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Nats: economic failures

Written By: - Date published: 10:57 am, September 12th, 2012 - 30 comments
Categories: Economy - Tags:

Fresh from having to delay the sale of Mighty River for 6 months because of sheer incompetence and on the back of hundreds of jobs losses in our largest employing sector – manufacturing – Key went overseas to boost our exports. His Russian FTA talks were a dismal failure (wonder why) and, now, he’s re-heating a failed attempt to boost tourism.

Key, remember, took the Tourism portfolio because he was such an amazing deal-maker that he would get the sector growing. 22 months ago today, he announced a plan to boost Japanese tourism. Today, he’s doing it again. How’s it working out?

A 34% fall in Japanese tourist numbers under Key. It’s not restricted to Japan and, to be fair the decline in real terms in tourism revenue started in 2004 and has fallen 24% in real terms since then (14% since 2008). But Key took the role because he’s supposedly so awesome that he could turn things around. He’s done exactly the opposite.

Now, Key’s criticising Australia – the place that 1,000 Kiwis are week are fleeing to because, for the first time in 20 years, unemployment is lower there then here. He says it has ‘Dutch Disease’ – the economic condition where spending up big on the back of a boom in exports of a commodity raises the exchange rate and kills the rest of the export economy, leaving the economy hollowed out when the boom ends. Of course, New Zealand has dairy Dutch Disease. And government policy is to make us more dependent on boom-bust commodities by intensifying dairy and hydrocarbon extraction – just like Australia.

30 comments on “Nats: economic failures”

  1. Has anyone done a follow up of Oram’s article ‘The Jig is Up’ from Sept 9 SST?
    He reports on Geoff Bertrams research that shows (roughly) the electricity SOEs (and the two privatised ones) have acted as a cartel and jacked up their asset valuations and power prices 100% over their value, and also scored a $500 million windfall profit from the ETS.
    Where is Labour’s comeback on asset sales promising to renationalise and put all these SOEs back into one Electricity system and stopping this rent rort?

    • grumpy 1.1

      News for you…..they have always jacked up their Asset valuations…….ever since generators and networks were allowed to price based on return on assets……

      • vto 1.1.1

        Being able to price on asset valuations is one of the biggest ripoffs ever.

        Ever parked in an airport carpark? Biggest lying cheating rorting ripoff on the planet. Do you know it costs the same to rent a room for a human to live in as it does to park a car on the asphalt? And that sums it up. Just gotta make sure that, likewise, that social contract thing is all ripped up as well when attending airports – ensure the cost is returned elsewhere on airport property.

        Same thing with dumping rubbish. Do you know in Chch it costs more to dump rubbish per kilo than it does to plant, grow, tend, harvest, package, freight, market and sell potatoes per kilo? Just gotta make sure that, likewise, that social contract thing is ripped up as well when attending rubbish dumps – ensure the cost is returned elsewhere on rubbish dump property (which, ironically, is pretty fucking difficult).

        Fuck the fuckers who fuck ya.

  2. vto 2

    Key, the wonderkid, is steadily being exposed as a one-trick-wonder. And that one trick was gambling other people’s money on money trading. Such an admirable role..

    He has since proved useless. Can somebody name something he has achieved since gaining office?

    I seen this before in people – success at something leads them to believe they will be a success at near everything. Then as time tootles, it becomes clear that they can’t do any other thing. Should have stuck to what they did before.

    Key should go back to being a money-changer.

  3. Lanthanide 3

    I suspect the CHCH and Japanese earthquakes in 2011 both have impacted on Japanese tourism in particular.

    • Lightly 3.1

      the job of being minister isn’t about just pointing out all the challenges you face. It’s doing thing about them. Sure, those are big challenges but what has Key done to overcome or mitigate them?

      • Lanthanide 3.1.1

        How do you know that he hasn’t done a lot and that without all the things he’s done the numbers would be a lot lower?

        There’s not really a lot the minister of tourism of small country like NZ can really do in the face of massive disasters like that.

