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Debt an excuse for enriching the elite

Written By: - Date published: 12:45 pm, January 27th, 2011 - 24 comments
Categories: privatisation, spin - Tags:

In 2008, John Key’s line was ‘New Zealand doesn’t have a debt problem, it has a growth problem’. In Budget 2010, he said the Crown would be back into surplus in record time. In December, he said debt wouldn’t force a downgrade. Now, he says debt is such a problem we need to slash and sell. When did he mean what he said? Never. It has never been about debt.

Key has three, sometimes conflicting, goals in government: be adored, don’t do too much hard work, and funnel more of the country’s wealth to National’s elitist supporters.

Debt or its lack is just a convenient excuse for policies that enrich the wealthy (and the illiterate will buy it wholesale).

In 2008, even though the debt projections were worse (remember, the ‘decade of deficits?’) Key said that debt wasn’t a problem, therefore we could afford to borrow $1.5 billion for the April 2009 tax cuts directed at the rich (does anyone even remember those?).

In Budget 2010, the net debt projections had improved dramatically to the point where we’ll back in surplus in four year’s time. Our government remained one of the least indebted in the world, and even our country as a whole was less indebted – our net international investment position has improved from debt equaling 93% of GDP to 85% of GDP as people borrow less. Again, this was cause for tax cuts directed at the rich, which aren’t fiscally neutral but will, according to Treasury, cost $1 billion over the next four years.

But, now, for no apparent reason, debt is supposedly such a problem we need to start slashing spending (the $800 million nominal increase is barely enough to cover health’s minimum increase due to inflation and population growth, everything else will be cut in real terms) and have a fire sale of assets. Yet, despite debt suddenly being a crisis issue, I notice that Key hasn’t reversed the tax cuts that he made when he said debt wasn’t a problem.

Audrey Young hits the nail on the head when she writes:

“Even if these had been golden days, and there had been no global recession to put the Government’s books in a parlous position about now National would be outlining a programme for partial asset sales to take into the 2011 election.
Good times or bad times, it was going to be part of its agenda for a second term… And what has become clear in the past two days is that National’s big message this year is going to be debt – fear of debt.”

Key wants to sell $10 billion of assets, supposedly to ‘Kiwi mums and dads’. How many of the 1.5 million households can afford to stump up $6,600 to buy their share? Not too many, I dare say. Certainly not the 50% of households with no net savings. Who will buy instead? The rich, and overseas interests.

Key says it’s slash and sell or borrow more but Bernard Hickey shows that selling assets is more expensive than borrowing:

In total, the four SOEs potentially up for sale generated total dividends last financial year of NZ$732.5 million and shareholder (government) equity stood at NZ$9.642 billion. This implies a combined (and very raw) dividend yield of 7.6% last year.

Yet the government is currently having to pay around 5.5% for the new debt it is selling, mostly offshore.

So on the face of it the government is a net loser by selling half of these state assets and avoiding having to raise new debt.

Look past the excuses about debt. Look at who benefits from each of these policies. Like I said yesterday, the question for each policy is ‘cui bono’ and the ones who have benefited from Key’s policies every time are the rich.

24 comments on “Debt an excuse for enriching the elite ”

  1. Nick K 1

    Key has three, sometimes conflicting, goals in government: be adored, don’t do too much hard work, and funnel more of the country’s wealth to National’s elitist supporters.

    And you wonder why no one listens to the Left anymore, after drivel such as this.

    I am sure you don’t actually believe this. So why then do you write it?

    • Blighty 1.1

      isn’t that an accurate summary of his leadership to date?

    • Blighty 1.2

      what do you know! After announcing a plan to do number 3 – funnel more of the country’s wealth to National’s elitist supporters – yesterday, today he’s doing numbers 1 and 2 again! http://www.stuff.co.nz/sport/rugby/news/4588618/PMs-son-offers-rugby-tips-to-baseball-star

      • Lanthanide 1.2.1

        I saw that. Pathetic, isn’t it?

        Wonder if the story has been sitting on the back-burner, waiting for Key to OK it to go to the press. He suddenly decided he needed a distraction run after the overwhelming negative response from their hokey plans.

    • Colonial Viper 1.3

      I am sure you don’t actually believe this. So why then do you write it?

      More mind-reading RWNJ’s? Where are they getting all their telepathic powers from?

    • Marty G 1.4

      Show me evidence to the contrary and then we’ll talk

    • Kaplan 1.5

      Hey Nick. Instead of cherry picking what you think is a nice soft target from the post why don’t you go for something with substance. How about refuting the basis of the argument and tell us how each of Key’s conflicting statements on debt could be true without contradicting the other.
      For bonus points see if you can do it in such a way that both writer and reader are able to maintain a straight face.
      Capthcha = clues. No, no clues here. JK is still clueless.

