- Date published:
2:15 pm, June 3rd, 2011 - 7 comments
Categories: economy, Unions - Tags: bill rosenburg, debt, economic alternatives
With the news that Treasury are already disavowing their forecasts a whole 2 weeks after the Budget, you might wonder where some better economic advice might be found. One that doesn’t predict that any National budget will create 170,000 jobs (and then have to change its mind).
The CTU’s Economic Bulletin shows some clear thinking. Here’s its Summary:
The 2011 Budget was a victory of story-line over needs. The story was that the New Zealand
government has a debt problem. When confronted with the fact that government debt is not a
problem by world standards – one of the lowest in the OECD – the government acknowledges
that the real problem is private overseas debt. But it says rating ratings agencies “increasingly
lump private and public debt together when looking at sovereign ratings”. Maybe so, but that
is a long term issue. Does it mean that the government should cut spending sharply when we
have not yet got out of recessionary conditions? The question is not “should we reduce debt?”
but “how soon?” and “which debt – government or private?”
It is much too soon. As we said in our pre-Budget commentary, the biggest immediate danger
to New Zealand as a whole is the ongoing recession – an economy with only fragile signs of
recovery and continuing high unemployment. The government still has a vital responsibility to
ensure through economic stimulus that the economy doesn’t go downhill again and to bring
down unemployment. The cuts the government has made to spending mean that the stimulus
has suddenly been withdrawn, which risks continuing high unemployment and even return to
recession. Meanwhile, overseas investors are queuing to lend to the government. When
weighing up the risks between a high likelihood of continuing high unemployment compared
to a low probability of trouble with creditors, the answer seems clear.
The Budget has no plan to put right New Zealand’s social and economic imbalances, and does
little to start cutting back the overseas private debt. It seems to be relying heavily on
reconstructing Christchurch, catching up with backlogs in investment built up during the
recession, and leaky building repairs to get the economy moving. The Budget of a thousand
cuts put debt and deficits ahead of people’s needs and a plan for the future.
It’s interesting that the Government – with their concern about debt – has put in a budget that even in the rosy Treasury forecasts saw net (public + private) debt start rising again in a few years’ time. If it’s debt they’re worried about and trying to alarm everyone about – why aren’t they putting in savings policies that will do something about it?
The whole CTU report is interesting, showing unnecessary concern about government debt, National’s lack of economic plan, growing inequality, and dangers of possible high unemployment or even double-dip recession.
It comes out monthly and if you want to know the economic state of the nation, it’s worth a read.
Private debt in NZ will remain an issue while we continue to have a love affair with housing and relatively cheap money borrowed at low interest rates.
No-one in this government of the last government has the balls to do what needs to be done in relation to the money flowing into housing in nz.
capital gains tax?
No. Regulatory control requiring higher deposits for securing a loan.
Levels could be set to favour productive investment and discourage speculation in housing.
Moreover, it will increase savings. Addressing two birds with one stone.
But they are not cheaper! The real cost of borrowing is ahrd to see but everywhere.
Its the crappy old tin of food you brought, its the shameless sales techniques, everyone
has to pay a risk premium to borrow, then has to pay higher costs because of all the
indebted farmers, businesses and home owners who were sold cheap mortgages
and are now being carried by fewer and fewer taxpayers. So much so that the
National plan is to get us even deeper with more cruel crude economics that
accelerate the decline. When a home owner or farmer comes to renegotiate their
debt they compete with new and existing ‘real’ growth industries who know not
only will they pay more if they set up or stay in NZ, but will be hammered the
next time the currency goes high and they have to pay even more in lost profits
to sustain all those in debt.
What happened was simple, instead of keeping an eye on lending, the naff
economists like Brash and English, bemoaned how hard Labour government
was on farmers. Farmers who reckless grew leveraged debt, property
developers who reckless grew leverage debt. So government instead of
behaving like an adult and reined in borrowing, and provided relief to
manufactures who could stick around export higher valued goods and
services. But no, the right said government was to be hands off, yet still
government intervenes in farming to get them off their pollution costs.
The whole economy is rigged abound keeping people in debt and
OZ banks and their currency traders in loads of money.
If UK, OZ, have GST off food, books, child goods, and CGT, then
I think every new finance minister should be forced to explain why we
cannot. It harms our ability to attract and retain companies and employees
if the NZ economy is rigged to help foreign banks and the new port union
– the neo-liberals national socialist union.
David Cunliffe has a very good roadshow with power point on the NZ economy and implications of the 2011 Budget and why and how Treasury is only right once in a blue moon – all in 20 minutes, and very easy for the even the economically illiterate to understand.
CTU also calculate that even though health was supposedly the winner in the budget and got rises, it is in fact $127 million short of the amount they need to provide the same services (given increasing and ageing population, inflation, wages etc).