfort zone tells you it’s all going to be OK if you just vote Labour for the magical 4th term where all will be glorious and propserous.
In some ways I actually hope Labour win - unlike the failed policies of the 90’s being blamed on National the Labour party might actually need to implement some hard-nose policies themselves to dig the country out of the mess they created.
[burt, I'm relying in the Treasury forecasts you irredeemable moron. SP]
Great spin boys. But we are pretty well stuffed for the next couple of years plus. It will be worse than this, the world changed dramatically in the past week, but we won’t accept this yet. We will be squeezed by big money as we are so small and they will be picky on where the money goes.
It will be even worse once the ETS kicks in as well, struggle street will be starvation street.
I suppose if un-employment goes up WINZ will hire more staff to cope with the increase.
The time is not right for reckless spending alright, he has been doing this for the past 9 years. What do you think of spending well over $500M more for the train set was then?
[lprent: You are still a boring troll - your comment looks like something that'd be easy to program, and I bet that I could make a JS emulation program have more wit and humour.
Did you copy and paste the lines from somewhere? How about coming back after you have learned something about economics? Or at the very least learn to write some lines that are interesting rather than simply mindless.]
burt: I take it you’ll be exhorting everyone you know to vote Labour, then?
L
Lew
I think I would need a few hundred thousand dollars to make a difference. Perhaps Labour can give me a blank cheque from the leaders fund and validate my spending if anyone finds out about it?
The means would justify the end…. again….
burt: Buying elections … hmmm, now, there’s an idea. Although I think the going rate is more like $50 per week
L
Steve P.
The Treasury statements were before the last round of “Hell on Wall St.”
Dr. Cullen has no idea what to do about all of this, except spend more and cut taxes…. How will that work ?
Since when have Treasury forecasts been anything but rubbish anyway.
While its clear there is a low to zero growth period coming up, didnt Treasury predict a much much less rosy picture over the last 3 years than was the case in the previous ‘prefu’.
Ill try to dig up the last election ‘forecast’ but I hope someone else will beat me too it.
Steve,
Did you go into the lock up in person?
How did you like the room it was in, I’m pretty sure those 2 floors (that can be seen in the stuff.co.nz photo) are the ones I spent a couple of months working. Unfortunatly I didn’t stay long enough to see it completed. Is it nice in there?
burt. what’s Key’s solution?
ghostwhowalks. I agree. I think the Treasury’s assumption that everything returns to normal in the medium term is dangerous.
The rainy day may have cometh but unfortunately Cullen has emptied the cupboard through his wasteful unproductive spending and inept management of the economy.
killingin. no i didn’t go. frankly, the budget lockup was a bit of a waste of time, especially when my net failed.
Steve P.
So have I got this correct, I’m an irredeemable moron for suggesting the economy is not recovering nicely yet you think the Treasury’s assumption that everything returns to normal in the medium term is dangerous.
Please explain?
[you're an irredeemable moron for claiming I was just accepting what you claimed was Cullen's make believe when my analysis is actually based on the official information. that's not at all incompatable with my also thinking that treasury tends to relay too heavily on norm assumptions in the medium term. i agree with treasury's shortterm projections and have no grounds on which to dispute them. SP]
The right wing morons blamed the high growth economy on the ‘world situation’.
Funny how when the world goes to hell in a handbasket quicker than you can say Ruth Richardson and its now labours fault.
However with banks failing in the US, UK, Germany etc , they are a lot lot worse off than we are, and even in Australia the Reserve Bank is borrowing , increasing Government debt, to fund private mortgages.
I think they might have run special flights on all the Kiwis wanting to return home in a hurry
gww,
The right wing morons blamed the high growth economy on the ‘world situation’.
Funny how when the world goes to hell in a handbasket quicker than you can say Ruth Richardson and its now labours fault.
The left-wing *morons* credited the high-growth economy on Labour’s savvy financial management.
Funny how when the world goes to hell in a handbasket quicker than you can say Karl Marx it’s now the “world situation” to blame.
it’s now the “world situation” to blame.
Ahh - Scribe - take a look around. It’s the worst financial crisis since the 1930s. $700 Billion bail out package which may or may not rescue the American banking system. NZ is not isolated from this crisis, all modern economies are intertwined.