        • fatty

          I’m pretty sure that if we are going to use the earthquake as an excuse (again)…then we can balance it out with the rugby world cup. The RWC came at the perfect time, in the aftermath of the quake and effectively mitigated any negative effects that the quake may have had on our tourism industry.
          No minister of tourism will get another opportunity like the RWC. Japan was involved, and its a corporate sport in Japan. If we still have had a drop with the RWC, then he is a shit tourism minister.

  4. Tracey 4

    cycleway anyone???

    Didn’t Putin favour a cycleway from Vladivostok to Cape Reinga with a bridge to boot???

  5. insider 5

    Ausralia has seen similar results http://www.tourism.jp/statistics/xls/JTM_outbound20120905.eng.xls

    The japanese are more going to Asia it seems

  6. Kevin84 6

    Perhaps the Japanese followed David Shearer’s and Russell Norman’s advice – to stop sending money going offshore.

    Apparently sending money offshore is terrible, so clearly the Japanese are following sensible advice and not sending their yen off shore by coming here as tourists. By staying in Japan they spent their money at home – which is good ; instead of some foreign NZers rorting them when they come here.

    More countries should strengthen their economies by not sending their money offshore. Aussies should stop coming here as tourists and should stop buying our exports, as they both involve hard earned Aussie dollars going offshore to NZ, and that as we all know is a bad thing. Likewise Poms, Yanks, the Chinese, French, Germans etc…

    If they stop sending their money offshore by coming here as tourists and instead toured their own countries then the global economy will improve. If foreigners stopped buying our exports – thus sending money offshore to NZ, then their economies will improve.

    Its simple logic. I can see why David and Russell sensibly support it.

    • bbfloyd 6.1

      Nice try kevvie, but I’m afraid overcooked sarcasm has been rather worn out for a while now…..Maybe if you didn’t try to be so Cecil B De Mille about it next time you could be amusing…

      • Colonial Viper 6.1.1

        Apparently Kevin84 doesn’t understand that Japan, the first example he uses, built up a massive manufacturing export industry based on having a rock bottom low yen.

        Japan then used that strategy to accumulate massive foreign account surpluses. On a net basis, Japan sucked in currency from the rest of the world, and spent relatively little except for energy and raw materials.

        My opinion of Kevin84 is that he is a devious twisty untrustworthy little shit, trying to miseducate people about the true dynamics of the world economy.

        I doubt that he’s even a NZer at heart.

        And how our leaders are letting billions in wealth get pumped out of NZ unnececssarily.

        • Poission

          Japan has a high internal surplus in the banks due to high savings rates.This allows fully liquid Japanese banks to invest in both short and long offshore havens such as AUS and NZ,Whilst they do take long positions,a substantial amount is in arbitrage ( cash and carry)

          The counter-cyclical cash and carry flows are the forcing that has introduced instability into the FOREX and why policy needs to be addressed eg Bollard AUG 2012.

          In a globalised world, big players lowering their domestic interest rates, whether by QE or
          any other tool, will (all else equal) tend to promote capital flows to other countries and
          appreciation of their exchange rates. As a small open economy, New Zealand has often seen
          the effects of carry trades on the exchange rate. This can be distortionary and problematic,
          because an economy relies on its exchange rate as a signalling price.

          The exporters council has released a discussion paper on the issues,which is a little naive in its analysis,but it is a start,the general issues as identified are.

          Concerns in respect to monetary policy settings have, over time, generally focused on four broad issues.

          1 How to support monetary policy achieving and maintaining price stability without the need to raise interest rates substantially – i.e. the need for monetary policy to “have mates”

          2 Issues associated with the Reserve Bank’s sole focus on achieving and maintaining price stability, and the reasons, if any, for having multiple objectives for the Reserve Bank. e.g. employment, growth or other objectives

          3 Dealing with an over (or under) valued currency

          4 Dealing with volatility in the value of the $NZ.

          It also cites Bollards paper

          The Governor’s paper clearly indicates that there are no easy options or silver bullets and underlies the importance of examining policy tools and their implications from a wide range of perspectives. The danger with meddling with the Reserve Bank Act (or other Acts in response to short-term problems) needs to be clearly understood. It is important that any new tool is appropriate to the situation.