  2. Adolf Fiinkensein 2

    Yes, he will be enriching the elite. All those hundreds of thousands of government employees earning over $100k for sitting on their arses writing reports for other leather arses to read and reply to.

    Now their super funds will be able to invest in their own energy sector.

    Good eh?

    Your only real problem is you forgot to tell Cunliffe.

    • RedLogix 2.1

      All those hundreds of thousands of government employees earning over $100k for sitting on their arses writing reports for other leather arses to read and reply to..

      mmm….. lets say 200,000 govt leather arses, all being paid an average of say $120k, totalling around $24b pa. Or something in the region of 40% of all govt expenditure.

      Now their super funds will be able to invest in their own energy sector.

      Possibly yes, if somehow you could restrict ownership to such entities. But if nothing else free trade rules make that problematic and very unlikely in the long run.

      The mere fact that you would write such poppycock tells us all that you know nothing of how govt works… or what it really spends it’s money on.

    • Colonial Viper 2.2

      All those hundreds of thousands of government employees earning over $100k for sitting on their arses writing reports

      Many of the new ones hired went straight to the PM’s office, whose staff numbers have been climbing relentlessly. What do you say about that?

    • Blighty 2.3

      Moronic Adolf.

      “All those hundreds of thousands of government employees earning over $100k for sitting on their arses writing reports for other leather arses to read and reply to.”

      most of the 250,000 government employees are doctors, nurses, teachers, police, military. Some senior doctors, professors, and principals are on more than $100,000 but not many.

      There are about 40,000 public servants. Of them and the people the Remuneration Authority covers (MPs, judges), less than 5,000 are on more than $100,000.


      The average public sector wage is pretty much the same as the private sector when you bear in mind that the government doesn’t employ checkout operators, cleaners, and other low income jobs.

  3. Sanctuary 3

    The most encouraging thing so far has been the skepticism of the average New Zealander to all this. The empty slogans of the 1980’s and 1990’s – “Ma and Pa investors” – have been greeted with an assortment of guffaws and downright cynicism from an electorate that remembers these hollow words from hollow men last time around.

  4. The bit that stuns me about the right wingers’ view of the world is that they see the New Zealand state as being no different to private owners, apart from having less commercial nous.

    They do not seem to understand that the income stream goes straight into our coffers and reduces the need to tax to build schools, provide health assistance or pay benefits. They do not comprehend that the structure and make up of our power system is so important in so many ways and communtiy control is absolutely vital.

    And they support Key in giving unaffordable tax cuts that make the country’s books worse AND in attempting to divest the state of a good income stream which also makes the country’s books worse.

    He relies on superficiality and the short term memory of the swinging voter. Remember when he said that we were “aggressively” coming out of recession. As if.

    Really makes you nostalgic for Helen and Cullen.

    Key does not seem to be able to look past November 2011. In so many areas, ACC, Climate change, the affordability of retirement and now crown control of the power system his decisions are short sighted and either populist or a reward for his hidden bagmen.

    • Olwyn 4.1

      If Helen Clark was the nanny, as the media depicted her, John Key is the con-man uncle, sending the kids to the movies so he can sell their bikes while they’re not looking and pretend they must have been stolen.

      • Colonial Viper 4.1.1

        and pretend they must have been stolen by some passing brown people.

        Just for clarity, you understand, Olwyn.

  5. ianmac 5

    A very intelligent take from Keith Ng http://publicaddress.net/onpoint/election-2011-go-/#comments
    15:05 Jan 27, 2011 7
    Yes, you can sell your house to pay off the mortgage, then you’ll be mortgage-free. But you’ll also be minus a house.

    In New Zealand’s case, we can sell our SOEs to pay off debt, which means we’d pay less interest to overseas creditors. But if we sold the SOEs to foreigners, then we’d just end up paying dividends to foreign investors instead. This may actually be worse than paying interest on debt.

    • Lanthanide 5.1

      That’s exactly what Bernard Hickey’s quote in the post says. The government is getting a bigger % return on it’s asset than it pays in interest for money it has to borrow.

      • ak 5.1.1

        Even the normally ACToid commenters on Hickey’s blog are panning it with vim. Another opinion-leading Joycemedia failure on top of Mining, Mt Albert, Lenslide (and soon, one warrants, Pike River).

        Big cracks appearing in the “smiley economic wizard” dam, more rain on the way, watch the next poll.

        • marsman

          A purler for the swine?

          ps have sent the ‘not for sale’ graphic to friends in e-mails and put some on Facebook. Is that ok person who created the logo?

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