Written By: - Date published: 5:32 pm, July 20th, 2008 - 53 comments
Categories: articles, election 2008 -
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Rod Oram can nearly always be relied upon for insightful analysis that takes debate a step further. In the SSTimes today he asks:
“are we being realistic about the current state of the nation? Each person will have his or her own view. But if, as individuals and a society, we’re gloomier than the facts warrant, we will undermine ourselves. We will fail to acknowledge and build on what we have achieved, fail to be confident and ambitious about the future. Then our worst fears will become reality….
By any realistic measure the economy today is far stronger, more flexible and resilient than it was then; conditions at home and abroad are much better; and New Zealand’s opportunities in the world far greater.
Failing to believe that will lead to three tragic outcomes: companies will sharply cut their investment in themselves, they will stunt their development; as a result, they will make the recession deeper and longer, they will be weaker when the upturn comes; and we will fulfil our worst fears about the New Zealand economy. Thus, now more than ever, this is a time for realism, confidence and ambition.”
With the political hothouse of Parliament returning this week, and Labour looking to convince the electorate that they can offer an agenda for change (whilst maintaining stability), let’s see whether they can also be convincing that we have room for optimism even in the depths of winter.
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“Reality:
House prices are collapsing because real estate is a lousy investment vehicle and you’re an idiot who bought into the hype.”
Good point but I think you’ve got to have a bit of sympathy for the house buyer who now may be losing money. That hype was whipped up hard.At the peak for about 6 months it went uncontested in the ol mm that this was now a longterm and strong market, so buy a house now or potientally never own one. That was the OFFICIAL messge in the media.
It’s a terrible thing to influence a market with fear, media should be doing the workers homework when commenting on markets not freaking us out.
I do, I’ve got tons of sympathy for them. Some of my really close friends went for it hook line and sinker. And they’re probably in more of a position to survive the aftermath than most. It’s really sad.
It wasn’t quite uncontested, but people just didn’t want to hear it, so it never caught on.
However, the people I hold in total contempt are the following:
Real estate agents, who clipped the ticket and made a killing peddling the scam.
Mortgage brokers who gave people a false sense of security while taking commissions from banks in return for not bothering to really show around for the best rates.
Fund managers, who collected huge bonuses for delivering unrealised gains that anyone with half a brain could see were unsustainable.
—
I can’t bring myself to blame the average mortgage holder. I just wish they’d think a bit harder.
Rex – you missed out the newspapers that were watching there classified advertising move over to trademe and so pumped real estate stories for all they were worth so they could take their pound of flesh in the shape of endless full colour full page advertising.
T-rex, I hear what you are saying about real estate. I was trying to inform some of my friends about “irrational exuberance” but noone wanted to believe it (esp. if they had bought into it with cash)
Labour had 8 years to engineer a controlled deflation of the housing bubble and rightly blame National for distorting the investment market. National’s LAQC was the turbo on this baby. Labour could very easily have turned the boost down by amending the LAQC. They could even have taken advantage of the first winter power crisis to make proper insulation mandatory before building could be sold, rented or leased, thereby making property ladder climbers think twice about what other surprises the government might have had instore for them. What stopped Labour from removing the distortions in the tax system that fuelled the boom? Surely Labour’s constituency is renters not landlords? Surely wise governence requires explaining how this policy benefits prospective home owners in the medium and long term instead living in fear of focus group perceptions.
Where are the John A Lee’s, the Micky Savage’s, the Nordmeyer’s and Big Norm’s that made one proud to be Labour. Big Norm is the only on that list I’m old enough to remember. My veiws on how the countryx should be run have changed a lot since then but my respect for these politicians integrity hasn’t lessened one iota. But the current bunch sicken me with disgust. Too busy following focus groups to have any time to lead the country forward (or backward). If length of time in office is the sole measure of success then Clark is the most successful Labour PM of all time. IMHO this lot have done less in three terms than each of the previous Labour government’s did in three years.