You can thank Dr Cullen and his prudent management of the economy that we are going to get through this crisis in not too bad shape.
You think the Government has been wise with its money??????
They have wasted Millions on NZ on Air, welfare and treaty settlements.
What about Health, Education and infrastructure.
Oh hang on, thats not Labour base is it?
You think the Government has been wise with its money??????
Yes.
They have wasted Millions on NZ on Air, welfare and treaty settlements.
In what sense wasted?
What about Health, Education and infrastructure.
Prudent spending and good results.
Oh hang on, thats not Labour base is it?
Labour’s base is people.
It looks like to summarise, crown debt is expected to rise from 17.4% to 24.3%. Labour is planning a multi-billion dollar tax cut package, which will worsen the cash deficit position. It is therefore fair to say that Labour plans to borrow for tax cuts.
Is that not the same argument that Labour has been running for the last several months about National’s tax policy?
I don’t think the argument “National will borrow more for their tax cuts than Labour will for ours” is very catchy.
Aw, how cute Helen and the standard get all biblical in the same week.
Helen for suggesting relgion will save us from knife crime and the standard for alluding to the ark of cullen saving us from the floods of righteousness slewing evil capitalism from mother earth.
rainy..? Cloudburst.. well maybe not yet. Cometh more correct, as you say, Steve.
To Scribe and Darren Rickard I’d say see me and stick with me.. for the straighout answers you very obviously need.. (clk my name)
To others I’d promised a sort of kiwi blogwatch commentary thing.. picking out the constructive stuff. Outta time personally, but buddy ty picked up on it. Today two topics, tomorrow who knows.. here’s hoping you figure(or feature, whatever). Elsewhere stability is the big deal and that’s pretty certain and a good thing in enzed right now..
uh uh…the new zealand sucks gang are back. it must be hell walking round with so much hate inside!
“[burt, I'm relying in the Treasury forecasts you irredeemable moron. SP]”
SP, I see you’re still not above personal insults.
Why didn’t you just call him a catholic hater and wrecker? Seems to be par for the course with you.
Pretty weak, mate.
dean you are a imbecilic cretin..howzat. I have no compunction whatsoever in dishing it out where its due so suck it up fascist bludger.
Struggle Street = looooooooooool
I shouldn’t have called Burt an irredeemable moron, and I would appreciate it if everyone cut out the insults, but here’s the thing. I’m presenting actual arguments based on the official data. I’m only too happy to hear counter-points also based on serious arguments. But when people like Burt come from a position of ignorance and attack my work because they are unwilling or unable to understand what is being discussed, it occasionally can get on my nerves. If Burt can’t keep up he would be better off not commenting or not assuming he is right.
Brett “You think the Government has been wise with its money??????
They have wasted Millions on blah,blah and treaty settlements.”
WTF sounds like typical Tory dribble (hidden racial undertones)
Aside from the fact that assets are returned or $$$$ is given in recompence when it has been proven in Legal Court/Tribunal that the losses where unlawful and intolerable.(Don’t blame this Govt for doing what all previous Governments havent had the balls to do - right the wrong) and settle an old debt.
The organisations that are bequeathed all these so called wasted millions must be structured in a way that is transparent, organised and operated as a business, pay taxes back into govt coffers and if their business fails it all goes back into the system anyway.
Cut the crap cause you sound like youre full of it
“We face the storm in much better condition than countries like Australia who allowed their banks to become exposed to risk on the international credit market, run higher unemployment policies, and undercut their tax base.”
Australia is not in a recession.
We are.
[give the man an award. Yes, we are in recession and Australia is not yet but it is feeling the effects of the credit crisis much worse than we are. As I wrote (and it would be really awesome if you would bother to read) while our economy is recovering and projected to grow in the fourth quarter, Australia's situation is worsening into recession. SP]
Tim - in reply to your comments:
“It looks like to summarise, crown debt is expected to rise from 17.4% to 24.3%. Labour is planning a multi-billion dollar tax cut package, which will worsen the cash deficit position. It is therefore fair to say that Labour plans to borrow for tax cuts.”
Yes it does! Quite frankly we could have just squeaked through this crisis without borrowing if the present round of tax cuts hadn’t been introduced. We might even have had some money left over for some more important initiatives.
