Grant Robertson is a financial genius

Written By: - Date published: 1:22 pm, October 9th, 2018 - 80 comments
Categories: business, Economy, grant robertson, labour, Steven Joyce, tax, the praiseworthy and the pitiful - Tags:

Remember the $11.5 billion hole that Stephen Joyce and National said Labour was going to leave the country with?  Well the 2017/18 financial books have been completed and released and the Government’s surplus was $2.4 billion greater than forecast.

From Tova O’Brien at Stuff:

The Government is awash with cash, recording a surplus of $5.5 billion – $2.4 billion more than forecast.

The 2017/18 financial books have been opened and major tax haul of $80.2 billion has left the government flush.

But Finance Minister Grant Robertson is warning about risks like international trade wars and mycoplasma bovis or other biosecurity incursions which could eat into the surplus.

The good thing is that there should be plenty now for the Government to deal properly with the Teachers’ pay  negotiations.  And the other good think is that it finally buries the lies that National was peddling about Labour’s fiscal ability.

80 comments on “Grant Robertson is a financial genius”

  1. Dukeofurl 1

    “The Government is awash with cash, recording a surplus of $5.5 billion – $2.4 billion more than forecast.”

    Not awash with cash . Its accrual accounting so is NOT a cash amount, as it excludes capital spending.

    On a cash basis they are still borrowing, not that there is anything wrong with that as its still a good result.

    Its pathetic that experienced gallery reporters made simple mistakes in news reports

    • Enough is Enough 1.1

      The Press Gallery has no understanding of accounting at all as is shown by this.

      Under both governments the media just publish what they are told by the Finance Minister without any independent thought or analysis.

      It is embarrassing.

      • alwyn 1.1.1

        “The Press Gallery has no understanding of accounting at all as is shown by this”.
        Why are you complaining?
        After all we have a Prime Minister who, when given an early briefing on this material, thought that these numbers were the GDP figures.
        She doesn’t even know what GDP is. Now that level of ignorance really scares me.
        It is a great deal more worrying than a bunch of idiot reporters.

        • Dukeofurl 1.1.1.1

          It was just a mis spoke – from the context she should have said , ‘I dont get the GDP ‘ and then talked about – these numbers- which she does have advance knowledge of .
          You be suprised who previously was ‘mis spoken’

          https://www.nbr.co.nz/article/i-misheard-mispoke-did-not-lie-%E2%80%93-key-166017
          “I misheard, misspoke, but did not lie – Key”

          • alwyn 1.1.1.1.1

            You are stretching a bit, aren’t you?
            She was asked about GDP.
            She asked for the question to be repeated. The interviewer again said GDP.
            She then said GDP herself and started to talk about having had “hints” of the result. That is NOT that she “misheard”.
            She clearly hadn’t the slightest idea what GDP was. Her error was vastly greater than being “misspeaking” and certainly wasn’t “mishearing”.
            Good try as a defence but no cigar.

            • Dukeofurl 1.1.1.1.1.1

              So that shows that she was having trouble hearing the word… which was the case.

              Who really is listening that close to Hoskings words anyway… perhaps a baby was crying at the other end !

            • SPC 1.1.1.1.1.2

              There were coming ascross her desk figures showing revenues above forecast, something that will not occur if the GDP figure is going to disappoint.

              Who exactly is not showing economic nous, Mike Hosking et al?

      • Dukeofurl 1.1.2

        “media just publish what they are told by the Finance Minister ”

        Ah no . Its the year end June 2018 Financial accounts as published by Treasury.

        Not that it would help you but you should try the source data some time
        https://treasury.govt.nz/sites/default/files/2018-10/fsgnz-year-jun18.pdf

  2. Sacha 2

    “there should be plenty now for the Government to deal properly with the Teachers’ pay negotiations.”

    Yes. Let’s see the priorities.

    • Dukeofurl 2.1

      No its not. Its not a cash surplus.

      if the teachers couldnt be bothered asking for ‘more pay’ during the Key years why should they expect a full catch up now ?

      • mickysavage 2.1.1

        It is OBEGAL. Sure capital comes out of this and borrowing but it is more money the Government has than was forecast.

