Hickey on surpluses and Key’s bullshit

Written By: - Date published: 9:17 am, December 4th, 2016 - 36 comments
Categories: debt / deficit, economy, john key, slippery - Tags: , , , , , , ,

Bernard Hickey is essential reading. Particularly so as one of the precious few commentators who is prepared to call Key on his bullshit, as he does today in The Herald:

Bernard Hickey: Show us the money, John

So which Treasury forecasts should we rely on, Prime Minister?

Next week Treasury is expected to unveil a bountiful set of Budget surplus forecasts for the next four years that allows us to have it all – tax cuts, extra social spending, two major quake rebuilds and debt repayment.

Key has very literally claimed that the government will “do it all”. Back to Hickey…

But Key’s reliance on those forecasts for some big talking certainly jarred just two days after he rubbished the Treasury’s forecasts in its Long Term Fiscal Outlook delivered last week. Under the same Public Finance Act, the Treasury has to forecast at least once every four years what the Government’s books will look like by 2060 if it continues on with its current settings.

Treasury pointed out for the third time in the current National Government that an ageing population allied to the current settings for New Zealand Superannuation would blow out the Crown’s net debt to over 200 per cent of GDP by 2060 from 25 per cent now.

The Treasury warnings were exceptionally forthright – Brian Fallow: Future written in red ink – but back to Hickey…

Key had not forgotten when he was asked if he was betting his legacy on Treasury getting its long term forecasts wrong.

“I’m telling you it’s a load of nonsense, because they can’t get predictions in 44 days right, let alone in 44 years.”

It is extraordinary for the Prime Minister to call the Treasury’s short and long term forecasts a “load of nonsense” and yet rely on the medium term ones to promise all manner of riches to voters on the eve of an election.

Nailed it right there.

Treasury’s forecasts are worthy of respect. Key may well be right that the Government can afford it all for the next few years, but if that was the case it should also address those longer term challenges evident in the Treasury’s long term forecasts.

Key doesn’t give a stuff about long term problems.

One way to credibly address the issue is to use the good times now to prepare for the longer term challenges. As Labour’s finance minister Michael Cullen resisted Key’s calls from 2005 to 2008 for big tax cuts and instead set up the New Zealand Superannuation Fund and KiwiSaver.

And there you have it. But a mass of other “opinion” writers prefer slick bullshit to competent government. They do us all a disservice.

36 comments on “Hickey on surpluses and Key’s bullshit ”

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  1. One Anonymous Bloke 1
    4 December 2016 at 9:36 am

    Boom!

  2. Keith 2
    4 December 2016 at 9:43 am

    You can have tax cuts or you can have good public services.

    Another article on RNZ’s site speaks volumes of the cost cutting to the NZ Police to pay for those tax cuts and the terribly predictable result for the people of Northland. Nowhere near enough cops, very low morale from those in that job there doing less with less and the public essentially left without law enforcement. It is no coincidence in this lawless climate that murders are on the up. All this from National who were “going to get tough on crime”.
    http://www.radionz.co.nz/national/programmes/insight/audio/201826014/insight-can-police-tackle-the-'lawless-north‘

    Thing is it is not only Northland, its the Waikato and the Hawkes Bay and Bay of Plenty and I could go on and on, they are all similarly struggling. And equally worrying is it the same in Auckland, Wellington etc but the only thing partially holding things together is they can borrow staff from other areas to sort of plug holes in the dyke. But the coverage is very poor none the less. These cut backs mean cops do less and people can die when that happens and we have an infamous example of that very recently in Auckland.

    National have done a remarkable job to bury the bad news but I am afraid to say the shit is hitting the fan big time and lying is not cutting it!

    Time for a change of government!

  3. mosa 3
    4 December 2016 at 9:52 am

    ” Key does not care about long term problems ”

    Of course not he governs and makes decisions on keeping power at every election and keeping the middle class and vested interests happy.

