web analytics
The Standard

Treasury: peering into the dark with a broken torch

Written By: - Date published: 12:09 am, November 2nd, 2010 - 54 comments
Categories: Economy, Keynes - Tags: , ,

I saw Labour’s press release yesterday about the latest Treasury monthly statements. Basically, Treasury says ‘the economy’s a whole lot worse than we expected but we stand by our growth forecasts in the Budget’. Odd, because the Budget forecast 1.6% growth so far this year and it has actually been 0.7%. How good is Treasury at forecasting?

They release updated economic forecasts twice a year – in the Budget Economic and Fiscal Update (BEFU) and the Half-Yearly Economic and Fiscal Update (HYEFU) (or Pre-Election Economic and Fiscal Update (PREFU) in election year).

When the BEFU is published, it’s half-way through May but the latest official GDP numbers are for the previously December (it takes about four months after a quarter ends for the GDP numbers to come out). Similarly, the HEFU is out later this month but will be forecasting from the September quarter onwards, despite the September quarter being over and the December quarter being half-done.

So, the first growth ‘forecasts’ Treasury has to make are for 2 quarters that are virtually finished already. Not surprisingly, it does reasonably well at that task. Over the past five years, Treasury’s ‘forecasts’ for these first two quarters have shown a strong 0.75 correlation to the real numbers.

But they’re often a long way out: the average growth rate per quarter in the past five years was 0.2%, while actual growth rate in each quarter was an average of 0.4% different from what Treasury forecast. So, Treasury was wrong by an average of twice the average growth rate.

So, Treasury’s record at predicting the present isn’t that great – they can see the trends but they’re not so good at pinpointing the actual numbers. So, how about predicting the actual future?

How does Treasury do at predicting the two quarters that begin after their forecast is published – eg. forecasting the growth in the September and December quarters of 2009 in Budget 2009 that was published in May?

Turns out they are really, really bad. Actually, they’re slightly worse than you would expect if you selected the numbers at random. These forecast figures show a -.01 correlation with the actual numbers – statistically, Treasury’s predictions bear no relationship to what actually happens six months after they’re made. As for the average gap between the latest prediction for a quarter and the actual growth rate, it’s a whopping 0.6%

The correlations improve when they predict further out but the gap between the growth rate they predict and reality doesn’t.

In Budget 2008, Treasury didn’t forecast the recession even though we were already four months into it. In Budget 2009, it forecast the recession would end in the coming September quarter when it had already ended in the March quarter.

In June of this year, the economy was 0.9% smaller than predicted this May, 1.8% bigger than predicted the previous Budget, and an enormous 10.6% smaller than forecast in Budget 2006.

That kind of error has very serious implications. Tax cuts that look ‘affordable’ suddenly become huge debt burdens – like the $1.5 billion we’ve borrowed so far for the April 1 2008 cut. Benefit spending and tax revenue turn out to be wildly out of whack from what was planned for.

Sure, there’s a major economic crisis going on and that makes things hard to predict. But Treasury’s inability to foretell the recession even once it had started, or to accurately estimate its depth and end point, or to get right the weakness of the ‘recovery’ that has followed so something fundamental is wrong. Treasury’s orthodox neoclassical economics simply can’t cope with bubbles, busts, and resource constraints. As Peter Lyons writing in the Herald last week noted:

“[according to the neoclassicists] crowd manias that lead to share market and housing bubbles simply do not happen. Markets are always efficient. The credit crunch and near-collapse of the world financial markets simply could not happen.”

John Maynard Keynes’ famous rebuke of the neoclassical equilibrium model has been proven true by Treasury’s failure to get its head around what is happening to the economy:

“Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is past the ocean is flat again”

It is time that Treasury rid itself of the failed ideology of neoliberalism and the failed theoretical framework of neoclassicism and embraced resource and behavioral economics. Because, right now, it’s all but useless at telling us where the economy is heading.

54 comments on “Treasury: peering into the dark with a broken torch”

  1. Colonial Viper 1

    Basically out of roughly 1,000,000 trained professional financial economists (including those working in universities, think tanks, Government agencies, sovereign reserve banks/treasuries, economics firms etc) perhaps 5 or 6 of them picked the Global Financial Crisis ahead of time.

    In the last 3 years the financial firms and banks led by these people have destroyed approximately 4 trillion USD worth of global wealth. That is more money than banks have ever made in their entire history.

    Therefore, financial economics is a totally failed discipline. Within this failed discipline, financial forecasting is a particular lead weight.

    The fact of the matter is that this entire discipline should be binned and started from scratch again.

    Financial economists, associated risk analysts and financial forecasters should be retrained and put to work in other fields. Perhaps in rice and maize fields.

    And any university which teaches financial economics should immediately suspend their courses. They are teaching witchcraft and charlatanism.

    Great post Marty.

    • M 1.1

      Couldn’t agree more CV.

      Economics is a totally useless, soft subject that is no more accurate than Romans inspecting chicken entrails or astrology for that matter. In time it will hopefully sink without trace like public relations and political science.

      I have done some study of economics (zzzzzzz) and it has always seemed to me that the economic theories put forward could never ever possibly be wrong which is complete rubbish. Forecasting is a laugh, they can really only guess at trends and most people can see trends very plainly and a lot more quickly.

      Under economics people are reduced merely to monetary items and often regarded as inconvenient or expendable if the predictions don’t stack up. When people are laid off economists often say that such people will move on to more “productive” parts of the economy or job market – what if there isn’t a more productive part of the economy or jobs?

      In 1991 I had to watch clever and hardworking friends fall into despair after being made redundant because of the “re-organising” of the economy where getting a job in fast food would have been a dream come true. One was so desperate she went escorting – guess the eCONomists thought she had moved on to more productive things. At least if she had contracted HIV such a condition would have provided a opportunity for other workers in the community to be productive like doctors, nurses, pharmacists and grave diggers.