      • Fran 2.1.2

        Teachers did ask for payrises during the “Key” years and ended up having to swallow dead rats because ” the global financial crisis”. Big promises were made that if teachers were good and swallowed the rats then there would be a payoff in the next round. National thought they would still be in Government, Labour has inherited yet another mess of Nationals making here.

        • In Vino 2.1.2.1

          As I remember, PPTA (Secondary Schools) were all set to make a big, big fight in 2011. But then the Christchurch earthquakes happened. PPTA had to can it all. You can’t go on National strike etc when most will blame you for being selfish, and detracting from the disaster-stricken… So they accepted one of those false offers like the current one: BIG % number – BUT -over 5 years; only a small percentage per year, each one eaten away by over 1% inflation for that year… And that is why teachers’ pay has slipped behind other professions.
          Teachers were going to make a last stand this year regardless of which party was Govt. People like Dukeofurl need to stop moaning about picking on Labour, and look at the real problem.

        • Dukeofurl 2.1.2.2

          GFC ended largely by 2012. What happened in the 5 years after that ?

          Even by 2016 I think the claim was 1 or 2% . What were they thinking, that 3 or 4% was worth going on strike for ? This was 2016 or so. not during the peak GFC of 2008 -2011

          • In Vino 2.1.2.2.1

            GFC had nothing to do with it. Ended largely by 2011 as much as 2012. The employer-favouring laws give only a limited period where strike action is legal, and, as I said, the Christchurch earthquakes thwarted PPTA’s intentions of fighting in 2011.
            I believe the next round of negotiations and possible strikes etc was in 2015, when strikes were possible again. I was in semi-retirement then, and cannot recall what went on. But these disastrous agreements that last over a number of years leave few windows of opportunity for strike action.

    • + 1 yep and more, much more for mental. Health.

      • Dukeofurl 2.2.1

        Wheres the trained staff ….. more magic wandism

        As Cullen showed , you have to put money aside when economy is humming along as bad times could be not too far away.

        • Siobhan 2.2.1.1

          Its not a surplus (or whatever) when your tax payers are desperate for a roof over their heads….this is the bad times, and best fixed while we still can, before the state of inequality gets worse, because inequality is a thing far easier to halt than to turn around. And if we don’t get on top of it before the next crash things may get ugly.

          https://www.odt.co.nz/news/national/rnz/napier-rental-gets-900-inquiries

          • marty mars 2.2.1.1.1

            Yep exactly.

          • cleangreen 2.2.1.1.2

            Wow Siobhan I have some flats there and we are only getting $250 weekly!!!!!

            Time to increase the rent looks like eh!

            • Siobhan 2.2.1.1.2.1

              Well, you could try.
              Though its also an area with the crappiest wages.
              Maybe Labour will increase the rent subsidies for you. In fact they are bound to. Or you could just wait for the next rise in the minimum wage and increase your rent to take the lot.

              Of course both these options are morally dubious. But if Labour allows and in fact encourages such exploitation then who am I to judge.

              Of course such actions have been taken by landlords throughout history, and usually end badly soon or latter.

              Then again, you could keep the rent at your current a fair amount, that way, once you have the right tenant, you will know they will do everything to stay long-term.

              Always an advantage.

              Nothing quite like a satisfied customer.

              It makes being in business so much pleasanter.

        • marty mars 2.2.1.2

          You are out of touch. I had a friend call the suicide helpline last night for someone they were concerned about. No one available – they called back in 10. You don’t think money could help that?

  3. Pete 3

    What I’ve got out of it so far:
    The Press Gallery is hopeless, Jacinda Ardern is is hopeless, Grant Robertson is hopeless and Steven Joyce is a genius.

    That’s right isn’t it?

    • Dukeofurl 3.1

      Joyce was liar – we all knew that before the election.

      • cleangreen 3.1.1

        Correct Dukeofurl= Steven joyce was a bald faced lair.

        he lied that he didn’t do anything ‘improper’ ever and this showed he made a deal that Matthew Hooten stated in this clip with a roading contractor illegally for amost $100 million Matthew said in front of Radio live Mark Sainsbury, Michelle boag, Mike Williams and Duncan Garner.at (26 minutes and 52 seconds on the clip) .

        http://www.thepaepae.com/matthew-hootons-assertions-re-the-prime-ministers-office/35076/
        I’ve archived it here too (audio player below) because RadioLIVE only keeps 7 days audio available and I’ve noticed sometimes Mediaworks launders its talkback station’s audio feed when things get … contentious.