“Is that not the same argument that Labour has been running for the last several months about National’s tax policy?”
Yes it is - but just remember that National is promising even bigger and better tax cuts and more spending on prisons (about half a billion), and broadband (one and a half billion), and .. well we shall just have to wait and see. Do REALLY think that this is good a policy in the current world situation? Remember the cost of borrowing from overseas is going to be a LOT more expensive.
“I don’t think the argument “National will borrow more for their tax cuts than Labour will for ours” is very catchy.”
No its not. Do we really want these tax cuts and the billions of debt they will incur? It has taken this country 9 years to reduce the previous govt debt of $22 billion in 1999 to $2 billion in 2008.
I thought Cullen’s tax cuts were a stupid idea at the time, now we see the results of this kind of crap. Apart from that Cullen has done a good job.
I thought you`d be a bit more positive here, its not all bad news. Given our economic outlook the Maori seats will be safe for at least another 10-12 years as there will be no money for treaty settlements.
QtR
I agree entirely.
Govt’s can only do what the people let them. I believe the constant braying by the media etc for tax cuts has forced Cullen into this. The wff way is the much better approach it targets relief where it is needed most. But the vociferous dinkies etc who miss out on wff want even more. If your not elected - you can’t do anything about it. The country gets the govt it deserves in the end, and if the country doesn’t want to pay taxes - with all its encumbent pitfalls (and you know them as much as I) then that’s what the country will get.
Scoop now features links to Farrar and KiwiBlog.
http://www.scoop.co.nz
10.29 PM
6/10/09
[it has done so for a few months. They're in buisness together, along with Public Address - scoop media. Basically, scoop organises their advertising and skims a bit off the top. Bit of a sell out on scoop's part but there you go. SP]
Actually the piece I liked was from Paul Buchanan
Death Of Neoliberalism, From A New Zealand Angle
That was a much better piece than kiwiblogs crying over missing out on unneeded taxcuts
Macro said:
I appreciate your intellectual integrity Macro. That is the crux of the real debate we should be having on the economy macro: what is a prudent level of debt?
National’s argument for some time has been that New Zealand doesn’t have a debt problem: 17.4% of GDP is not a high level of debt. Key was promoting increasing debt by about 2% to fund infrastructure. The Labour Party would have had it, a couple of months ago, that this was reckless gambling on the New Zealand economy. They have today published the PREFU, forecasting debt to rise to 24.3% of GDP. That has pretty much killed Labour’s argument.
There are three things you can do when the government’s balance sheet is worsening: cut spending, increase taxes, or increase debt. Even 30% debt-to-GDP is very low by OECD standards. If you cut spending or increase taxes in a recession, you risk worsening the recession. If debt isn’t a problem, then you can maintain spending and revenue, and increase debt in the short term.
I don’t think debt is a problem in the short term. I think National would like to see a lower long-term spending track, and a higher long-term growth path. We’re not going to get the latter unless we significantly increase infrastructure spending. The only way to fund that higher growth path in the medium term is by increasing debt. I don’t have a problem with that.
macro: Just as an example, the current top search terms for this site are:-
The Standard, tax cuts calculator, tax cuts 2008
The first has been the long-term favourite, the latter ones kicked in big time last week.
Macro says”
Of course that’s true. If you ask even the most dedicated socialist if s/he wants to pay any more tax than is necessary, they’d answer no. The argument revolves around what’s necessary. But when a politician’s telling us what needs to be taken from our wage packets their answers can’t be trusted because (aside from PREFUs) we’re getting spun.
Yes there are Budgets, but Treasurer of the day can pretty much make them say what s/he wants them to. The PREFU is the closest we come to direct, unfiltered reporting from Treasury to the NZ public.
At times I’ve lived on the dole and at others I’ve owned a business and been fairly comfortable. Whenever the financial situation has changed I’ve sat down with my family and put all the cards on the table - the new income, the fixed expenses, and the variables.
Assuming there’s a surplus after fixed expenses everyone has a say in what should be spent, and how, and what should be saved. The kids have learned that if they go nuts when there’s a bit of extra cash, then the hard times will be really hard.
So if I can trust my children, why can’t the politicians trust us?