T-rex, Since you’re in a bit of a down mood at the moment this might not be the best time to ask for clarification of one of your earlier reponses to this post, but I’ll take that risk anyway.
What did you mean when you argued that efforts to isolate our economy from oil price fluctuations are being hampered by the same idiots who said real estate could never go anywhere but up?
Did you mean that
a) rental property investors shifted from buying new inner-city apartments to buying suburban houses, and
b) the borrowed so much money to buy these suburban rentals that they couldn’t then afford to infill?
Since both of these actions will have hampered the reversal of the sprawl developments of the 50s and 60s they definitely did our energy security no good at all. Sudies in Portland found that CBD dwellers have half the daily vmt of suburbanites. Even if cbd apartments didn’t dominate the housing market at any point they were a big enough part to mitigate continuing urban sprawl to a significant degree. Apartments and infill housing increases the number of PT customers per route km thus making it more efficient and economically viable. While this can also lead to more traffic the US evidence is that a 10% increase in population density increases traffic density by only 8%, As long as the government gives Transit priorities that prevent substantial spending on urban roadway capacity increases that is actually a positive thing for commuter rail. In this regard National was better than Labour as National’s hands-off approach to roading left Transit/Transfund with the Road Safety Strategy as it’s only Government policy directive that it had to “have regard to” in it’s funding allocations. Hence the perception that National did nothing about Auckland’s congestion. Fixing crash black spots and black routes is what Transit/Transfund was focussed on especially since the BCR calculations valued years of potential life lost more highly when it was an individual life lost in a crash rather than collective lives “lost” in traffic jams.
Interesting thread re Trotters column. There seems quite a bit of agreement with his broad and inaccurate generalisations. I would suspect that few of you know either farmers or rich people. Someone up above based it on overhearing conversations on a train.
Those comments are EXACTLY like the broad ugly generalisations that get thrown at the dole-bludger, Sth Auckland gangsta kids and (insert group here).
Talk-back radio on the computer screen.
Disappointing. But not surprising.
vto,
I agree that Trotter’s generalisations are far too broad. This is what I said above. Yet as I also said, there will be many farmers and rich people who do not deserve to be painted with the brush he wields and for this reason I think this column is counterproductive.
Trotter would have been better off directing his attack more specfically to organisations like Federated Farmers and the Employers Associations who have a long and documented history of behaving exactly the as he describes.
And after all the National Party is in rural areas at least, nothing much more than the political wing of Fed Farmers.
Well put Redlogix. It did seem a very odd column – poorly thought out. Or perhaps Trotter has some other aim.
It does amuse me how sometimes people pull up other sectors for abusive generalisations, and then go and do it themselves to other sectors. The failings of human nature. Glass houses and stones. I’m glad I’m not human sometimes, ha ha.
Just one more note re Trotter – a few months back he went on about the end justifying the means, when it came to achieving his political preferences. Encouraged breaking the law, etc. And talking of bomb-making material locations. And then here he is now berating the farmers for doing exactly that with the calcivirus thing..?.!! Poor form.
Kevyn – Indirectly, yes. And you’ve just reminded me that I still owe you a response on another thread from a week ago, crap!
Basically I meant that the present housing crash is largely the result of people failing to think ahead and anticipate the likely outcome. Our huge dependency on foreign oil is largely the result of the same sort of short sighted thinking (who cares that we’re dependent on oil – oil is cheap!).
There were numerous possible solutions (those you mention above are good examples), but what was really missing was just basic foresight.
Kevyn: Where are the John A Lee’s, the Micky Savage’s, the Nordmeyer’s and Big Norm’s that made one proud to be Labour.
Right in front of you. Helen Clark and Michael Cullen.
Too busy following focus groups to have any time to lead the country forward (or backward).
Labour don’t govern by focus group, if they did they would never have undertaken some of the unpopular measures that they did. If you’re against direction by focus group, expect National (aka Crosby Textor) to be much much worse in this regard.