        Mark Sainsbury hosts ‘Sunday morning’ at RadioLIVE with guests Michelle Boag, Mike Williams, Matthew Hooton & Duncan Garner 31 Aug 2014
        MP3 file
        – P

        enclosure: http://www.thepaepae.com/wp-uploads/2014/08/Boag-Hooton-Williams-RadioLIVE-Sunday-morning-31Aug14.mp3 24057464 audio/mpeg

      • Incognito 3.1.2

        The L-word gets doled a wee bit too easily nowadays especially when referring to politicians with whom one doesn’t agree.

        My view is that Joyce smoked his own dope and was mesmerised by his own righteousness and intellect, with a bit of help from MSM, which really made him more human than Borg. When a dildo landed on his face he actually showed a SoH too. Anyway, he’s gone and now we have Grant the Genius …

        • RedLogix 3.1.2.1

          The L-word gets doled a wee bit too easily nowadays especially when referring to politicians with whom one doesn’t agree.

          Yeah. It’s frequently used as a lazy shortcut to outrage; not helpful.

          • Incognito 3.1.2.1.1

            And then there’s the H-word, the R-word, the C-word (no, not Marama’s one), the S-word, etc.

            When I was young, I loved sticky labels but now they have lost their appeal and they’re on par with chewing gum trodden into the carpet and cigarette butts cast in pot plants. Filthy lazy habits some people have …

            Sorry, I seem to find myself bored tonight 🙁

  4. Stuart Munro 4

    I’m not sure about genius.

    He seems to be vaguely competent, which is certainly more than can be said for the last lot.

    Rockstar pretensions notwithstanding.

    • mickysavage 4.1

      Rhetorical florish in response to National’s attacks from last year.

      • Dukeofurl 4.1.1

        Does Robertston have a MNZGA cap ?

      • Stuart Munro 4.1.2

        It’s a Blomkvist perspective: looking around NZ parliament one does not see very many people in immediate danger of Nobel nomination. The musical talents of the last lot fell a bit short of Eminemesque too – if they’d been up to playing a cover version the artist might’ve been more sympathetic.

        The use of ‘genius’ therefore is lazy reporting at best, but more often than not, not reporting at all. Mere repeating of unaltered (in fact probably unread) press releases.

        Which is so far short of basic journalism standards that those responsible should be receiving no more than cadet pay rates.

        • mickysavage 4.1.2.1

          Does this mean I get paid? 😀

          • Stuart Munro 4.1.2.1.1

            On the whole you probably do rather better than a great number of MSM professionals – which damns you with faint praise and damns them utterly – they had one job…

          • greywarshark 4.1.2.1.2

            We have talked on this blog about chocolate fish in the past, which is a cheery gesture, but the trouble is I feel that you are priceless so what’s to be done there. Are you angling for a Chrissy present. You and Lynn deserve one. A nice carton of boutique ale perhaps?

        • Dukeofurl 4.1.2.2

          The people in parliament , you are so dismissive of Stuart Munro, all have one thing that you will never have .
          They were elected .

          • Stuart Munro 4.1.2.2.1

            I’m not dismissive of them – only of the claim that they are geniuses. Which is as absurd of Robertson as it was of Muldoon. Or English.

      • JC 4.1.3

        “$5.5b surplus demands respect”

        “Comment – The Government accounts are in a strong position and the envy of a lot of countries around the globe.”

        https://www.radionz.co.nz/news/on-the-inside/368291/5-point-5b-surplus-demands-respect

        And as i recall.. aren’t they also, NOW, paying into the ” Cullen Fund”, i.e. Superanuation … unlike the previous several years!

        https://www.beehive.govt.nz/release/super-fund-contributions-secure-generational-legacy

        Respect!

  5. Dennis Frank 5

    An amusing headline. Some readers may even take you seriously, eh? I never did Economics 1.01 but those who did probably got taught that govt surpluses are generated by the income to spending ratio.