    The tough decisions are always left to a Labour government to tidy up as was the case in 1999 and when this current love affair ends Labour will have to get us back to the harsh reality that Key is hiding from.

    I would listen and pay attention to Hickey not because he is honest but he knows what he is talking about and can see through the irresponsibility of Key and English.

    The problem with Super is it needs planning and savings now to deal with what will be a major cost to the country starting now.

    Key wants that fourth term badly but is he prepared to to start governing responsibly in that next term to face the problems he should have acted on eight years ago as sooner or later he or his replacement will be facing the full effects if they dont and want to stay in government.

    • KJT 3.1
      4 December 2016 at 10:21 am

      The trouble with super, like any social spending, is the more wealthy, who benefit the most from Government spending anyway, need to pay enough taxes.

      Just like Greece, the rest of us are expected to pay back the borrowing needed because the rich, who are the greatest drain on resources, are allowed to avoid taxes.

    • Draco T Bastard 3.2
      4 December 2016 at 11:55 am

      The problem with Super is it needs planning and savings now to deal with what will be a major cost to the country starting now.

      Wrong. It needs planning, yes, but we don’t need to save money. Money is nothing and saving money saves nothing. In fact, money sitting in a ‘savings’ account should be taxed so that it will reduce to zero over time.

      What’s needed is the economy to be developed so that it can operate at the same or greater level that it does today with less people working in it. In other words, we need to increase productivity enough to cover the loss of those retiring while still being able to maintain those people at an adequate standard of living. This is something we’re not doing and all the wealth that we need to do it is a) being sold offshore and b) is being placed in the control of the rich.

      • mosa 3.2.1
        4 December 2016 at 1:44 pm

        Sure Draco unless the economy performs and delivers to pay for what we need to fund and we change the idea that exporting all our wealth is futile then we are caught in a never ending cycle that achieves nothing.

        We need a total change in direction because it is simply not working as it should and only for a few.

  4. Tony P 4
    4 December 2016 at 10:03 am

    Rod Oram has said much the same thing in the Sunday Star Times today. Somebody else who knows what he is talking about.

    • mosa 4.1
      4 December 2016 at 11:29 am

      Yes dead right there Tony.

      Oram is excellent and his regular column is the only thing i miss since i stopped buying that paper.

  5. Siobhan 5
    4 December 2016 at 10:04 am

    I know its wrong, I know as well as anyone the pain and carnage and thwarted lives another term of National will bring…but there is a small part of me that hopes National can limp through another term as the wheels fall further off the cart.
    Then maybe, maybe, the swing voters who support National can get a clearer picture of what they have done to this country, all because they didn’t like Helen telling them to use energy efficient light bulbs or whatever..and then maybe they can realise the folly of repeatedly voting in a Government that comes to elections with no clear declaration of their true intentions, other than some crap about tax cuts.
    Then, maybe, we can have a true strong Labour Government (and coalition) that, between then, comes in with a Landslide victory, based on a good old fashioned vision of Strong communities, and a fair, compassionate and decent society.

  6. red-blooded 6
    4 December 2016 at 10:19 am

    Hey, let’s all work for victory this time! It doesn’t have to be a landslide (this lot are operating on one seat); it just has to be a victory. Another term with Key and co adds layers of crap that have to be undone and recovered from before there can be true social progress. Plus, each loss adds to the “Labour is dead” meme. Rather than waiting for a perfect storm (and letting people squat in their cars, our social housing stock gifted to other “providers”, our schools attacked and our hospitals crumbling…) I’m out there working for victory this time and I challenge any of you who aren’t to find the party that’s the best fit for you and get on with it.

  7. RedBaronCV 7
    4 December 2016 at 11:06 am

    Well the next non NACT government could ask all those people who have done so well under the current government to assist with repaying the debts created.
    How about :
    An annual levy on those who entered NZ under the wealthy migrant schemes so they can pay for their share of the infra-structure they are using.
    Annual levies on property owned by offshore interests related to the value of the property
    Annual levies on property owners who are not domiciled here for tax purposes.