How many people would demand tax cuts if they really understood how their taxes were spent and had a say in it? Perhaps they might want a cut, but a lesser one than politicians think they need to promise to get elected. Perhaps they’d be happy with a reallocation of resources to things they feel matter. Perhaps they’d still want a large cut, as is their right. In PR parlance they’d call it “getting buy-in”.
Technology has evolved to the extent that we can now have this sort of national conversation, so there’s no excuse for not involving us more.
It’s our money, and it’s our country.
Surely someone from the Government has to come out swinging at this crap from Key?
Labour is responsible for the current down turn in the economy?
That is a mighty brave thing for an ex-Merrill Lynch man to say, when he has been awfully quiet about the rest of the problems of speculation on Wall Street.
The New Zealand markets have had some resiliency so far because in part of the availability of NZ capital through the savings schemes introuduced, and taken up in large numbers, by this Labour government.
Surely someone has to come out show this rubbish for what it is? Lame politicking, from someone who has married themselves to tax cuts on the speculative gamble that this will buy them the election, damn the circumstances.
If we had already taken the tax cuts and measures backed by finance spokesman Key at the last election how would we be sailing now?
“If we had already taken the tax cuts and measures backed by finance spokesman Key at the last election how would we be sailing now?”
Exactly.
Tim? What say you?
Goodness me, PB, it’s a bit early on a Tuesday morning to be nominated as the spokesperson for the Right.
I don’t know how we would be sailing now. Right now we are in recession. It is going to be deep. Australia is not in recession. It is safe to say that if I were living in Australia right now, I would not be living in an economic recession. I wouldn’t go so far as to say that if Don Brash were Prime Minister, we would not be in a recession, but I don’t know what his policy response would have been.
I am confident though that as John Armstrong says in this morning’s herald:
I think Armstrong is spot-on with that analysis.
I’ve just listened to the international financial news and right across Europe and the US governments are panicking and desperately blowing out debt forecasts to bailout their failing banks and markets. It seems pretty sweet here by comparison…
I agree Robinsod, the ongoing news from the US seems to be very, very messy right now. I don’t think we’re anywhere near immune from it though. About the only thing in our favour is that our banks (yes, the Australian-owned ones) are the safest banks in the world.
“About the only thing in our favour is that our banks (yes, the Australian-owned ones) are the safest banks in the world.”
According to standard and poors and we KNOW how good their track record is of late.
Lil ole NZ will play late catchup on this global recession, we dont lead demand we follow it.
The diminished size of the NZX also reduces our exposure. Which kinda makes a joke of the right’s frequent claims the damn thing needed “saving” by way of partial floats of SOEs…
I don’t follow that logic Robinsod. The SOE floats were about increasing private savings and investment in New Zealand assets. If there were more quality domestic assets for New Zealanders to put their private money into, they would have been more likely to invest in those high quality, local assets, rather than put their money into offshore funds and/or risky New Zealand asset classes.
Thanks Tim, I wasn’t nominating you for anything, just asking your opinion.
Not sure what Australia’s got to do with anything. You say that you don’t know what Brash would have done, and that’s true. But we do know what he campaigned on.
He thought that the surpluses we were running three years ago were theft, and that they should be payed back via tax cuts, and that we could have afforded to be running small deficits back then. Key was his finance spokesman.
You didn’t seem to address this aspect at all, for understandible reasons, prefering to think that Brash might’ve somehow made us Australia.
The SOE floats were about increasing private savings and investment in New Zealand assets.
What faith you have in rational economic individuals. All an asset float would have done is further expose productive New Zealand assets to the speculative and emotive vagaries of the market…
PB
Australia has had a raft of cutting tax cuts over several terms now - comparisons between countries with different economies and reliance on varying sectors makes all inter-country comparisons very difficult.
“He thought that the surpluses we were running three years ago were theft, and that they should be payed back via tax cuts, and that we could have afforded to be running small deficits back then. Key was his finance spokesman.”
Depends what really what National would have done with those surpluses - how much would have gone to fund infrastructure, how much would have been returned to the taxpayer - what would they have used it for what effect would that have had on the economy - who knows ?