    At best, you could give the finance minister credit for holding the austerity line on spending, in accord with the neoliberal doctrine of the Bilderbergers. Tax income, if higher than usual, comes from the collective payment of kiwi businesses, so they deserve credit for that. So you could amend the headline to Local Capitalists are Financial Geniuses, ably supported by Grant Robertson! Then we could all stand around and applaud the left/right solidarity.

    But then again, I’m no expert on economics. If anyone is sure I’m wrong about this, we could benefit from a comprehensive explanation why.

    • Dukeofurl 5.1

      What does that even mean…. well you are no expert is true.

      Did you know that counted in the ‘governments balances’ is $545,950,000 is residential tenancies bonds, ie other peoples money.
      thats $0.5 Bill of real money
      all the Crown ‘trust accounts like that come to $0.93 bill of other people money. ( page 141 of financial statements)

      When other spending is taken into account there is a ‘residual cash surplus of $ 1.3 bill

      That is mostly because of timing of spending so is more a case of spending = income.
      page 5
      https://treasury.govt.nz/sites/default/files/2018-10/fsgnz-year-jun18.pdf

      • Dennis Frank 5.1.1

        Interesting that they include tenancy bonds as govt income! Surely such bonds get repaid when tenancies end? If so, seems extremely mickey mouse to call them part of a surplus as if they are spendable by the govt. Are you suggesting the govt does actually spend them (rather than keep them in a holding account) because it can always repay the individual amounts when necessary (like a private bank)?

        • Dukeofurl 5.1.1.1

          Well they arent part of the spending , but its part of the ‘crown balances’ along with $16 bill of Kiwibank deposits!!

          That part comes into it when they have the total government borrowings against ‘balances’.
          Thats why I look for the cash basis and the full year borrowing.

    • left_forward 5.2

      Surpluses are not generated by a ratio, but the difference between accrued income and accrued expenditure.
      For some reason you excluded the major tax contribution of wage and salary earners in your analysis.
      While taxation is so low, driven by Natz policies, expenditure also needs to be conservative. To move from the austere spending environment inherited from them, we either need to run surpluses or increase taxation.
      You are certainly no expert.

      • Dennis Frank 5.2.1

        Neither are you. Can’t even figure out that the difference derives from the ratio! The reason I didn’t mention the tax paid by employees is that it isn’t as cyclic as that paid by business. The business cycle is often dramatised in the media as boom/bust but those are just the extremes – normally there are just years when business is good and others when it’s sluggish. Never seen a media story referring to any such cycle in employee income so we can assume it is normally steady state, right? So the big surplus cannot be explained as employee-produced.

  6. UncookedSelachimorpha 6

    A surplus is bollocks when we have homeless and child poverty. One interpretation is that you didn’t spend enough… And a surplus can result from the failed policy of austerity (austerity for the majority, largesse for the wealthy).

    Not to mention the whole nonsense of thinking that the state budget is the same as a household budget. A fundamental lie that Labour perpetuates, as demonstrated by the fiscal responsibility nonsense. Not to say the Greens and National are any better in that respect.

    Bill Mitchell puts the lie to the kind of thinking that worries about government surplus:

    https://www.radionz.co.nz/national/programmes/sunday/audio/201852897/there-s-no-such-thing-as-fair-austerity

    While I think Labour have much better intentions than NAct – they continue to be locked to the same neoliberal lies, which greatly limits their ability to improve things. Attempting to educate the public on how state finance actually works would be a useful public service.

    • Pete 6.1

      A surplus is bollocks if it’s the Other Lot who comes up with it and a work of intellect, genius and fantastic management if it’s your own lot.

      • Dukeofurl 6.1.1

        Who ever said the other lot having a ‘surplus’ ( not really in cash terms) is bollocks.
        I think they said having tax cuts was bollocks when you are in the small period when economy is at full blat.

      • greywarshark 6.1.2

        No a surplus and embedded structural poverty are always the same, whatever ‘lot’ are in power.

    • left_forward 6.2

      A surplus is essential for any sustained program to address homelessness and poverty and other social investments.
      You are being naive – the opposite, fiscal irresponsibility will mean the Government does not have the resources to invest in people. You are advocating the policies of the right, with their intent to reduce the size of the state (i.e. reduce tax, reduce spend, reduce state equity).
      The analogy of the state budget being like the household budget is a very useful way to think about it, particularly if you can’t get your head around it.

