web analytics
The Standard
Advertising

Labours fiscal plan – ring fencing

Written By: - Date published: 5:24 pm, July 5th, 2014 - 14 comments
Categories: budget 2014, Economy, labour, same old national - Tags: ,

I have spent a large chunk of the this week digging my way into Labour’s fiscal plan after the Liu smear collapsed. I think that the fiscal plan is a work of art, and very classy art at that. Of course you have to read it closely and look at what it is intended to do.

Brian Fallow, economics editor at the Herald seems to like it as well. His analysis is a lot better than mine, so read that first. I’ll quote some interesting bits and add some commentary.

But first the boring bit. Labour and National are going to do roughly the same surplus and debt levels via different mechanisms. Labour will wind up with more debt, but also more assets than National would.

nz core debt as a percent of GDP - labour fiscal plan

The plan balances between doing the things that have to be done for the long-term good of society with the need to not make the business community to go apeshit with shock the way that they did in 2000. Not that they needed to then, and definitely not now.

Fallow on Labour and  National budgets

There are important differences, of course, but the similarities are striking.

Both are committed to running surpluses and paying down debt. Over the three years 2015/16 to 2017/18 inclusive they both forecast operating surpluses which are almost identical.

The debt target Labour focuses on is net debt including the assets of the New Zealand Superannuation Fund, to which it would resume contributions four years earlier than National.

So it borrows more but has a corresponding increase on the asset side of the Crown’s balance sheet.

This measure of net debt would fall from 15 per cent of gross domestic product now to 12.1 per cent in 2017/18 and 3 per cent three years later, compared with 11.8 per cent and 3.7 per cent projected in Budget 2014.

14 comments on “Labours fiscal plan – ring fencing”

  1. mikesh 1

    The necessity of reducing debt seems to need clarification. For public works and infrastructure, borrowing, in order to spread the costs (repayments and interest) over the many generations of taxpayer who will benefit from that infrastructure, seems reasonable.

    Similarly, the focus of both parties on reducing deficits seems misplaced as they don’t have to borrow in order to run deficits. Thjey can simply create the money they need and, if necessary, use the tax system to avoid inflation.

    • Colonial Viper 1.1

      Hey mikesh,

      There has to be a bit of caution IMO in that past assumptions of regular and significant real economic growth (3% + p.a.) which does allow interest bearing debt to be reliably paid back are probably over.

      Thjey can simply create the money they need and, if necessary, use the tax system to avoid inflation.

      Yes. Or compulsory savings as another vehicle – which is a good concept by Labour. (Shame its directing money to Wall St gamblers and private financiers though).

      You don’t have to raise interest rates on debt and increase unemployment to avoid excess inflation.

      • mikesh 1.1.1

        I think a time is coming when the main political divide will be between those who want growth and those who want sustainability. Herman Daly, eco-economist and former World Bank economist, believes that the reason the 1933 Chicago plan was not adopted was because it insisted on getting rid of fractional reserve banking, and it was thought that this would hamper growth. National and Labour both seem to be pro-growth, which seems to explain the similarity between the budget and Labour’s alternative.

    • Draco T Bastard 1.2

      For public works and infrastructure, borrowing, in order to spread the costs (repayments and interest) over the many generations of taxpayer who will benefit from that infrastructure, seems reasonable.

      But happens to be physically impossible and is thus totally unreasonable.

      Similarly, the focus of both parties on reducing deficits seems misplaced as they don’t have to borrow in order to run deficits. Thjey can simply create the money they need and, if necessary, use the tax system to avoid inflation.

      Correct. So why don’t they? Why do so many people say that they can’t do what can actually be done?

      The answer comes down to one reason: The rich won’t like it as it will remove the power that they have at the moment that their wealth gives them.

      • mikesh 1.2.1

        “But happens to be physically impossible and is thus totally unreasonable.”

        Maybe. But National seems to have chalked up 50 billion doallars worth of debt in any case.

        • Draco T Bastard 1.2.1.1

          Yes. It’s part of the delusion that is our monetary system. A delusion that is used to take our wealth from us.

  2. George 2

    the need to not make the business community to go apeshit with shock the way that they did in 2000.

    That’s not a need, it’s a nice to have.

    • George 2.1

      Good policy though. Spending in education and health is not simply nice to have.

  3. Colonial Viper 3

    All this long term budget planning takes into account the end of affordable fossil fuels in 25 years or so, right? Right? :shock:

  4. finbar 4

    Johnny and his tight five,will for sure leave debt of $70 billion,if lost this time round.God help the other billions given another round.More care says,no more of this debts freinds usury,more care says enought.Socialist says,care can be managed.

  5. Michael 5

    Not much difference between Labour and National, IMHO. They are both committed to appeasing global capitalism and making the poorest and most vulnerable people pay the cost. There are alternatives, which a “real” Labour Party would adopt, defend through the campaign, and implement once elected.