    • Draco T Bastard 1.2

      Actually, it was 11 economists that managed to publish a credible prediction of it.

      In the last 3 years the financial firms and banks led by these people have destroyed approximately 4 trillion USD worth of global wealth.

      No they haven’t. They’ve removed $4t worth of money from the system but the economy is still worth what it was before hand. The reason why we went into recession is because the people with all the money, capitalists, banksters etc, panicked and stopped loaning it out once they realised that there was far more money in the system than the economy was actually worth. The accumulation of money in the hands of the few will always cause a recession and/or a depression.

      Therefore, financial economics is a totally failed discipline.

      Most economists don’t know how the economy works. They know how money works (neo-liberalism and even classical economics is a theory of money) and they’re not too good on that score either.

      And any university which teaches financial economics should immediately suspend their courses. They are teaching witchcraft and charlatanism.

      Agreed.

  2. Jeremy Harris 2

    I remember the episode of the West Wing where the Treasury economists say to the President,
    “We want you to look at the GDP forecasts for 10 years time”,
    and President Bartlett says,
    “Have they ever been accurate to within say $200,000,000,000..?”,
    the Treasury officials say,
    “No”,
    President Bartlett,
    “Why would I want to look at them then”,
    economists,
    “We want you to look at them anyway”…

  3. It’d be interesting to compare the accuracy of New Zealand’s Treasury with that of Australia, which sounds like it’s a functioning government department as opposed to a bizarre and demented cult.

  4. Colonial Viper
    And least we forget – one of the million failures is our prim minister
    Easter Island and statues come to mind.

    • Draco T Bastard 4.1

      Financiers, although they have some economic training (which means training in neo-liberalism these days), are not economists. The discipline, interestingly enough, is actually different.

    • KJT 4.2

      Actually he was very effective at gambling with our currency in New York.

  5. IrishBill 5

    As has been noted both here and at the dimpost one of the problems with treasury is it has a monopoly on economic advice. Clearly it needs to be opened to competition if it is to function more sufficiently. Perhaps forecasting should be tendered on a quarterly basis to private firms, NGOs and university departments. I’m not saying treasury couldn’t compete too just that they would sink or swim based on their ability to meet the accuracy and price the market required. I’d be interested to see what advice treasury would give on such a proposal.

    • Colonial Viper 5.1

      Clearly it needs to be opened to competition if it is to function more sufficiently.

      IB don’t know whether to laugh or to cry with your response.

      See my original post above? Which of the million wrong professional qualified financial economists did you want to hire to create this ‘efficiency’?

      In Jun 2008 the NZ Reserve Bank was still talking about increasing interest rates in order to dampen expectations of too high economic growth/inflation. In Sept 2008 the full force of the GFC and recession hit the country.

      These people are worse than useless. Fire them all and give their salaries to our teachers, nurses and doctors. Not joking here.

      I believe that putting more bets on the wrong race is not going to give you any winners. You may get an ‘accurate’ result completely by chance. But I could do so for you more cheaply and you will never know until it happens.

      Further its quite possible for someone to forecast a gradual incremental change from today’s status. But that is a ‘so what’ result which is almost completely unimportant and uninteresting. A cab driver could do the same. Its the ability to predict a severe and damaging step change in the economy a year ahead of time which is crucial to a nation. And because they are totally unable to do this – apart from at sheer random, which a cab driver can probably do better – , but can predict a near steady state year after year for years in a row, when the big change happens, they have set the country up for walking confidently straight into a hole.

      In this sense, financial economics is worse than useless and should be binned.

      Do you know Cullen’s brilliance? Cullen’s brilliance was not in predicting the GFC; he did not. It was in setting NZ up to be far more resilient to deal with the consequences and aftermath of such an event.

    • Greg 5.2

      While economic advice (at least to the government) is not tendered, treasury are still kept on their toes by the private (and state – universities) sector. Firms like infometrics, berl, nzier etc etc all do economic analysis on some of the same policy as treasury. They forecast too.

      While I like the idea of a free tender to the goverment it would create some serious issues for the independence part of the public service. It wouldn’t be good if the government of the day got to hand out the tenders – possibly could work with some sort of independant department set up to choose who got it.

  6. Carol 6

    I went to a talk by Marilyn Waring a couple of years ago. I don’t know a lot about economics, but she seemed to make making some similar points to Mary, CV & M. Waring talked about how economists are very selective in the data they count as relevant in estimating GDP etc. She gave examples from her work in (I think, the Solomons) showing how unpaid work contributes to the country’s economy, but is ignore by conventional economics. But, it looks to me like she maintains a believe in economics, but just wants a better version of it. And I don’t know how well her version holds up.

    However, her point about how unpaid work contributes to the economy seems to me to be an important one. NACT seems to want to cut back on the public sector and leave some of that work to voluntary unpaid work. This seems shocking to me, that they would set things up so activities necessary to the country’s economy, as well as to social well-being, are expected to be done for no pay. This is because they only seem to officially count “tradeable”/exportable goods and services as being of value.

    • lprent 6.1

      …NACT seems to want to cut back on the public sector and leave some of that work to voluntary unpaid work.

      They’re certainly cutting funds that go to the front line voluntary sector like the womans refuges, so I guess that unpaid is the key, Or perhaps they’re just simply shifting it to their mates rather than looking at needs both present and future – for instance private schools.

  7. ghostwhowalksnz 7

    Havent they had a big jump in resources given them?. While others like early childhood education have had cutbacks.

    Could that be the reason , they were never given the money to do a proper job? Sounds familiar!
    Bill English , being ‘one of their own ‘ has fixed that. But he still makes his decisions based on shoddy advice , since he likes the sound of it. A bit like a judge on Americas got Talent

    • Carol 7.1

      I heard somewhere (on one of the weekend polictical TV shows on One or 3) say that the only areas of parliamentary/ government public services that have increased staff has been in the department of finance, and Public Relations staff. So they can produce more figures with more people to spin the relevance and “reliability” of them – yes, much like America’s got talent.