      • UncookedSelachimorpha 6.2.1

        You didn’t listen to the Bill Mitchell interview it seems? If not, you would find it interesting.

        “A surplus is essential for any sustained program to address homelessness and poverty and other social investments….The analogy of the state budget being like the household budget is a very useful way to think about it, particularly if you can’t get your head around it.”

        No it isn’t x 2. A household cannot issue New Zealand dollars, the government can. There is no bank account with “tax” going in and “government expenditure” going out – and the government has to worry about this account running out of cash. Doesn’t work that way for a state. Does for a household.

        “You are advocating the policies of the right, with their intent to reduce the size of the state (i.e. reduce tax, reduce spend, reduce state equity).”

        No – I am advocating the opposite. I support more state expenditure and involvement, and more tax. The latter for the purpose of redistributing real resources however – not because it is needed for the government to have money to spend.

        • left_forward 6.2.1.1

          No. I did listen to the interview and although interesting, his idea is pretty fringe. When he was asked about the convention of matching bonds to an issue of cash, he described this as fake knowledge but did not provide to me at least, a convincing explanation other than the idea that a robust economy simply absorbs it. This skates over the consequence of the action – the accounting process to create a credit in any accounting system needs a corresponding debit – this is how double entry accounting works – the basics of accounting. Government’s do not have a magical wand to create credit from nowhere.

          Describing the convention as bollocks as you did (in the context of the Government’s impressive surplus – thus undermining the achievement) is pretty steep considering that your alternative idea does not appear to meet basic accounting standards.

          • UncookedSelachimorpha 6.2.1.1.1

            Yes, MMT is currently a fringe way of thinking – and I am only starting to get my own head around it.

            Thinking MMT is in violation of double-entry accounting standards might be an example of confusing private finance with state finance. A firm (or individual) has revenue, expense, asset, liability etc accounts, and yes, they all balance with double entry transactions. But the state has an extra capacity that the private sector does not – the ability to issue its own currency – from nowhere. From an accounting point of view, I suppose this could appear in double entry accounts as a form of revenue (I’m no expert!).

            The government (and yes, private banks) does create credit from nowhere – where else do NZ dollars come from? The people buying government bonds, for example, are not creating the money they use to purchase them.

            And governments have to spend first (creating money), before they can collect tax (getting money back). The idea they must tax first, in order to spend, is incorrect. Tax is still absolutely necessary – but not to permit spending. Managing the amount of government spending is likewise still important – but the supply of NZ dollars from taxation does not limit government spending (they can just make more).

            The following were quite helpful to my own understanding:

            http://bilbo.economicoutlook.net/blog/?p=11161

            https://www.nakedcapitalism.com/2014/06/randy-wray-modern-monetary-theory-basics.html

            I suspect we are not far apart in our basic outlook – for example I strongly support “tax and spend” to achieve good social outcomes, including reducing inequality. MMT is just making me think the “tax” and the “spend” is not linked in the way we are often told they are.

            • left_forward 6.2.1.1.1.1

              I certainly want to believe that you are right about this, but my own experience makes me naturally wary of the idea. I can agree with a lot of the discussion in these articles… particularly the idea of spend first, and tax later if necessary.
              Accordingly, I modify my previously expressed view on the essential need to create the surplus first.
              As many have said on this thread, we need to urgently restore our investment in social supports for people in need (yes indeed – welfare!), and I accept that this should be the priority for the Government.
              This should not only be in education and much needed support to teachers, but also in primary health and social services.

              I agree that we are not far apart on our outlook.

              • KJT

                Spend first, tax later is exactly how the initial round of State housing was financed.

                The increase in economic activity, and efficiency from comfortably housed workers returned the spending, in spades.

                Avoiding having to pay compounding interest to private sector banks was a big plus of this approach.

                Using bank “printed” money to bid up land prices is doing us no favours. Overseas finance now takes out more than dairy exports, earn!

                Governments current round of borrowing at interest, to spend, started with the IMF. Basically a privatisation of Government financing.

                Governments always find the money when needed for war. The war on poverty and decaying infrastructure is no different.