IMHO this lot have done less in three terms than each of the previous Labour government’s did in three years.
Labour have accomplished plenty during their 9 years, much of it in the last 3. Lest we forget: unemployment down to 30 year lows, crime down, numbers on benefits down, economy growing, Working for Families, superannuation increases, minimum wage raised every year, four weeks leave, 20 hours free early childhood education, fair rents, interest free loans for students, poverty / childhood poverty rates down, suicide rates down, cheaper doctors vists, modern apprenticeships, and employment law which stopped the widening wage gap with Australia. An independent and sane foreign policy. Planning for the long term future via Cullen Fund and KiwiSaver. Strengthening the economy by paying off massive amounts of 70′s and 80′s debt (so reducing previously crippling annual interest charges), a booming rural economy, and with state owned assets (Air NZ, KiwiBank, KiwiRail, breaking up the Telecom monopoly, back to ACC).
I think history will put Cullen up there with Savage and Big Norm for superannuation and KiwiSaver alone – serious long term structural planning for the economy and for our aging population.
“IMHO this lot have done less in three terms than each of the previous Labour governments did in three years.”
That’s an interesting proposition. Given that this may be the last term of the present Labour government I wonder what the regrets are (if any) from the participants.
” I think history will put Cullen up there with Savage and Big Norm for superannuation and KiwiSaver alone – serious long term structural planning for the economy and for our aging population.”
Cullen has been the first finance minister in my generation to actually sound like he is acutely aware that citizens are hugely affected by his decisions, especially the poorer members of society.
Cullen and Clark have provided a stable leadership team, a relationship missing in our domestic politics since at least 1975.
Cullen’s weakness is arguably
1) his inability to create or enter into debate about the way we present ourselves financially to the world. Are our systems to control inflation outdated and open to exploitation?
2) Address our low wage society sufficiently. Wages only go up one way and that’s by negotiation. What needs to be done is to get real and considered wage negotiation back into our economy . Wages are the way we measure the sacrifice of hours of our lives to activities that in many cases detract from the quality of our lives. Wages are our ticket to enjoy the fruits of the wide array of hyper active markets WE (our parents, their parents etc) have created in our fast paced modern marketplace. The economy is primarily about our quality of life, everything else is just the rules we arrange to maximise our “pursuit of freedom.’
“It did seem a very odd column – poorly thought out. Or perhaps Trotter has some other aim.’
I can’t help thinking if the major papers scrapped all their opinion writers no one would notice. They all seem to want to shock rather than educate, the headline more important than the content of the article. The worst ones seem to be just writing for the 40 cents per word paycheck oblivious to any intent. .and some are just pathologically angry.
Trotter confuses me. He seems to view politics as an excusable game of trickery which reflects badly on the intent of his own writing.
T-rex, you could learn from r0b – his list of Labour achievements gets bigger every time (and rightly so).
My views on Trotter’s piece: did his internal monologue accidentally slip out? Those are certainly views held by some people in the groups he mentions, but not all rich are evil, not all farmers are thoroughly self-centred (ok, reactionaries are as he describes from memory, but that group is limited to those who hold those views he mentions…).
So, what was he hoping to achieve? Distatste by association? One could just as easily list a bunch of very decent people who are planning to vote National, so that can’t be it.
I suspect that what he’s saying is that such people (as he describes them) make up part of National’s core constituency. That’s perhaps debatable, but I think it’s an important point he failed to mention. If you disagree with this, tell me what side of the spectrum such people would be more likely to vote…
The groups Trotter identifies are those that often call the tune in National. I have many friends who vote National who are embarrassed by the excesses of the right. They regard Farrar and his mates as the lowest of the low. There are many farmers who are quite liberal. There are many rich folk who admire Cullen’s conservatism, and who do not rate a move to Douglas or English with any relish at all. There are many in the gay community who are fearful of a return to old days. There are many childless couples who hurt every time an anti-Helen Clark putdown is made simply because she has no children.