      • M 7.1.1

        Carol, wonder if staff at WINZ have increased markedly?

        • Vicky32 7.1.1.1

          I am not Carol, but from what I have heard, no! I was summonsed to a compulsory “job seminar” in August, so we stupids could be told how to apply for jobs. Duh. But the woman leading it spent the afternoon whining about how she knew that she was on thin ice (as was everyone doing her job) – she wanted us to feel sorry for her? Young, well-dressed and with contacts..
          Deb

        • KJT 7.1.1.2

          No. They have reverted to type since National got back in.
          I have supported a few teenagers through WINZ etc lately.
          These are not deadbeats. They are kids who would leap at almost any job offered.
          Yesterday after waiting in the queue for 20 minutes one was told. “You are 1 minute late for your appointment. Come back next week”.
          Staff are now exceptionally mean and contemptuous. This has now happened twice.

  8. Sounds good Bill
    But don’t forget all the other economists/forecasters come from the same religious sect, they have all been taught from the same books.
    People from all walks of life are incapable of understanding limits to growth and resource depletion, most are to lazy and apathetic to open their eyes, it is clear the king has no clothes, and he can not stop the tide form coming or going, yet millions of fools do not want the truth, as witnessed on election day … time and time again ‘we’ fall for their bullshit.
    Before you have an economy you need energy, that energy has to be cheaper than the energy it takes to get it, for example you can’t ‘make a profit’ having slaves growing food if that food goes to feeding the slaves.
    1900 ish 1 barrel of oil invested would give you 100 in return, now it is something like one in for three returned, ignoring cleaning up the mess (air, water, land).
    We are over 23 years PASSED the per-capita peak in global energy,
    War is good for GDP, so I guess we have a rosy future.
    Some reading for the non-apathetic
    http://oilcrash.com/articles/arnett05.htm

  9. If you read this latest report from the govt http://oilcrash.com/articles/wake_up2.htm and are more capable than treasury of putting the numbers together, then I am sure you will agree with these figures.

    > An annual depletion rate of 2% allows roughly 50 years for all of a resource to deplete, (and for one to get one’s mind around the concept of the import of that event.) An annual depletion rate of 3% gives one 33 years.

    4% gives one 25 years.

    5% gives one 20 years.

    6% gives one 16 years.

    7% gives one 14 years.

    8% gives one 12 years.

    9% gives one 11 years.

    10 % gives one 10 years.

    11% gives one 9 years.

    12% gives one 8 years.

    13% gives one 7.6 years.

    14% gives one 7 years; and,

    An annual resource depletion rate of 15% gives one just ~6.6 years until the energy resource is, for all practical purposes, GONE! We must remember that we are talking here about the continuance or the cessation of this fossil-fueled Industrial Civilization — NOT patching joints on sailing boats on the shores of the Black Sea.

    We should also remember, that as more liquid fossil fuels are depleted, the depletion rate per annum will continue to INCREASE to 50% and higher in the final years, until the resource is ultimately (for all practical considerations) 100% depleted, thus ANY time period one chooses will be drastically shortened as it approaches its own end. <
    http://oilcrash.com/articles/arnett05.htm

    38* months ago the IEA said 'we' had 3-5 years before 'we' faced an about 9% decline in oil supply …. at best this system will be over by 2023…. according to the International Energy Agency, whom the govt use to quote whenever the suggestion that peak happened/was going to happen – in 2005, Malard, Brownlee, Hodgson, Hughes, Dynhoven have all said don't worry your silly little head Robert, peak oil WILL NOT happen until 2035 – 37

    I/we told them so

    * Listener article September 8 -14 2007 "The global oil crisis will hit home in just five years. How will New Zealand cope? "

    • Lanthanide 9.1

      Oil is going to be around for a long time yet. This talk of “100% depletion” doesn’t really mesh with reality. It also doesn’t really matter, just 20% reduced from current production will drastically change the world, and 40% will probably send it to disasterville.

      • KJT 9.1.1

        No shortage of oil. Just of cheap oil.

        Trying to compete with emerging economies like China for oil will mean that we will not be able to afford it.

        • Lanthanide 9.1.1.1

          I agree that it is possible for cheap oil to deplete entirely, but it is not clear from Robert’s post that he is only talking about cheap oil:
          “An annual depletion rate of 2% allows roughly 50 years for all of a resource to deplete”

          Also, if you consider anything below $150 a barrel ‘cheap’, then as soon as the price goes over $150/barrel then there is effectively no ‘cheap oil’ left at all because all barrels on the open market will cost at least $150 each. So really saying “cheap oil is going to deplete” doesn’t tell us anything that isn’t already obvious.

          • Colonial Viper 9.1.1.1.1

            Let’s not redefine what ‘cheap’ is here. Doing so would be to fall into a typical perceptual fallacy of us making ourselves believe that we have a grip on what is going on.

            $25-30-35/barrel oil is cheap. Its been that cheap for long periods of time in the last decade. $80-90/barrel of oil is already frakin expensive. In 2002, just 8 years ago it would have been considered in conceivable.

            Also realise that $120-140/barrel oil in early 2008 tipped the economic game into an oil shock which then precipitated the start of the subprime mortgage collapse. Which lead to the GFC.

            Yes there are over 200 billion barrels worth of tar sands in the americas (Canada and Venezuela) but as people have already pointed out we won’t be able to afford any of it. Or to put it more correctly, we won’t be able to afford the quantity and type of logistics/transport that we use now to sustain a globalised economy.

            So really saying “cheap oil is going to deplete” doesn’t tell us anything that isn’t already obvious.

            Correct. But the implications of no more cheap oil is slightly less than obvious.

            For instance. No more economic growth in the western world is a likely outcome of no more cheap oil. And what is that going to lead to? No one knows yet.

            Very interesting.