          • Nic the NZer 6.2.1.1.2

            It is incorrect to think MMT doesn’t respect double entry accounting, MMT is built on and depends on double entry accounting.

            There is a central accounting identity derived from GDP accounts known as the ‘Sectoral Balances’ approach (look it up). This demonstrates that every dollar of government surplus is supplied by collecting that income from the rest of the economy (and the reverse for a deficit) and so reducing the non government sectors spending capacity. This means if the private sector maintains its spending over a falling income it must increase its indebted-ness to do so. This is derived by accounting so it is an unavoidable consequence.

            The other important factor is that in NZ the government instructs the central bank of NZ what to do. The RBNZ has an absolute monopoly on creation of NZ dollar currency (its the only institution allowed to create this kind of money), so all the governments spending (the NZ government pretty much exclusively taxes and spends NZ dollar currency) must have come from there.

            The main implication of this is the government can (and already does) create spending at will. This has to respect double entry accounting of course but that is basically automatic if the government decides to borrow directly from the RBNZ (including if its a zero interest overdraft). Basically the government account records an overdraft of the amount the government has spent matching the amounts as the government spends it. The important question here is just if the government is running an overdraft on its spending account, will the RBNZ ever prevent them spending more? And obviously the answer to that is no because its a government institution. As far as I know the finance minister can today instruct the RBNZ to lend to it directly in the legislation which is more of a historical curiosity of social credits influence than used, but it is I think legal today with no changes in the act.

      • KJT 6.2.2

        No. Because a household cannot issue more currency to match an increase in trading, goods and services traded, like a Government can..
        The analogy between a Government and a household, like most over simplifications, gives a totally false idea of how Government spending works.

        Until recently economists ignored the effect of finance considering it simply a redistribution over time. Not the creation of money that it is. A bit of a puzzle that opponents of Governments “printing money” which always used to be a function of Government, ignore the uncontrolled effects of private banking, printing money. Of course this made their models unrealistic. Hence their shock when surprised by the GFC.

  7. One Two 7

    5.5Bn… is a made up number

    • Dukeofurl 7.1

      Same way they did the numbers when national was in government. Treasury, no friend of labour does the accounting.
      Basically its the money left after income – ‘operational’ spending.
      Operational spending is only part of government spending but the surplus of that a better number than Key and English ever got.

    • Sacha 7.2

      3 .. is a magic number.

    • Nic the NZer 7.3

      Another way of viewing this outcome is treasury got their economic forecast wrong by about 2.4 billion dollars. As the budget projects both the income and expenditure the forecast budget surplus must be derived from a macro economic forecast describing how much tax the government is likely to collect given their spending (essentially).

      As a result of the forecast being wrong the government decided to skimp on public spending to the tune of 2.4 billion dollars (maybe more) even if we take their target surplus as the primary desirable outcome (which its not).

      Further if we decide that treasury’s forecasting error makes their boss a ‘financial genius’, then this kind of outcome seems quite likely to repeat itself.

  8. Any Accounting 101 student would recognize your claim (an offset of the $ 11Bn “hole” with the Crown accounts surplus) … as apples compared with lemons.

    They have no direct relationship or offset as one (the hole) refers to a budget projection … where Labour grossly underestimated future charges such as PS pay settlements … compared (erroneously) to a settled interim financial “result” based on actual PS revenue (tax/receipts) transactions.

    There are two sides (a debit-expenses/and a credit-revenues) side to this “fairy tale” folks.

    • Dukeofurl 8.1

      That was all covered at the time. Every reputable economist came out in Robertson’s favour while I don’t think Joyce could find a taxi driver to back his theory.
      Much mirth was made of Joyce abysmal failure in his economics subjects at University. In general he was prospective ly a good student but in practice dint do the work and flunked out of a vetinary degree with a poor degree in zoology…..eventually

  9. Ad 9

    Hmph. Rainy day.

    Makes English look like he was blowing it all on pussy and beer.

  10. Herodotus 10

    Great so now we have a government taking ownership of the present and the future of NZ.
    No more “9 years of ….” that we had from 1st; The Nats and Labour recently.
    More money now available to adequately pay both; primary and secondary teachers.

  11. Jimmy 11

    I think the headline is a bit over the top.

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