          Indeed the knee jerk policy responses as seen only seem to have negative feedbacks,that have increased instability and reduced confidence as a whole in NZ.


        • Kevin84

          Great, Japan has built up a manufacturing base that required a low resource country to pay far higher food, oil and raw material imports than they would have had they not dicked around with the Yen. I’m sure low-income Japanese loved that on top of tariffs on rice imports, nothing like making the working poor pay more for food; just like how British Tories just loved the Corn-laws, it protected their farming profits and thus their landed-estates, and of course kept food prices high for the poor. Thank good Cobden, Ricardo and Gladstone told them where to shove it.

          I do like how China is keeping the Yuan devalued. It’s like a 15% foreign aid give away in our favour. Because we can get clothes, IPads, IPods, and now even cars at a rate lower than we would have, now many of us have more to spend elsewhere. If I can save $60 on my next Smartphone because of the low Yuan, I can spend that extra left over $60 at my local hairdressers or buy tickets to an All Black game. I can have my Smartphone and tickets to the game. But with a higher Yuan then I may only have my Smartphone, and may have to miss out on the game; so I’m less wealthy overall and local business misses out as well.

          You have to feel sorry for the Chinese though, a low income country where the government keeps your currency down so it’s harder to import NZ baby formula, lamb, beef, milk or even visit NZ as your currency is kept low. You can see why many want China to appreciate their currency, if they did, perhaps far more Chinese can come to NZ and improve out tourism intake, or buy more of our exports, but unfortunately, that manufacturing fetish that so many Chinese leaders have means the Chinese people will just have to go without, as will NZ exporters as the demand for our exports is lowered by a silly manufacturing obsession.

          I can’t wait for Pitcairn to go for a robust manufacturing sector. They will show the world how it’s done; as every country needs a strong manufacturing sector… no matter how small. Boeing and Airbus watch out, Pitcairn is on the march!

          • Colonial Viper

            Oh I agree mate.

            If you still have a job and are earning good money in NZ, you can buy cheap foreign made shit to your hearts content with our strong NZD.

            You simply do it at the cost of local industry and local jobs. But what the fuck do you care about that if you are in a position of economic privilege?

            • Kevin84

              So I should only buy goods made in NZ? Allow me to extend your logic further. If Canterbury wants to rebound from the quakes, then it should make logical sense for them to buy goods only sourced from Canterbury as importing goods from outside Canterbury will come at the cost of local Canterbury industry and Canterbury jobs.

              Have fun moving that man made national border. Tell me, was the reunification of Germany a disaster? You know the trade balance between the western German states and the eastern ones disappeared in 1990. Before then people measured it, got worried about it, made press statements about it, called for action… then one day the border went and people had free trade.

              Now even with a border marked on a map why can’t I trade across it? If Canterbury were their own sovereign state would you recommend that they only buy locally? In fact why stop at Canterbury, why don’t the people of Christchurch only trade within Christchurch, hell why stop there, why don’t the people of Riccarton only trade within Riccarton. Why stop there! Why don’t the people of Straven Rd, Riccarton only trade with the local people in that street. WHY STOP THERE! Why don’t the people living in a house on Straven Road, Riccarton, buy local within their own home, grow their own veggies, do their own electrical work, do their own plumbing repairs, painting, computer repairs, make their own couches…. local trade must be good, so let us get truly local!

              • Colonial Viper

                Yeah thanks for your irrelevancies.

                BTW local trade and self sufficiency is the way of the future.

                • Kevin84

                  So you intend to do all the tasks in your home, your never going to get a plumber in or sparky to help fix any issues you may have, even if you have no idea what your doing? Are you also going to source all the foods you enjoy locally? Home kill the meat? What about your salts and spicies – they come from many foreign and exotic places, are you going to go without them? Good luck with that finding salt and pepper seaoning in you back yard. Tell us how it goes.

                  Deep down I think you know all too well what your logic entails – a real decline in living standards.

                  • McFlock

                    So your perspective is that the only two logical options are free trade or hyper-protectionism of the household economy?