            • Lanthanide 9.1.1.1.1.1

              Germany has grown for the last 10 years despite having flat oil usage. Of course they are in the middle of europe surrounded by countries that were increasing the oil usage, but it doesn’t mean that growth is impossible in an oil constrained world.

              Also IMO anything below $250/barrel is cheap (based on all of the amazing things oil can do for us, compared to gold which does nothing), I was just using the $150 figure there to prove the point that it’s meaningless to say “cheap oil is going to reach 100% depletion” because it logically does that as soon as all barrels are sold for more than the ‘cheap’ price, despite there still being an abundant supply of oil available.

              • Colonial Viper

                Flat oil usage with cheap oil is not the same scenario at all to flat oil usage with much more expensive oil.

                Your opinion of anything under $250/barrel as being cheap is fine – as long as you realise that our modern growing economy of the last 100 years would never have happened at that price, and globalisation would also have never happened.

                • Draco T Bastard

                  Actually, we had quite a significant amount of globalisation 100 years ago, arguably more than we do today. It all went away with WW1.

                  • Colonial Viper

                    Sailing ships full of tea travelling from India to England was indeed a mark of ‘globalisation’.

                    But that is still not quite the same as the free and instantaneous flows of capital, labour, technology and jobs which has occurred in the last three decades.

      • Bored 9.1.2

        Lan, that comment seems to me a bit of both blind faith and wishful thinking. How long before its gone is not the real issue, its the response that is important. More importantly you are not alone in that outlook, there are a whole pil of alternative energy techno junkies out there who go further and even deny the issue.

        The danger with the approach of “hell we have both time and technology” is that even if it were true we would likely carry on doing what we currently do until we hit the wall…which incidently is probably what will happen. If by contrast we were to take the approach of “we have energy today, lets use it to do the things we need to do to transition to low energy” we might all be better off.

        • KJT 9.1.2.1

          We do not have time. NZ is due for a huge fall unless we develop alternatives to fossil fuels NOW.
          7 Billion a year in fossil fuels at the moment. Imagine the effect if the price doubles.

          There are compelling economic as well as environmental reasons to lower our fossil fuel use.

          • Bored 9.1.2.1.1

            You are completely correct. Fortunately for us, and unlike the majority of the world we can keep the majority of our electricity supply, something most of the rest of the world need oil and coal to achieve. We also have abundant wind power.

            My prediction for the future is that we will need to develop what I would describe as “short haul fuel” for local purposes. For example, dairy farms might use methane from cow dung to power their output, we would domestically use a lot of small scale wind and water power to do minor work such as domestic refrigeration and lighting.

            What is certain is that our transport network will change dramatically back to train and boats and shanks pony. And we will manufacture the infrastructure we need to keep things running, something we have not done for the last 30 years. Back to the future.

            All up, if you had to be somewhere at the “end of the oil age” NZ is probably a good place to be.

            • Robert Atack 9.1.2.1.1.1

              The New Zealand grid is as dependent on coal as much as any other system, our grid is dependent on factories overseas for all the ‘wing dings’ that keep the system going ie computers for a start, New Zealand is dependent on trucks and mining machinery getting diesel so they can get the copper and other minerals we import to maintain our grid, and don’t forget the tons of rare earths that go into wind turbines … all turbines/motors for that matter (magnets?)
              Iron ore for power pylons – needs coal to make steel. And the oil and gas dependent food supply that all the workers are dependent on?
              Our grid is also dependent on plastic … how are we going to replace even a damaged power socket, let alone a fridge, washing machine, or computer?.
              Then there is the question – what do we need electricity for? I mean nearly all of our appliances are imported (more oil), and 99% of our food is delivered on trucks (oil), a lot of our water and waste water is dependent on diesel driven pumps.
              Take plastic out of the hospitals and they will not be able to pull an ingrown toenail without a whole lot of pain, I would guess that every machine in hospital would not function without oil/natural gas dependent plastic.
              There is no ‘life boat NZ’ we are all in the same amount of trouble, that is what our collective apathy has bought us.
              But at least we have a thinking government, who have all our futures at heart, what with all the new roads on the books and Kiwi Saver we can’t lose.
              I feel like a beer

              • Draco T Bastard

                how are we going to replace even a damaged power socket,

                Ceramics.

                The trick isn’t to look at how we can’t do it but to look for new (or, in the case of light/power sockets, the old fashioned way) ways to do it.

                Then there is the question – what do we need electricity for? I mean nearly all of our appliances are imported (more oil),

                But they don’t have to be and we really do have the resources here to make them. Magnets don’t need rare earths in them, they’re better if they do but simple carbon steel works fine. We would need electricity to power our industrial base.

                Take plastic out of the hospitals and they will not be able to pull an ingrown toenail without a whole lot of pain,

                And why would that be? It is, after all, possible to make syringes out of glass.

                and 99% of our food is delivered on trucks (oil)

                Which would mean a switch to electric trains and trucks.

                Our future in NZ may not be as prolific as what we have now but it doesn’t have to be a massive drop in living standards either.

                • Colonial Viper

                  As you have pointed out DTB, there are many uses of oil for which alternatives are currently available.

                  The one which we are really screwed over on is oil as a transport fuel. There is no replacement source of energy able to replace oil as a transport fuel in either our national or our global economy.

                  Which would mean a switch to electric trains and trucks.

                  Our future in NZ may not be as prolific as what we have now but it doesn’t have to be a massive drop in living standards either.

                  I have my doubts as to whether or not our current electricity infrastructure is going to be sufficient to plug in and supply dozens of electric locomotives, tens of thousands of electric trucks and hundreds of thousands of electric cars.

                  Wouldn’t be surprised if we need to bring online an additional 10 GW of electrical generation to supply that demand.

                  No living standards would not need to drop hugely – I agree with you. But there will be massive change. Suddenly, half the things you eat in a day may need to come from within 200km of where you live.