Perhaps whoever’s in charge of the economy after the election can ring the Canadians and ask if they still want to drop 2 billion into the NZ economy for a 40% share of AIA Ltd - seems we’re going to need it rather badly.
sod
Talking of vagaries what’s going on with the liabilities under Kyoto.
http://www.treasury.govt.nz/government/liabilities/kyoto
hs, The US has also had tax cuts aplenty over the last decade and all their stats are looking worse than when Bush took office. I agree that these comparisons are hard, but I didn’t bring them up.
We do know what Brash campaigned on though. He said that Cullen was a thief for running surpluses and that they should be returned via tax cuts. We all know what this would have done to the NZ government books in hindsight. It’s about judgment. No comparisons with Australia are needed.
PB
In terms of the US - it’s a very simple combination of greed and stupidity that many commentators saw coming over a decade ago - it’s happened before it’ll happen again.
“I agree that these comparisons are hard, but I didn’t bring them up.”
Quickly followed by ……
“We do know what Brash campaigned on though. He said that Cullen was a thief for running surpluses and that they should be returned via tax cuts. We all know what this would have done to the NZ government books in hindsight. It’s about judgment. No comparisons with Australia are needed.”
This is very muddy thinking - we do not know what this would have done to the government books in hindsight unless you are assuming that Brash and his government would have embarked on exactly the same spending as the Labour led government of the day and that the money put back into the economy in the form of tax cuts would have had no effect.
Hey Y’all,
I really would like a “shit, trav told us this ooh, about 5 months ago and we told her she was nuts” right about now.
Now please watch money masters and money as debt
We don’t own anybody anything. It’s a rip off and a scam perpetrated by the banksters and a very good reason to throw John Key, Don Brash and their ilk out of this country. Nuff said.
By the way, the idjit who said that Oz was not in a recession should tell that to all the kiwi’s who are trying to find a job back here.
Hey Trav,
I’ll concede that you did tell us all about this 5 months ago.
I’ll also bet all the money (as debt) in my pockets against all the money (as debt) in your pockets that you made the same “cry-wolfist” claims six months ago… and 1 year ago… and 2 years before that…
That’s the beauty of shotgun doomsday predictions. Eventually you’re going to be right, but that doesn’t make you Nostradamus.
Cast your minds back, just one month….
Economy over the worst: Cullen
So who wants to say they trust this man to guide us through the rainy times ahead? He has no F$#king idea what he is doing.
[burt, it's you that has no idea what is going on. The indicators, including business confidence, is that our economy is picking up. But month ago, was before the wall st meltdown and Cullen's opinion has changed since then. National's plans have not changed. SP]
What’s the difference between an investment banker and a pigeon?
A pigeon can still put a deposit on a Porsche.
Oh, it me that has no idea…. Well just as well I’m not the Finance Minister then isn’t it - but really Steve, it’s not about me.
Do you think that Dr. Cullen actually thought (just one month back) that the worst was over or do you think he was just making stuff up as he went along to make people think that Labour are prudent managers of the economy?
These are the rainy days. Fortunately, we’ve acted wisely during the good times. We face the storm in much better condition than countries like Australia who allowed their banks to become exposed to risk on the international credit market, run higher unemployment policies, and undercut their tax base.
Mr. Pierson or whoever you are, that must be the most ridiculous statement of 2008, and therefore I award you the Nobel Prize of Economics with emphasis on Stupidity.
Only a Labour supporter could write that in defense of a pathetih Dr. Cullen.
noxxano said “Fortunately, we?ve acted wisely during the good times”
Really? So buying a train set at way over value just when the country clearly couldn’t afford it was acting wisely?
The problem with having a history teacher running the economy is that he can tell you everything about what happened yesterday but wouldn’t have a clue about what to do about tomorrow.
When Cullen said he was out of his comfort zone that was code for “way out of his depth and scared totally shitless”.
NZ’s heart services lagging behind
OK, so the money spent on health over the last 9 years has achieved a negative result. What else has Labour made a pudding of?
captcha: bondi bridges - Oh yes.
[lprent: Now that is silly of you. Tell me what is a primary characteristic of an aging population.... They tend to have more people wanting health services. That means that the health budget has to spread further so just increasing spending doesn't mean that the dollar per person wanting services goes up. The solution - raise taxes to pay for more spending.]
lprent
“The solution - raise taxes to pay for more spending”
That is not what Labour are doing ? Do Labour not understand this as well as you?
