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National: Irresponsible Economists and Liars

Written By: - Date published: 1:46 pm, June 10th, 2010 - 21 comments
Categories: budget 2010, tax - Tags: ,

National’s budget broke a number of economic promises. One that’s not been emphasised enough is their commitment to be fiscally neutral.

Labour got New Zealand to $0 net government debt, we actually had net financial assets for the first time. Now we are headed back into the red again and National is making it worse, not to create jobs to help ordinary Kiwis through the recession, but to fund tax cuts for their rich mates. Labour got in independent economists and have discovered that it is not just in the first year the government is more than $500 million short, by 2024 there is a $9 billion budget shortfall. The new taxes imposed (GST & rental property loophole closure) will not increase their value over the years in the same way as those cut (income and business taxes) would have. As they are also refusing to invest in the Cullen Fund once they are projected back into surplus in 2016, another lie, the baby-boomer superannuation hole just gets ever bigger.

With their GST rise (another broken promise…), tax cut for the rich, ACC levy rises, rent increases, additional Early Childcare Education costs, increased power and petrol prices from the ETS (flowing on to everything that’s transported – like food), this is a very inflationary budget.

And what does an inflationary budget mean: on Thursday Alan Bollard will have to start raising interest rates. And he’s going to have to keep raising them. So those renting will be hit by the closing of landlord’s tax loopholes, and those with mortgages will be hit by the increased interest rates. Everyone earning under $80-90K will be worse off next year after their housing costs are added to their GST, ACC and ETS costs.

Increased interest rates have another side effect too. Money will start to flow into New Zealand in the “carry trade” that ruined Iceland. The Japanese will prefer our high interest rates to their own at 1%, so they’ll put money in our banks. This raises the exchange rate, killing the exporters who we need to grow our economy. Some speculators are already talking about parity with the US dollar next year.

So the Government will make the vast majority of people worse off, and harm our exporters trying to grow us out of the pending superannuation debt problem that National is making worse. What to the future though, maybe the next generation can save us? The bright skilled workers coming out of our tertiary education institutions will have the ideas – except that 8500 (and counting) students won’t be coming out of those institutions as the government has frozen the dollar amount of funding for tertiary education. And cut ACE and the Training Incentive Allowance for those going back for a second chance. High-skill, high wage economy? Not with these jokers.

All this so those earning above $80k can enjoy tax cuts; those on $1 mill get $1000 a week, to be paid for by debt and hitting the most vulnerable. The old will suffer with meals on wheels cuts, home care slashed, having their pension rise attenuate over the next 2 years so they’ll have to pay the extra GST without extra income after that, and having resident withholding tax increased to 21%. The young have ECE cut, so no longer will there be an equal opportunity for all New Zealanders to start out on their good foot.

National aren’t creating a fair New Zealand, an economically or ecologically responsible New Zealand. The pay off? Their rich mates get richer, and we have less than 1% additional growth in 8 years time.

Bunji

21 comments on “National: Irresponsible Economists and Liars”

  1. ianmac 1

    Of course it could be deliberate. If cost of living goes up and the Government is short of finance, what better excuse to sell assets like Kiwirail, shift Super age entitlement out, user-pays unemployment benefit, part payment of hospital charges, limit DPB to a short time and lower the bar for entry of Maori to prison. Machivalian experts in there somewhere

    • jimmy 1.1

      There is just too many reasons for this government to run us into the ground, no doubt a little jealous of their Greek counterparts (the Greek version of the Tories that is). They would love nothing more than another recession.

      Another economic bump and were screwed, prudence would have been the logical move but hell its not like they are trying to prove that elected citizens can run an economy.

  2. seth 2

    Thats strange, because Labour were so fiscally irresponsible we ended up having to borrow $250 million a week. Thanks to policies such as their fcuking stupid vote buying interest free student loans policy and then buying the dog that is Kiwirail for 3 times what it was worth. This is not to mention getting 50% of all families in New Zealand dependent on government handouts/rebates/benefits in order to have children.

    And you call that fiscally responsibile? Please promise me you will never ever get a job where you are in charge of spending money or buying things.

    [lprent: Or it could be that the tax cuts were fiscally irresponsible… ]

      • Bored 2.1.1

        Nice comment Kaplan “I suggest you inject some reality into your life”. You will like most people probably say the same to me, but at the risk of Bored being boring here it is:

        * the only really good thing I see about what Labour did was to recognise the folly of debt and act upon it, to be commended.
        * the whole gammut of those tea leaf readers we call economists seem to believe in two things, the ability to have limitless growth on a limited planet AND the ability to create debt and pay the bill in the future.

        If we could grow continuously we could prop up this debt but it is really a Ponzi scheme, a pyramid underpinned by the use of non renewable resources. They happen to be running out, sort of stuffing up supply and demand graphs geared to constant growth.