                  Unless you live around Wellington no more Whittakers chocalate for you; unless you live around AKL, no more Tip Top icecream for you. Well, maybe for special occasions like a 21st, or a 60th or some such 😛

                  • Draco T Bastard

                    Suddenly, half the things you eat in a day may need to come from within 200km of where you live.

                    Oh, I can definitely see the end of long range food. It just won’t be possible to ship it fast enough (relative to productivity) without spoiling. This will force our production of food down. I see this as a Good Thing as it will allow us to shut down a hell of a lot of farms allowing nature to regenerate.

                    Ice cream can be made locally and will be as transport limitations force decentralisation. So can computers but we won’t be looking primarily at exporting them. They’ll be made for the local economy so it’ll be a repair and replacement economy rather than a major push for the latest innovation and toys. It won’t be that progress will stop but that what you have now and is working won’t be replaced until it’s truly and fully dead.

                    We’ll need more electricity than we have now but probably not too much more as we’ll find life slowing down to match the available resources rather than trying to keep it going flat out through the capitalist/consumerist delusion of infinite growth.

                    • Lanthanide

                      Actually don’t be so sure that shipping food will vanish.

                      One of the rebuttals to the ‘food miles’ concept found that something like 95% of the oil used in transporting food was from the supermarket to the consumers home, and the other 5% was from the farm, to the distribution centre, to the supermarket. Simply because of the volume of goods shipped in the backend supply, the per-unit oil cost of shipping food was minuscule… until someone buys it off the shelf and takes it home in a car that is mostly empty and has poor efficiency.

                  • Colonial Viper

                    Lan, I’m sure your figures are somewhere close to being right. BUT corporate buyers looking to take cost out of *their* logistics networks (they do not care about what the consumer pays to take groceries home, after all its not their problem) are going to start looking at buying a little more local, not a little more global, as transport prices creep up. Hence, regional producers are start going to gain in competitiveness vs centralised corporate food processors.

                • KJT

                  Lacking imports I am sure all sorts of no 8 wire entrepreneurs will spring up with replacements. Some of which may be in demand overseas so we can pay for things we really cannot make here.

                • Bastard

                  Reluctantly I am replying to your anonymous post
                  Listen to this

                  KATHY MCMAHON ON ECO-SHOCK RADIO: PEAK OIL VS. PATHOLOGICAL OPTIMISM

                  http://www.energybulletin.net/media/2010-11-01/peak-oil-vs-pathological-optimism

                  How are you going to make glass post crash?
                  96% of drugs are dependent on oil/NG, what are you going to use in your syringe?

                  [lprent: This is a forum that is not anonymous – it is pseudonymous. This allows opinions to be expressed freely within what the moderators allow. The moderators keep track of behavior – not you. As far as I’m concerned everyone including you is using a pseudonym – we only keep track of identity theft issues. Attacking someone on the basis that they’re using a pseudonym or that they are ‘anonymous’ is both incorrect (they aren’t to me if I choose to look) and irrelevant. It is also not allowed here on the basis that it inevitably leads to flamewars and bullying (the latter is a right reserved for moderators not you).

                  This is the second time I’ve had to point this out to you. The next time I’ll ban you for a period to see if it will drive the point home. Read the about and the policy, and confine yourself to our rough site rules – they aren’t onerous. ]

                  • Colonial Viper

                    natural gas is a fine feedstock to replace oil with in most chemical synthesis operations.

                    Humans have been making glass since at least the Rennaisance and before the commercial discovery of oil, right?

              • prism

                R.A. I feel like I’ve had a dose of Castor oil.

              • KJT

                RA. Mostly I agree with you, but instead of lying down and letting the whole thing roll us over we should be taking steps now to come out the other side with an intact society that can live within its means.

                Oil is produced in NZ as are iron ores.
                It would be better used for production such as plastics. Although Waikato Uni are researching resins and reinforcements from renewable s right now.

                Some oil would be required for heavy machinery and shipping, but I suspect those grades will still be relatively cheap.

  10. Adrian 10

    In Sept 2008 I asked a very senior IMF ( top half dozen, a relative) what was going to happen after those first tremors we had and the reply was that the IMF didn’t think there was anything in it, it certianly wouldn’t affect the middle classes and a few poor over committed homeowners in the US would lose their house. These are supposedly the “smartest guys in the room”, where have we heard that expression before! If I want to know how we are doing I call a mate who has bin business ( a very efficient one, he sorts all the rubbish coming in and dumps it or recycles it and only takes about 20% to the landfill) in Auckland and every Friday afternoon when he does his volumes for the preceeding week he can tell exactly how well the NZ economy is doing. BTW, if you want to know, we’re dead flat.

    • Colonial Viper 10.1

      Adrian.

      Any chance of a monthly skip bin-based economic forecast?

      I am betting that you will be able to give us a superior view of the state of the nation’s economy than Treasury/Reserve Bank.

  11. How about this for a scenario?

    The Treasury department economists are told what kind of prediction to make because the reality would cause civil unrest.

    Why? Because if people knew how badly America was really collapsing and how that will drag China and India with it to start with there is just nobody who can afford to import dairy products, meat and wood from halfway across the world you’d have a massive panic on your hands.

    Added to that the resource and currency wars the US and China are currently engaged in will drive up the price of oil and other resources to the point of making it unaffordable to the general population in the years to come. I’m being careful here and giving us sometime to adapt but the truth is that the NZ dollar is going up against the US dollar, not because we have such a hot currency but because helicopter Ben Bernanke is printing toilet paper dollars faster then we can shit on them leading the way to hyper inflation and we all know how that looks. If you don’t, think Mugabe and his marry banksters printing money like there is no tomorrow.

    Or what will happen if like it is in the books the US Federal reserve devalues the US dollar causing mayhem in the treasuries of China and other assorted countries with heaps of US treasury bonds in their vaults.