  6. Jepenseque 6

    Hi, labours fiscal plan outlines 1 billion + in annual capital gains tax revenue in 5 years time. It says this is from berl modelling. What does this imply for house price growth under labour? I’ve emailed David parker but no reponse has come. Anyone know here?

  7. Tracey 7

    Thanks for this Lynn.

    Numbers are not my gig, not helped by numerical dyslexia so I appreciate the efforts of those who try to dig deeper.

Links to post

Important links

Recent Comments

Recent Posts

  • Taxpayers not suckers when it comes to casino lemon
    The Government should not be asking New Zealanders to stump up extra cash to bail out John Key and Steven Joyce’s dodgy SkyCity convention centre deal, Labour Leader Andrew Little says. "A deal is a deal is a deal. SkyCity… ...
    2 hours ago
  • Supreme Court decision an early Christmas present
    Women on low pay in New Zealand have been given an early Christmas present with yesterday’s decision by  the Supreme Court not to intervene in a decision of the Court of Appeal, says Labour's Spokesperson for Women's Affairs, Sue Moroney. … ...
    2 hours ago
  • Dunedin Hospital needs more than drip feed
    An ongoing and embarrassing pattern of major building leaks and equipment failures at Dunedin Public Hospital has been revealed in papers released under the Official Information Act, Dunedin North MP David Clark says. “Documents released under the Official Information Act… ...
    1 day ago
  • Dunedin Hospital needs more than drip feed
    An ongoing and embarrassing pattern of major building leaks and equipment failures at Dunedin Public Hospital has been revealed in papers released under the Official Information Act, Dunedin North MP David Clark says. “Documents released under the Official Information Act… ...
    1 day ago
  • 17 too young for teens to be shown the door
    Laws which see young people under the care of CYFS abandoned once they turn 17 will mean at least a dozen young Kiwis will be left to fend for themselves over the December festive season, Labour’s Children’s spokesperson Jacinda  Ardern… ...
    1 day ago
  • 17 too young for teens to be shown the door
    Laws which see young people under the care of CYFS abandoned once they turn 17 will mean at least a dozen young Kiwis will be left to fend for themselves over the December festive season, Labour’s Children’s spokesperson Jacinda  Ardern… ...
    1 day ago
  • National’s albatross, taxpayers’ curse
    Government consideration of further corporate welfare hand-outs to SkyCity for its convention centre shows just how weak the original contract was, Labour’s Economic Development spokesperson David Clark says. “Taxpayers will be appalled to hear that on top of the humiliating… ...
    1 day ago
  • Recognizing Palestine: The European Parliament Votes
    Last week I wrote a blog drawing attention to Sweden’s formal recognition of the state of Palestine (the second Western state to do so after Iceland).  That move has created ripples throughout the international community. In recent months the parliaments… ...
    GreensBy Kennedy Graham MP
    4 days ago
  • Recognizing Palestine: The European Parliament Votes
    Last week I wrote a blog drawing attention to Sweden’s formal recognition of the state of Palestine (the second Western state to do so after Iceland).  That move has created ripples throughout the international community. In recent months the parliaments… ...
    GreensBy Kennedy Graham MP
    4 days ago
  • Recognizing Palestine: The European Parliament Votes
    Last week I wrote a blog drawing attention to Sweden’s formal recognition of the state of Palestine (the second Western state to do so after Iceland).  That move has created ripples throughout the international community. In recent months the parliaments… ...
    GreensBy Kennedy Graham MP
    4 days ago
  • Minister has work to do over Xmas
    Red flags raised in a multi-agency review into how Phillip Smith was able to flee the country highlight the inadequacies of those very same agencies not having red flags in place that would have notified them of his plans, says… ...
    4 days ago
  • Minister has work to do over Xmas
    Red flags raised in a multi-agency review into how Phillip Smith was able to flee the country highlight the inadequacies of those very same agencies not having red flags in place that would have notified them of his plans, says… ...
    4 days ago
  • Minister has work to do over Xmas
    Red flags raised in a multi-agency review into how Phillip Smith was able to flee the country highlight the inadequacies of those very same agencies not having red flags in place that would have notified them of his plans, says… ...
    4 days ago
  • Gerry Brownlee’s revolving airport door story
    A new report shows Gerry Brownlee is the latest Cabinet Minister to have contracted the infectious tell-porkies-until-you-are-caught disease, Labour’s Chief Whip Chris Hipkins says. “A Civil Aviation Report out today shows that despite being an extremely recognisable figure, Gerry Brownlee… ...
    4 days ago
  • Govt spend on transport out of step with reality
    The National Government is planning to allocate ever increasing amounts of taxpayer funding to build expensive new motorways despite record numbers of New Zealanders flocking to buses and trains, said the Green Party. The Government released its Government Policy Statement… ...