Really? So buying a train set at way over value just when the country clearly couldn’t afford it was acting wisely?
Troll speak - calling it a “train set” is a pretty good indicator of the quality of your “thinking”. Governments are supposed to invest in infrastructure, remember? And it doesn’t get much more fundamental than rail infrastructure, especially as we start to ponder a low emissions future.
The problem with having a history teacher
More troll speak (Key is an accountant eh?). Dr Cullen has a PhD in Social and Economic History, and has been Finance Minister for 9 years.
When Cullen said he was out of his comfort zone that was code for “way out of his depth and scared totally shitless”.
Or, possibly, he meant that he was out of his comfort zone.
r0b said “Governments are supposed to invest in infrastructure, remember?”
No problems with investing in infrastructure. What I do have a problem with is paying way above the odds for the assets. Even Cullen at the time admitted he had paid a premium for it. For him to admit that suggests, as some commentators suggest, that he had paid hundreds of millions too much.
“Dr Cullen has a PhD in Social and Economic History,”
Exactly my point.
“Or, possibly, he meant that he was out of his comfort zone.”
No, I think my description is better. He has only known bountiful economic times. I think he would definitely have been looking at the future with fear and trepidation.
r0b, don’t be so sensitive about the terse language. Afterall, a lot of people, including myself, are feeling pretty pissed off about the state of the accounts. I don’t think blaming it all on market conditions really washes IMO.
SP said:
In my haste this morning I didn’t read this, and agree with noxxano that it is absolute nonsense. New Zealand is in recession. Australia isn’t. New Zealand banks are owned by Australian banks, which happen to be the safest in the world, due in a very large part to a mixture of a very strong economy, very large savings records, and sound fiscal management.
We will be facing much tougher times in New Zealand. If our banks weren’t Australian-owned, we would be in much more trouble.
No problems with investing in infrastructure.
Pleased to hear it.
What I do have a problem with is paying way above the odds for the assets. Even Cullen at the time admitted he had paid a premium for it.
Do you have a reference for Cullen’s comment? I’d be interested to see it.
“Dr Cullen has a PhD in Social and Economic History,”
Exactly my point.
So we can describe Key as an accountant then?
r0b, don’t be so sensitive about the terse language.
I have no problem with terse language, been known to be terse myself. But there are certain phrases which are just cut and paste KiwiBlog right troll speak - “train set”, “history teacher” - if you have serious points to make you don’t do yourself any favours with troll speak.
I don’t think blaming it all on market conditions really washes IMO
Why not? It would have been a great deal worse without Cullen’s prudent management - I won’t repeat it all but see the second comment in the thread.
burt: Sorry that last should have been as a message rather than a note (I was rushed for time before a meeting).
Labour does understand this. They have already massively increased spending on health and have more still in the budget. However the political reality is that the Nat’s have been politically irresponsible for their short-term electoral advantage. They’ve been pushing major tax-cuts into public perception (because it is frankly their only really popular policy platform). Of course they don’t bother to detail the ongoing costs of doing that.
Cullens ‘tax-cuts’ are effectively just removing accumulated fiscal drag (and I’d love a way of doing that as a routine system rather than as ‘taxcuts’). Much of the money from the slow increase in taxes from fiscal drag has gone into dropping old Muldoon-related debt (finally) which is good because it also has dropped the interest payments out of the cost side.
Most of the increase in the revenue from reduced unemployment and interest payments, and a better tax-take from a growing economy has gone into preparing for a aging population in the future, eg Cullen fund, Kiwisaver, WFF (be nice to have young ones to help pay for it in 30 years), Health, and Education (be nice if the young ones are able to pay for it).
However it still isn’t enough. The super system is still not fully prefunded for the peak. Increased funding for health still isn’t keeping up with demands on the health system due to an aging population that lives longer.
Nationals usual solution is to say “Bugger all of that - lets put it into the pocket now and let productivity increases take care of the future”. That is fiscally irresponsible because to date they haven’t shown a single way that those productivity gains are going to happen (and if anyone mentions their broadband solution again I’ll have fun explaining again why it is a waste on money). They sound to me like used car salesmen - but I prefer AA reports because they’re MUCH more reliable.