    I can tell you what’s in store in the foreseeable future. based on what you won’t find in the newspapers but is predicted by very smart and educated people and if you read it will make your hair stand on end. Such as there could be more than 11 million houses foreclosed on in the next few months alone, 50 million people are using food stamps on a regular base and according to a former Wall street editor and assistant treasury secretary because all those jobs moved to China and India and Mexico there are no jobs to be found in the foreseeable future. In the US you only get welfare support for 99 weeks and after that you’re on your own.

    According to another respected trends forecaster we will see tax revolts and blood in the street and at least one state is taking that serious and started placing armed guards in their unemployment offices.

  12. Lanthanide 12

    Marty, does the treasury prediction include details on US/NZ currency predictions, or interest rate predictions?

    If it does, digging in further and seeing if their predictions on those fronts met reality or not might help to show where a lot of their error is coming from. Eg they predict NZ$ to be 60 cents and interest rates to be 3.5%, but in reality they end up being 75 cents and 3%, could go a long way to explaining why the rest of the prediction is off.

    • Bored 12.1

      Interesting question Lan, I think the real issue with economists here is that they do not reside in the real world, and as a result reality eludes them. because they think in theories based upon abstracts as opposed to real people and events they are always going to be wrong.

      A better guide might be (as we just had demonstrated in the Hobbit fiasco) to “follow the money”. Exchange rates questions might be better posed by asking “in whose interest and how much clout do they have”? The exchange rate has bugger all to do with theories or realities, its all attached to a exchange market in which emotion and rumour runs rampant, and in which traders can short an economy for their own interest.

    • Colonial Viper 12.2

      where a lot of their error is coming from.

      I’d argue that you are looking at this from a fundamentally mistaken perspective.

      Financial economist predictions may meet reality when reality is moving at a +/-100 basis points per month rate, but that’s not what we need accurate forecasts for. What we need accurate forecasts for are the huge and now very frequent financial implosions which are occurring in our toxically over leveraged world.

      In other words, the ability of a forecaster to predict smooth sailing when the weather is fine is useless to us as a country. It gives no insight whatsoever into whether or not they can predict ‘black swan’ events which cannot be inferred by normally tracked observables.

  13. Adrian 13

    Cheap/dear oil is a bit of a misnomer. The oil that powers ships is very cheap, because its so thick you can damn near shovel it, while other oils are already 180-200 a barrel and dearer because they come out of the ground a bit special. West Texas Crude and Brent oil are the quoted prices and they are almost non-existant, which is more evidence that oil pricing is all smoke and mirrors. Apparently most of the Middle East crude costs only about 12USD because it is on long term contracts and only the royalties have to be paid by the companies as the infrastructure has been there so long it costs them bugger all to get it out and the royalties are only a small portion of the quoted price.. We’re being ripped off of course.

    • Colonial Viper 13.1

      Good point. China for instance has forward contracts with fixed prices and preferential supply for oil and gas with many countries which extend way into the future.

      They’ve already figured out the game coming up within the next 10 years.