        Boring and tedious I know, but the baliff will appear to collect the debt. Cant say we have not warned all and sundry, as Jeremiahs we will expect to be blamed aswell. So enjoy the party whilst it lasts, or go home early and make other arrangements.

    • Lanthanide 2.2

      Interest free student loans was blatant vote buying, but it is also damn good policy. I do think they tipped it a bit too far to the generous side, and I approve of Joyce’s $50/year fee for people with loans.

    • Sam 2.3

      In actual fact, interest free student loans was more from the good work done by NZUSA than it was Labour investing in our future.

      But whatever.

    • Draco T Bastard 2.4

      We ended up having to borrow $250m/week (which I believe is wrong but I’ll stick to your figures) because of tax cuts. Without those tax cuts then we wouldn’t have need to borrow. NACTs further tax cuts mean that we get to borrow even more putting us even further in to the red.

      BTW, Cullen didn’t want to put into place that tax cuts that he did but they were a hell of a lot more responsible than the ones that NACT put in once in power.

  3. Pete 3

    Ignoring the ignorant (seth), thanks for the comment Bunji.

    To be fair to the government though, less than 1% additional growth is still “growing the pie” like their supporters always said they would.

    • Bunji 3.1

      Yes, but you’re going to have to grow the pie an awful lot more than that if you’re going to make up for cutting down most people’s share of the pie.

      captcha: policys (as in National have as rubbish ones as the spelling ability of the anti-spam machine)

    • Draco T Bastard 3.2

      1% growth would be growing the pie – if it happens and all real experience of such things over the last 30 years of neo-liberalism has shown that it doesn’t.

  4. Good post. Shame that there is so much attention on Ministerial visa card use today. The wingnuts ought to read this instead. They may learn something, like what a great job Michael Cullen did.

    • seth 4.1

      Right…..if he did such a great job, how come we plunged into recession as soon as a whiff of anything bad happened? How come they lost the election by a landslide if they were doing such a great job?

      Why is it that Key and his lot is being held up in Australia as an example of what Kevin Rudd’s Labour should’ve done? Surely they should be using Michael Cullen as the example if he was so amazing?

      • Lanthanide 4.1.1

        From your apparent beloved master English in 2008 after he took office:

        “Having condemned his predecessor for many years for paying off debt too quickly, English said: “I want to stress that New Zealand starts from a reasonable position in dealing with the uncertainty of our economic outlook.”

        “In New Zealand we have room to respond. This is the rainy day that Government has been saving up for,” he told reporters at the Treasury briefing on the state of the economy and forecasts.”

        Grow a brain.

      • zonk 4.1.2

        Because the right wing wet dreamers are all about greed and ignorance. This is the right wing revival based on climate chamge denial…

        • Andy 4.1.2.1

          Interesting approach, since the ETS will result in a wealth transfer from the average NZ household to the rich forestry and electricity company owners.

          How does this fit in with a left wing viewpoint, one may ask?

      • mickysavage 4.1.3

        if he did such a great job, how come we plunged into recession as soon as a whiff of anything bad happened

        Ask Blinglish

  5. I feel like i’m at the base of a giant pyramid scheme run by the gov’t who know it’s gonna collapse real soon. So they’re getting as much as they can out of it by rorting the system and paying off their mates with taxcuts that when the shit global money market hits the fan of popular discontent, they’ll hopefully have stolen enough off the taxpayer to protect themselves from the blowback.

    Come that day i’m pickin they’ll leave this country for dead and retire to some private island in another part of the pacific or a walled community here in NZ

    The other thing i feel, is that they’re stupid if they think money will protect them.

    • Bored 5.1

      Thanks Polly, much along my way of looking at it, we are watching an argument over how best to walk a dead duck. No amount of stroking the feathers into shape is going to resurrect it, better perhaps to prepare it for the oven.

  6. Herodotus 6

    “Labour got New Zealand to $0 net government debt, we actually had net financial assets for the first time” yet gross debt only reduced from about $37b to about $30b. So there was minimum gross debt repaid, this fact always gets overlooked and that for 8 of the 9 Lab years the gap between rich and poor was extented ref Parl Question time ealier on in the month as to a tabled docomunent that was tabled by both Lab and NAt within 5 minutes of each other.
    “..National aren’t creating a fair New Zealand..” funny enough Labour achieved almost everything that is now being pointed towards National (except min wage increase). Did not the OCR hit 8.5% just before the election and inflation rose to 4% on 2 occassions and the range that the Reserve Bank had to keep inflation was widneed from 1-2% to 1-3% and this new target was achieved by the reserve bank about 50% of the time.
    Until both sides cease this partisian attitude of blindly following “US” without any policies to point to how can NZ achieve anything. No wonder the MP’s spending has taken so much time in the media as there is no substance to be seen from a politicial party. Unless those on this site start to demand something tangible from Labour all we will have is the blind leading the blind, and NZ will be slipping behind what is now 3rd World countries in performance.

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