Trotter may have stated his case bluntly but there is so much in his comments that resonate truth. Ed Hilary and others suffered because they joined the Citizens for Rowling Campaign, but there are not too many who would own up to being derisive of Rowling now.
We face the same choice as to where we go in the next election. Key may not be a Muldoon, but his puppet-masters behind the scenes offer an even bleaker prospect for New Zealand.
PS: What happened to the Trotter article on Stuff. Could someone who kept a copy please post it.
I think he was perhaps being agressive and striking out ..
rOb, Maybe T-rex’s downmood was contagious. That diatribe just seemed to pour out by itself.
In fact much of what Labour did under Savage was just renaming things (eg, State Advances Corporation, State Highways) and merging existing legislation such as the Pensions Act becoming Part I of the Social Security Act, with no obvious changes to the text, and the Unemployment Relief Act became Part II, with a significantly reduced standdown period. Much of the great public works spend-up would have happened irrespective of what party was in Government. In the case of highways the funding came from increased petrol sales. The increased funding for railways could have gone in tax cuts or been spent on highways as the funding was uncannily identical to the revenue from the unemployment relief tax on petrol.
State housing was a good idea but with the benefit of hindsight we can say that the quarter acre section approach was seriously wrong.
Nordmeyer and Rowling had the courage respond to oil shocks by doubling the petrol tax in an effort to reduce petrol consumption and it’s impact on the balance of payment. This government hasn’t been brave enough to do that. In fact it was too scared to even make the small increase requested by the National Road Safety Committee.
Labour isn’t responsible for increased global commodity prices or any of the economic benefits that flowed directly from them. Householders have been taking on foreign debt as fast as Cullen has been paying it off. Personally, I am inclined to think that if Cullen had cut taxes instead of running surpluses the biggest beneficiaries of those tax cuts would still have taken on debt and would simply have squandered the tax cuts on trips to OZ, flasher cars and flasher appliances – all imported of course. Cullen may have given us the lesser of two evils.
Perhaps I should state at this point that it is my considered view that all economic theories assume that the entire population make their spending decisions exactly the same way economists do. Thats about as false as any assumption can be. Ipto facto left wing economic arguments are just as fatally flawed as right wing economic arguments. To reduce income disparity I advocate a tax system derived from the polymer manufacturing. Every income earner is taxed at the same percentage – divide the tax revenue by the number of taxpayers – every taxpayer receives that amount. The government should provide only two services – information and monopoly prevention. Get those two right and everything else falls into place.
As a final note, I must concede that the only area where I know for a fact that Clark and Cullen have been making outrageous claims, exagerating and deceiving is land transport. In this area the Government has definitely been following public opinion instead of shaping it. This time you actually can blame National. If they hadn’t been making dodgy claims about road safety and road funding in the late 90s I probably wouldn’t have spent so many rainy Sundays in the university library copying the numbers from transport annual reports into spreadsheets. Without being able to check the numbers Labour’s land transport claims would have seemed more believable than Nationals. The trigger was the road deaths/petrol price study commented on on frogblog last week that totally refutes the claims Annette King makes in the Land Transport Strategy discussion document that the Government is responsible for the drop in the road toll since 1999. The Harvard Medical School research concludes that the reduction is due entirely to reactions to rising fuel prices – including the doubling of cyclist and motorcyclist fatalities.
“The government should provide only two services – information and monopoly prevention. Get those two right and everything else falls into place.”
I agree. It would be refreshing to see a party talk honestly about the problems of the marketplace.
1) A lack of information leading to poor investment and decision making. If risktaking is to be part of the modern economic game plan at least we should look at ways of minimising it with free, proactive access to clear market data and analysis.
2)Fortress market retention strategy from the larger business players (taken to an ugly artform by our biggest company telecom) or as you say “Monopoly”
Our economics shouldn’t be this mysterious.