Links to post

Recent Comments

Recent Posts

  • TISA – Another secret trade deal you may never have heard of
      This post first appeared on The Daily Blog You’ve probably heard of the Trans-Pacific Partnership Agreement (TPPA) by now and the widespread concerns around it but what about the Trade in Services Agreement (TISA) also being currently negotiated by… ...
    GreensBy Gareth Hughes MP
    5 hours ago
  • Health chickens coming home to roost as Dunedin loses right to train doctor...
    News today that Dunedin Hospital has lost orthopaedic training accreditation is a major blow and proves the Government’s prevarication is having devastating consequences, Labour’s Health spokesperson Annette King says. “Losing orthopaedic advanced training is serious. There is a knock on… ...
    1 day ago
  • $74,000 quarterly rise shows crisis out of control
    New figures out today showing Auckland house prices have spiked by a massive $74,000 in the past quarter is further evidence the city’s housing crisis has spiralled out of control, Labour’s “In spite of constant announcements and photo opportunities from… ...
    1 day ago
  • Democracy for Nauru now
    Murray McCully must send the strongest possible message to the Nauruan Government that New Zealand does not condone its actions given the disturbing developments there, Labour’s Foreign Affairs spokesperson David Shearer says. “Right now we are seeing Nauru stripped of… ...
    1 day ago
  • Recovery needs more than a rebrand
    Today’s announcement of new governance arrangements for Canterbury seems to be nothing more than a fresh coat of paint on the same old approach, says Labour’s Canterbury Earthquake Recovery spokesperson Ruth Dyson. “The Canterbury Recovery has been too slow, with… ...
    1 day ago
  • Copper decision a victory for status quo, not Kiwi households
    New Zealanders hoping for cheaper copper broadband will be disappointed by the Commerce Commission’s latest decision in the long running saga to determine the price of copper, Labour’s ICT spokesperson Clare Curran says. “In an apparent attempt to appease everyone,… ...
    1 day ago
  • It’s time for hard decisions in the Bay
     The Ruataniwha dam project is turning into a huge white elephant as the economics fail to stack up, says Labour’s Water spokesperson Meka Whaitiri.  “Ruataniwha simply doesn’t make economic sense when you look at other major irrigation schemes around the… ...
    1 day ago
  • More testing won’t lift student achievement
    Hekia Parata’s latest plan to subject school students to even more testing and assessment won’t do anything to lift the educational achievement of the kids who are struggling, Labour’s Education spokesperson Chris Hipkins says. “New Zealand school students are already… ...
    1 day ago
  • Bad week for NZ economy gets worse
    The bad news for the New Zealand economy got worse this morning with the 8th successive drop in dairy prices at this morning’s global dairy auction, again exposing the absence of any Plan B from the National Government, Labour’s Finance… ...
    1 day ago
  • System failing to protect women and children from family violence
    Last week we called for mandatory child safety investigations in domestic violence cases. This came after the coronial inquiry into the deaths of Bradley and Ellen Livingstone and the verdict in the trial of the west Auckland boys charged with… ...
    GreensBy Jan Logie MP
    2 days ago
  • Backers banking on social bonds cash?
    The Government is refusing to say what the $29 million it has set aside for its controversial social bonds programme is for, raising suspicions it is an upfront payment to the project backers, Labour’s Health spokesperson Annette King says. A… ...
    2 days ago
  • Plastic Free July
    Today is the start of Plastic Free July. Since its inception in Perth, Western Australia four years ago, more and more people and organisations from around the world have joined the call to refuse single use plastic products. Nearly all… ...
    GreensBy Denise Roche MP
    2 days ago
  • State house sell off Bill gives extraordinary powers
    The Government is about to give Ministers extraordinary powers to take direct personal control of selling state houses, exempting Ministers from normal legal requirements and leaving the sale process wide open for corruption, Labour's Housing spokesperson Phil Twyford says. The… ...
    2 days ago
  • Cash for charter schools, mould for state schools
    At a time when state schools are struggling in old, cold, mouldy buildings and can barely make ends meet, the National Government is shovelling cash at charter schools which aren’t even spending the funding on kids’ education, Labour’s Education spokesperson… ...
    2 days ago
  • New Zealand needs a wise response to climate change
    Today in Parliament I got to hear from a group of New Zealanders who are concerned for the future of our country. Called Wise Response, the group is a broad coalition of academics, engineers, lawyers, artists, sportspeople and others who… ...
    GreensBy Russel Norman MP
    2 days ago
  • No alternative as waste scheme trashed
    Nick Smith must explain how he is going to prevent contamination of New Zealand’s ground and water with liquid and hazardous waste after scrapping the only monitoring scheme and offering no replacement, says Labour’s Environment Spokesperson Megan Woods. “From today,… ...
    2 days ago
  • Flawed system rates death traps as safe
    ACC Minister Nikki Kaye needs to come clean about what really lies behind the reclassification of 18 vehicles in her new motor vehicle registration system introduced today, Labour’s ACC spokesperson Sue Moroney says. "New Zealanders deserve the truth about the… ...
    2 days ago
  • Tiwai Smelter and 800 workers left in limbo
     Workers at Tiwai smelter and the people of Southland have once again been left in limbo over their future in the ongoing debacle over whether the plant stays open, says Labour’s Leader Andrew Little.  “It’s not good enough that after two years of… ...
    2 days ago
  • New twist in state house sell-off saga
    The Government has opened the door to buyers of state houses simply being landlords and not required to provide social services, Labour’s Housing spokesperson Phil Twyford says. The Prime Minister said at his post-Cabinet press conference buyers would not “have… ...
    2 days ago
  • Government fees will hit charities hard
    National’s decision to ignore the concerns of charities will see the voluntary sector face hundreds of thousands of dollars in new costs if the Policing (Cost Recovery) Amendment Bill passes, says Labour's Community and Voluntary Sector spokesperson Poto Williams. “National’s… ...
    3 days ago
  • Four out of ten for Simon’s Bridges
    The Transport Authority’s decision to fund only four of the 10 bridges promised in National’s shameless Northland by-election bribe is a huge embarrassment for Transport Minister Simon Bridges, Labour’s Transport spokesperson Phil Twyford says. “After one by-election poll showed they… ...
    3 days ago
  • Falling consents adding to Auckland housing woes
    Falling numbers of building consents being issued in Auckland will add to the city’s housing shortfall and fuel skyrocketing house prices, Labour’s Housing spokesperson Phil Twyford “The Productivity Commission found there was a shortfall of around 32,000 houses by the… ...
    3 days ago
  • So Mr English, do you have a plan?
    DIpping confidence about jobs, wages and shrinking exports are highlighting the lack of a plan from the government to diversify the economy and build sustainable growth, Grant Robertson  Labour’s Finance Spokesperson said. " Data released over the last week… ...
    3 days ago
  • Serious risks to tenants and assets in sell-off
    Overseas evidence shows there are serious risks around the Government's plan to sell off state houses to social housing providers, Opposition Leader Andrew Little says. “In the Netherlands – where community housing providers supply the majority of social housing –… ...
    3 days ago
  • Land of milk and money
    Kiwi families are paying over the top prices for their milk and someone is creaming off big profits, says Labour’s Consumer Affairs spokesperson David Shearer. “In 2011 the Government told us high New Zealand milk prices were a natural result… ...
    5 days ago
  • MoBIE largesse doesn’t stop with TVs and hair-straighteners