The responsibility of government is to be fiscally prudent, not only for now, but also into the future generations. Cullen has been. English/Key looks like they just want to load debt on to a future smaller tax base.
I’d prefer to tax now to pay for it. After all the taxpayers now are going to be the pensioners who receive the benefit.
r0b said:
Google it, r0b. There are literally dozens of references for it. At the risk of sounding terse, I’m not: there are just too many references to the statement to list here.
Lynn,
Could we please have a policy that all right wing commenters who maliciously refer to Dr Cullen as a “failed history teacher” (or similar)…should be summarily banned as trolls.
The man was a lecturer in Economics History; a highly pertinent and valuable pre-requisite to the job as Minister of Finance.
By contrast Mr English has no discernable qualifications in Economics, and seems to be determined to repeat all the mistakes the Massey govt made in the Great Depression of the 1930’s.
[lprent: Isn't going to happen. However saying it - without any other points is a bloody good indicator of a troll.]
I think that’s over simplified but I get the point you’re making.
Assuming you’re talking about the decision to buy Australian residential mortgage‑backed securities, it is fair to say that this is about reducing the risks that the the housing bubble might burst. There’s plenty of NINJA (no income, no job or assests) mortgages in Australia that rightly cause concern but the big four trading banks don’t actually have lots of exposure to the credit crisis - I think ANZ’s $150M to Lehman’s was the highest single write-down/off (but I could be wrong).
However, unemployment in Australia is comparatively low - 4.1% for the year ending August 2008. Sure this is marginally higher than in NZ but small fluctuations shouldn’t be over-emphasised. Labour force participation overall is historically high but is projected to decline primarily due to shifting demographics.
I’d say the Australia economy is well positioned to see out this crisis but if you’re close to retirement, however, you’ve probably seen a fair chunk of asset value disappear which will be worrying.
And while you’re at it, let’s also ban anybody who refers to John Key as a “money market manipulator” or variations thereof. Alternatively, we could just choose not to take such expressions from either side seriously.
Actually Bill English does have an economics degree. He also spent some years working as a policy analyst in the Treasury. They seem like quite credible and discernable economics qualifications to me, if such qualifications are actually needed. He also spent several years as a Finance Minister.
I personally don’t think that previous economics backgrounds matter quite so much. I don’t care that Michael Cullen was an economic history lecturer. Almost the entire time that he has been Finance Minister, he hasn’t had to deal with an economic crisis. It is a pity that he will almost certainly be voted out of office before he gets to deal with it. That’s the true test of a great Finance Minister.
[lprent: Neither is going to happen. However saying either or equivalents - without any other points is a bloody good indicator of a troll.]
lprent
That sounds a lot like the good old cradle to the grave policies of yester-year. The only problem is that the pensioners of today were told repeatedly over the last 40 years that if they pay higher taxes “now” (over the last 40 years) they will be looked after in their retirement. Sadly though intergeneration theft occurs because dim-bulb interventionist can’t remember why they collected all that money and find new and exciting ways to spend it today in the interests of getting elected “NOW”.
I’m old enough to remember we have heard all of this before, perhaps you are not and that might be why you buy into the idealism of it (as I once did) ignoring the ‘heard all that before’ and the reality is that it is primarily BS. Feel good stuff that the govt have touted about but never delivered because sure the future is why we do this stuff but that gets thrown out the window when an election needs to be won. (The massive overspend to buy KiwiRail is a prime example)
Paul at 12:19pm: I think that’s a fair, sober and lucid explanation of the prospects for the Australian economy. The bottom-line is that Australia is forecast to withstand this crisis without facing a recession. New Zealand is already in recession.
The statement from SP that we are better placed in New Zealand to deal with the international crisis than Australia is just nonsense.
Actually Phil,
It was not a prediction. Nostradamus I am not.
It was reading 112 news papers a day and watching every video I could lay my hands on. It was reading Stiglitz, Whitney, Roubini to name a few. This system was doomed to fail from it’s inception in 1907.