    A couple of once off levies on the high income earners over the last few years ( they can have time to pay) to recoup their tax reductions.

    Some once off levies on overseas companies relating to their annual turnover in NZ/Worldwide turnover x worldwide profits x a thumping % less the small amount of tax they may have paid.
    Make all this equivalent & enough to pay back the national debt over three years.

    In education – no grants to sectors who have had heaps. High fees private schools should expect no aid for a number of years – also charter schools – destiny schools etc. Use the money to shore up our mouldy state schools.

    The possiblities are endless but we need to grab back the amounts that have been leached out of our economy.

  8. Thinkerr 8
    4 December 2016 at 11:29 am

    It’s called a ‘bow-wave’.

    The medium term forecast is full of promise, but come time to deliver, the medium term will be the short term, and we know how inaccurate those forecasts are.

    So, while it looked like you could have it all, unfortunately you can’t, and it’s not our fault.

  9. Draco T Bastard 9
    4 December 2016 at 11:40 am

    “I’m telling you it’s a load of nonsense, because they can’t get predictions in 44 days right, let alone in 44 years.”

    It’s probably more likely to get long term projections right than short term ones as they’re looking at trends rather than trying for precise numbers. And Treasuries predictions on the surplus wasn’t weren’t all that inaccurate either.

  10. Adrian Thornton 10
    4 December 2016 at 11:41 am

    While this is all true about National, and of course I despise their nefarious ideology, the elephant in the room is that Labour is still itself tied to essitianly the same free market, laisser-faire economic principles as National, and this economic ideology and nothing else ultimately guides all our domestic policies, so whom ever gets power in the up coming election matters little, the overall direction of the country will remain the same, sad but true.
    Turn Labour Left.
    Citizens not consumers.

    • Draco T Bastard 10.1
      4 December 2016 at 12:00 pm

      +1

    • red-blooded 10.2
      4 December 2016 at 12:53 pm

      That’s all very well, Adrian, but the Socialist Union Party has never exactly thrived at the ballot box, has it? The fact is that we live in a democracy and that means that any party who wants to govern us has to win votes from middle NZers, not just committed socialists. Putting aside the issue of whether true socialist financial policies would work in the 21st century world of the international market (and that’s the world we live in), it’s pretty hard to imagine a NZ in which enough voters were convinced that these were the right policies to follow and voted in a government with the power to act on them.

      That doesn’t mean that we should abandon attempts to create a fairer, more empowering society, to fund our health system, education system, support for the disadvantaged, protection for our natural environment… etc. It just means that we have to get on with working to improve the world we live in rather than waiting for the glorious day of the revolution.

      Right, rant over… I’m off to celebrate the by-election win.

      • mosa 10.2.1
        4 December 2016 at 1:50 pm

        Red Blooded Kiwis cant decide if they are Socialists or Capitalists !

        They want privileges but dont want to be taxed to pay for it.

        • JanM 10.2.1.1
          4 December 2016 at 2:12 pm

          Most people I know are perfectly ok with paying their fair share of tax to provide a fair and orderly society. I’m sure every country has it’s share of the dim, short-sighted and greedy – the last 30 years of me-tooism hasn’t exactly helped of course.

        • Matthew Whitehead 10.2.1.2
          4 December 2016 at 2:42 pm

          I’m pretty sure kiwis want the better deal for ordinary people, (“working people” being the usual catchphrase) they don’t particularly care whether that deal comes through tax cuts or social spending, so it’s up to those of us who know that, by and large, government spending is more efficient than tax cuts, to turn boring facts into a convincing emotive argument.