    GreensBy Julie Anne Genter MP
    5 days ago
  • Govt spend on transport out of step with reality
    The National Government is planning to allocate ever increasing amounts of taxpayer funding to build expensive new motorways despite record numbers of New Zealanders flocking to buses and trains, said the Green Party. The Government released its Government Policy Statement… ...
    GreensBy Julie Anne Genter MP
    5 days ago
  • Solar homes stymied by Govt inaction
    Government inaction is allowing the big power companies to discourage the nascent solar power sector, the Green Party said today. Green Party MP Gareth Hughes launched a petition today calling on the Government to empower the Electricity Authority to act… ...
    GreensBy Gareth Hughes MP
    5 days ago
  • Foreign buyers for iconic island must add value
    Labour will look very closely at any Overseas Investment Office application to purchase Pakatoa Island if it is not bought by a Kiwi, says Labour’s Land information Spokesperson Stuart Nash. “Pakatoa is an iconic island in the middle of Hauraki… ...
    5 days ago
  • Way opening for April Sun in Cuba
    The United States of America’s President’s historic announcement yesterday to restore diplomatic ties with Cuba should be applauded by the New Zealand Government. The announcement marks a turning point in more than five decades of hostility between the two countries… ...
    GreensBy Kennedy Graham MP
    5 days ago
  • Minister ducking for cover over ‘Diplomat Case’
    Apparently the Ministerial Inquiry into what now seems to be being referred to as ‘The Diplomat Case’ ( I have a few other names for it) has been completed and is in front of Foreign Affairs Minister McCully. Initial Reports seem to… ...
    GreensBy Jan Logie MP
    5 days ago
  • Energy users need answers on Vector share plans
    Energy Minister Simon Bridges needs to stop ducking for cover about whether or not the Government will support plans to nationalise and then privatise $2.1 billion of shares in the Auckland Electricity Consumer Trust, Labour's Energy spokesperson Stuart Nash says. “It… ...
    6 days ago
  • Turning up the heat on working conditions
    A “Jobs That Count” campaign has the full support of Labour, the party’s Labour Relations spokesperson Iain Lees-Galloway says. Organised by the Meat Workers Union, the campaign aims to put the spotlight on job insecurity in the meat processing industry. ...
    6 days ago
  • Biosecurity it’s everyone’s responsibility
    Biosecurity costs New Zealand millions of dollars in attempting pest eradication and much more in ongoing management of pests in farming, horticulture, beekeeping and conservation, as well as in our own backyards and recreation areas. More work must happen at… ...
    GreensBy Steffan Browning MP
    6 days ago
  • Is the Health Minister accountable to the public? He doesn’t seem to thin...
    Lately I’ve been involved in a sort of farcical standoff with the Health Minister, who seems to be under the illusion that I have no right to ask questions about conflicts involving Health Promotion Agency Board member Katherine Rich, and… ...
    GreensBy Kevin Hague MP
    1 week ago
  • Irresponsible tax cuts lead to seventh successive deficit
    National's borrowing to pay for cutting the top tax rate was irresponsible and will likely lead to a seventh successive deficit, the Green Party said today. Treasury have forecast a $572 million deficit this year in its Half Year Economic… ...
    GreensBy Russel Norman MP
    1 week ago
  • Heartfelt sympathy for Sydneysiders
    The Labour Party has offered its heartfelt sympathy to the people of Sydney after the hostage situation in the city, says Labour’s Acting leader Grant Robertson.  “Our thoughts are with all those who went through this horrific and traumatic experience. ...
    1 week ago
  • Farewell at Phillipstown
    Last Wednesday, I attended the farewell for Tony Simpson, Principal of Phillipstown School. It was a very emotional event where many of us in the large crowd shed tears. Bagpipes and tiny tamariki performing kapahaka brought the house down and… ...
    GreensBy Catherine Delahunty MP
    1 week ago
  • The CIA Torture Report
    Earlier this week, the United States Select Committee on Intelligence released the Committee Study of the Central Intelligence Agency’s Detention and Interrogation Program.  The report, which was five years in the making, looked into the CIA’s interrogation techniques from 2001… ...
    GreensBy Kennedy Graham MP
    1 week ago
  • Haere Rā 2014
    We’ve almost reached the end of the Parliamentary year so I wanted to take a moment to reflect on some of my highlights of the term in this blog post. It’s been an absolutely hectic year juggling an election campaign… ...
    GreensBy Gareth Hughes MP
    2 weeks ago
  • NZ should formally recognise Palestine
    New Zealand should follow the lead of Sweden, and now recognise Palestine as a separate state On 30 October, Sweden’s new government formally recognised the state of Palestine, only the second Western country to do so, after Iceland. Down here… ...
    GreensBy Kennedy Graham MP
    2 weeks ago

Public service advertisements by The Standard

Current CO2 level in the atmosphere