I started to tell my in-laws and friends two years ago and all of them now have beautiful veggie patches. In fact last week I received an e-mail with photo’s of a proud friend with her first harvest. A young assistant of my husband sold his house just before it all went to pot and I can assure you he was very grateful for having followed up on my advise. He is renting cheap and has a veggie patch too.
Two other friends on the verge of buying houses recanted after I showed them what was going on in the world and they too are relieved to have followed up on my advise.
Some of them have completely gone of the grid as we have almost too, to ride out this storm.
But than they are people who know me and know that they can trust me and I show them the sites were I get my information from so they can make up their own minds as I do here too by the way.
What you are watching is the US going supernova and the worlds privately owned financial system is what’s causing it.
And I’ll give you another one for free.
Last week the US senate was threatened. If they refused to vote in favour of the bailout plan America would go under martial law
Based on that and the fact that US army troops called back from Iraq are training in the US (in total contravention of the Posse comitatus act) for crowd control, FEMA has build over 400 huge prison camps which are all manned already and the USA has been in a state of emergency since 911(funny how that day made it possible for Bush and his cronies to take just about all of America’s civil liberties away eh) I predict that America will be under martial law before the election date and there will be no elections. End game.
Just in case you’re wondering I’ve been telling friends that for the last 5 months and I sure as shit hope I’m wrong but it ain’t looking good.
r0b said “So we can describe Key as an accountant then?”
Look r0b, I’m sure that Michael Cullen is a very nice fellow, in his own smug sort of way. But he ain’t no business man, thats for sure. There is no way a Ron Briely or Bob Jones would have paid as much as Cullen did for Tranzrail. In fact, it was reported at the time from Australia that the Tranzrail directors were laughing all the way to the bank, not surprisingly. I saw another article at the time where Bob Jones commented on Tranzrail being an absolute dog.
Cullen’s problem was he wanted the deal at any cost. So that is what he paid. The only thing was it was our money he was using. It is a well known axiom that the party who has the power in a negotiation is the one that is willing to walk away from the deal. Clearly, this wasn’t Michael Cullen.
At least John Key has a sort of ruthlessness about him that comes from the hard knocks of doing business in the real world. I think
that is what the country needs right now.
The massive overspend to buy KiwiRail is a prime example
What massive overspend Burt? What was the market value of Tranz Rail, and how much too much did the Government pay? I’m interested in what you think the details are.
Travellerev I think you have demonstrated that by reading so much and influencing so many people that an economic meltdown is imminent, you have caused the housing crisis in New Zealand. It is that kind of doom and gloom took that is causing the housing market to collapse. If all of your friends and family who had sold their property to plant vegetable patches had just quietly stayed in their homes, then New Zealand wouldn’t be in the recession we are in today.
I’m sure you meant to do well, but you do seem to have caused a lot of economic misery. Remember the eighth law of economics: if you tell somebody often enough that something will happen, it will happen.
Cullen’s problem was he wanted the deal at any cost. So that is what he paid. The only thing was it was our money he was using.
I think that’s probably correct. But Cullen has a much bigger picture of “our money” than you (and the other right wing detractors) have. Here’s what he said about it in Hansard:
Looking at both sides of the equation helps to put things into perspective don’t you think?
At least John Key has a sort of ruthlessness about him that comes from the hard knocks of doing business in the real world. I think that is what the country needs right now
Interesting point of view, and not one that I agree with. Key has shown abundantly just how ruthless he can be with peoples’ livelihoods.
Tim, while you’re back, do you want to have a punt at Pascal’s Bookie’s question from earlier?
Y’see, Key said last night that after 9 years of Labour we’re going to have 10 of deficits (and blaming the former for the latter… Perhaps he’s just not that bright after all). The problem with that statement, of course, is that if we’d had 3 years of National to date, we’d have already have had 3 years of deficits, and already have sizeable debt.
So a deficit is bad if Labour causes it, according to Key (despite the fact that it was not ’caused’ by Labour but a forecast drop in GST take, Corp tax take and so on), but a National deficit is fine.
If you now add in the projected extra $7bn debt forecast, well, you’d have to say New Zealand is extremely lucky to have not had a National government since 2005.
rOb
Sorry rOb, I forgot that Labour=good and public rail = better and National would have had us pay more for a trip on the train becaus