                    • Kevin84

                      I see no other option but free-trade. Why do people arbitrarily stop at one border? Australians haven’t limited themselves to their state borders, why can’t we just ignore them. If you use the gravity model in international trade you can see that these borders lower trade and thus lower our overall welfare. We must do more to free up capital, money and labour to move around; so all the people of the world can have an equal share of the world’s wealth.

                    • thatguynz

                      I’m hazarding a guess K84 that you would also wholeheartedly endorse a global currency?

  7. Carol 7

    David Cunliffe delivered a little (print) lecture today on National’s economic delusions. He does a brief over view of the wrong turn taken by NZ & other governments towards Chicago School economics in the 80s, and cautions about people who talk as though there is only one economic viewpoint – as though it’s the “truth”.

    Then he lays into our current government economics and finance spokespeople:


    In the dogmatic world of John Key, Bill English and Steven Joyce there are no lessons to be learned from the Global Financial Crisis. They appear not to care that their obviously failed policies have seen thousands upon thousands of New Zealanders lose their jobs, their livelihoods and their hope of making a future in New Zealand.

    While the USA, the UK and the New Zealand people have moved on, all the National Government does is preach failed ideologies.

    • thatguynz 7.1

      Which is absolutely tremendous – it’s pleasing to see at least one politician demonstrate that they understand the problem.  Not entirely unsurprising that its Cunliffe to be honest.
      What I’m more interested in however is what is he going to be doing about it given the Labour party’s economic ideology is not that far removed from National’s in the sense that it isn’t exactly Chicago vs Austrian schools of economics or dare I say it – a different approach altogether…

  8. Poission 8

    His Russian FTA talks were a dismal failure (wonder why)

    Both key and grocer did not understand the Russian position.

    The ex NZ ambassador on morning report stated that the Russian wanted high value trade ie intellectual agriculture property and systems expertise to develop the Russian agriculture potential.

    This would would involve NZ r&d,expertise and cross training at research facilities and an interchange of science.

    Key wanted a short term result ,tariff reduction and painted the RF into a corner,which one Russian commentator described as a kulak mentality.

    Sovnarkom includes the definition of a Kulak as involvement in trade, money-lending, commercial brokerage, or “other sources of non-labor income”


  9. Poission 9

    In QA the opposition seems to have found that English does not understand the problem.

    Hon BILL ENGLISH: I do not have in mind, and I do not think anyone has in mind, a particular level. All the measures of relative values of the New Zealand dollar show that by historical standards it is at high levels. If it was 75c in the US dollar, that would be easier. If it was 70c it would be even easier for exporters, but bear in mind that would also mean a reduction in living standards for New Zealanders. As I said before, either way, we cannot pick the exchange rate. We do not try to pick the exchange rate. We get on with making our exporters as competitive as they possibly can be.


    Lets put it another way at 70c Tiwai point would be generating profits of around $50m,maybe if he asked either treasury or the RB for some high quality advice rather then his “contractors” he maybe less uncomfortable.

    • Carol 9.1

      And that was after the long preamble where English refused to answer the question (#11), and couldn’t explain or clarify why he had some “discomfort” about the exchange rate…..i.e. English tried to avoid answering the question….. I guess because he doesn’t understand the problem….?

      • Poission 9.1.1

        I guess because he doesn’t understand the problem….?

        English does not understand the problem,which is why his offerings of solutions are illegitimate ie a contradiction of the proposition.

        As the problem is significant some more rigorous questioning by the opposition is required ie multiple party questions and preferably better posed questions.

        • Poission

          As the problem is significant some more rigorous questioning by the opposition is required ie multiple party questions and preferably better posed questions.

          A good example would be what is the cost of the appreciation in the TWI to the Government Superannuation assets (which holds around 9b$ in overseas assets) does the appreciation in the TWI

          i) Increase the risk perception of overseas long term investors?
          ii) What is the cost to the taxation base of the depreciation of these assets?
          iii) if as BERL suggested (with a high statistical correlation of r^2 = 97) an increase of 1% in the TWI decrease the value of NZ exports by 0.81% what is the net cost in terms of the overseas trade deficit?
          iv) What is the cost in NZ production by import substitution?

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