    The number of MoBIE staff earning more than $150,000 has risen 23 per cent in just a year, Labour’s Economic Development Spokesperson David Clark says. Documents obtained from the Ministry of Business, Innovation and Employment show there are now nearly… ...
    5 days ago
  • English wants to flog state houses to Aussies
    Bill English’s admission that he would sell hundreds of New Zealand’s state houses to the Australians is the latest lurch in the Government’s stumbling, half-baked housing policy, Labour’s housing spokesperson Phil Twyford says. “Bill English should face reality and admit his… ...
    6 days ago
  • Exports continue to fall as Government fails to diversify
    The Government quickly needs a plan to diversify our economy after new figures show that exports are continuing to fall due to the collapse in dairy exports, Labour's Finance Spokesperson Grant Robertson says. “Dairy exports fell 28 per cent compared… ...
    1 week ago
  • Government inaction leads to blurring of roles
    The Treasury wouldn’t have had to warn the Reserve Bank to stick to its core functions if the Government had taken prompt and substantial measures to rein in skyrocketing Auckland house prices, Labour’s Finance spokesperson Grant Robertson says. “The problems… ...
    1 week ago
  • Courthouse closures hitting regions
    The Government’s decision to shut down up to eight regional courthouses, some supposedly only temporarily for seismic reasons, looks unlikely to be reversed, Labour’s Justice spokesperson Jacinda Ardern says.“The move has hit these regions hard, but appears to be a… ...
    1 week ago
  • A Victory for Te Tiriti o Waitangi
    This week my partner, who has a number of professions, was doing an archaeological assessment for a District Council. He showed me the new rules around archaeologists which require them to demonstrate “sufficient skill and competency in relation to Māori… ...
    GreensBy Catherine Delahunty MP
    1 week ago
  • Tough bar set for Ruataniwha dam
     Today’s final decision by the Tukituki Catchment Board of Inquiry is good news for the river and the environment, says Labour’s Water spokesperson Meka Whaitiri. “Setting a strict level of dissolved nitrogen in the catchment’s waters will ensure that the… ...
    1 week ago
  • Minister for Women and National missing the mark – part two
    The Minister for Women was in front of the select committee yesterday answering questions about her plans for women. Some useful context is that we used to have a Pay and Employment Equity Unit within the then Department of Labour… ...
    GreensBy Jan Logie MP
    1 week ago
  • Lavish penthouse spend confirms culture of extravagance
    At the same time thousands of New Zealanders are being locked out of the property market, the Government is spending up on a lavish New York penthouse for its diplomats, Labour’s Foreign Affairs spokesperson David Shearer says. News that taxpayers… ...
    1 week ago
  • Māori Television exodus cause for concern
    The shock departure of yet another leading journalist from the Native Affairs team raises further concern the Board and Chief Executive are dissatisfied with the team’s editorial content, says Labour’s Māori Development spokesperson Nanaia Mahuta. “Annabelle Lee is an experienced… ...
    1 week ago
  • Million-plus car owners to pay too much ACC
    More than a million car owners will pay higher ACC motor vehicle registration than necessary from July, Labour’s ACC spokesperson Sue Moroney says. “During a select committee hearing this morning it was revealed that car owners would have been charged… ...
    1 week ago
  • Bill will restore democracy to local councils
    A new Labour Member’s Bill will restore democracy to local authorities and stop amalgamations being forced on councils. Napier MP Stuart Nash’s Local Government Act 2002 (Greater Local Democracy) Bill will be debated by Parliament after being pulled from the… ...
    1 week ago
  • Minister for Women again misses the mark – part one
    Yesterday I asked the Minister for Women about the government’s poor performance on it’s own target of appointing women to 45% of state board positions. I challenged why she’d put out a media release celebrating progress this year when the… ...
    GreensBy Jan Logie MP
    1 week ago
  • Banks enter Dragon’s Den in pitch for Government’s mental health experi...
    Overseas banks and their preferred providers were asked to pitch their ideas for bankrolling the Government’s social bonds scheme to a Dragon’s Den-style panel, Labour’s Health spokesperson Annette King says. Dragon’s Den was a reality television series where prospective ‘entrepreneurs’… ...
    1 week ago
  • Global Mode bullying won’t stop people accessing content
    It’s disappointing that strong-arm tactics from powerful media companies have meant Global Mode will not get its day in court. Today a settlement was reached terminating the Global Mode service, developed in New Zealand by ByPass Network Services and used… ...
    GreensBy Gareth Hughes MP
    1 week ago
  • More questions – why was the Former National Party President involved wit...
    Today in Parliament Murray  McCully said the reason Michelle Boag was involved in 2011 in the Saudi farm scandal was in her capacity as a member of the New Zealand Middle East Business Council. The problem with that answer is… ...
    1 week ago
  • Minister must explain Maori TV interference
    Te Ururoa Flavell must explain why he told Maori TV staff all complaints about the CEO must come to him – months before he became the Minister responsible for the broadcaster, Labour’s Broadcasting Spokesperson Clare Curran says. “Sources have told… ...
    1 week ago
  • KiwiSaver takes a hammering after the end of kick-start
    National seems hell bent on destroying New Zealand’s saving culture given today’s news that there has been a drop in new enrolments for KiwiSaver, says Labour’s Finance spokesperson Grant Robertson.  “New enrolments for the ANZ Investments KiwiSaver scheme have plunged… ...
    1 week ago
  • Straight answers needed on CYF role
    The Government needs to explain the role that Child, Youth and Family plays in cases where there is evidence that family violence was flagged as a concern, Labour’s Children’s spokesperson Jacinda Arden says. “The fact that CYF is refusing to… ...
    1 week ago
  • Prime Minister confuses his political interests with NZ’s interest
    The Prime Minister’s statement in Parliament yesterday that a Minister who paid a facilitation payment to unlock a free trade agreement would retain his confidence is an abhorrent development in the Saudi sheep scandal, Opposition leader Andrew Little says.  ...
    1 week ago
  • #raisethequota
    Last Saturday was World Refugee Day. I was privileged to spend most of my day with the amazing refugee communities in Auckland. Their stories have been inspiring and reflect the ‘can-do’ Kiwi spirit, even though they come from all different… ...
    GreensBy Denise Roche MP
    1 week ago
  • Dairy conversions causing more pollution than ever, report shows
    The Parliamentary Commissioner for the Environment (PCE) released two reports on freshwater quality and management last Friday. The water quality report shows that dairy conversions are hurting water quality and says that despite great efforts with fencing and planting, large… ...
    GreensBy Catherine Delahunty MP
    1 week ago
  • Employers want urgent action on health and safety
    Moves by National to water down health and safety reforms have been slammed by employers – the very group the Government claims is pushing for change, says Labour’s spokesperson for Labour Relations Iain Lees-Galloway. “The Employers and Manufacturers’ Association has… ...
    1 week ago
  • Labour calls on all parties to end coat-tailing
    Labour MP Iain Lees-Galloway is encouraging all parties to support his Bill to end the coat-tailing provision when it is debated in Parliament this week.  “New Zealanders have sent MPs a clear message. An opinion poll found more than 70… ...
    1 week ago
  • Government social sector reforms
    I’ve written previously about the major shake-up that is happening in the provision of government and community services. Yesterday, the Minister of Social Development spoke publically about what these reforms are likely to look like within MSD. There are major… ...
    GreensBy Jan Logie MP
    1 week ago

Public service advertisements by The Standard

Current CO2 level in the atmosphere