      • Adrian Thornton 10.2.2
        4 December 2016 at 3:11 pm

        @red-blooded, I admire your optimism in working within the Labour structure as it exists now, for more equal and fair society etc.
        However you surely must understand that the economic ideology that Labour chooses to have as the foundation of the party will always dominate the ultimate direction of the party, and it’s domestic policies, it has too, they have no choice, that is how ideologies function.
        Sure under Labour the citizens of New Zealand will have a few more wins, maybe we feel that we get a touch more equality, etc, but all the while Labour, if in power would be driving the country in basically the same direction as National, just at 60 kph instead of Nationals 110 toward the same cliff.

        • red-blooded 10.2.2.1
          4 December 2016 at 4:44 pm

          Adrian, for any left-leaning party to gain power, it has to gain votes. For it to stay in power, it has to retain them. Do you really see a lot of people who currently don’t vote waiting for a party with a harder-left financial perspective to come along? Yes, I know about the “missing million” – but do you think they’re missing because they are committed socialists who won’t dilute their principals and therefore will only vote for a hard-left party? ‘Cos I don’t.

          Labour (just like other parties and social movements) has evolved and changed over time. Current feminists don’t have exactly the same world-view as the suffragettes of the 19th century. That’s not because either generation is/was wrong – they are/were simply of their time. Upcoming generations will have different priorities again.

          In a way, this links to why I see a written constitution as a potential negative: one generation of thinkers get to put upcoming generations into a straight-jacket of their beliefs and values. Witness the absurdity of the 5th amendment in the US. I know that’s wandering from original point a bit, but basically I’m saying that the core values of the Labour Party are still the same; it’s the means to the end that has changed over time, and that’s it’s perfectly natural for that to change.

          • garibaldi 10.2.2.1.1
            4 December 2016 at 5:17 pm

            Red-blooded I can understand your compromise position cf Adrian (who thinks along the same lines as myself) but when you say that Labour still has its core values then all I can say is that it’s a pity they ignored them for the last 30 years. Maybe they have come right ( as we keep being told) or maybe they are just trying to be “3rd way mk2”. As far as I’m concerned we are still waiting for the evidence.

          • Olwyn 10.2.2.1.2
            4 December 2016 at 5:30 pm

            Do you really see a lot of people who currently don’t vote waiting for a party with a harder-left financial perspective to come along? Yes, I know about the “missing million” – but do you think they’re missing because they are committed socialists who won’t dilute their principals…

            To begin with you are conflating real need and privation with an ideological position. More importantly, it is now abundantly clear that within a neoliberal framework, those who are of no use to the powerful must be kicked to the kerb, e.g. the ex-working class of wealthy countries. The establishment left has been allotted liberalism as their patch. Goff saw that PC, accompanied by few material gains pissed people off, and made a bid for a new patch, the Waitakere tradesman – still middle class but without the PC curse. It didn’t work for him.

            I accept that a party needs more than just the worst off to get elected. But if it is to continue to exist, they must be included within it broad base. Which demands courage and a willingness to push against the boundaries of the neoliberal allotted space. If you can’t push back when people are being kicked out of houses for false accusations of P use, or when a mine containing 29 workers’ bodies is being sealed to their relatives’ horror, then your purpose is a very limited one.

            • red-blooded 10.2.2.1.2.1
              4 December 2016 at 6:50 pm

              “To begin with you are conflating real need and privation with an ideological position. ”

              No, I’m not – I’m suggesting that maybe Adrian is, and it seems to me that maybe you are, too. There are plenty of conservative, right-leaning people who are working class, just as there are plenty of progressive, left-leaning people in the professional class.

              As for pushing back against evictions from state houses or the sealing of Pike River, Labour has pushed hard on those issues (which, btw, aren’t particularly relevant to the point I was making about the lack of demand for a “hard left” party, but do serve well to illustrate my point that Labour still lives by and acts on its core values).

              • Olwyn …
                4 December 2016 at 11:27 pm

                My point is that Labour needs to push against the boundaries of its allotted space if it is to remain relevant. I put forward the alleged P houses and the horror of Pike River as events that show why they must.

              • KJT …
                5 December 2016 at 8:30 am

                When Labour adopted Neo-liberalism and social vandalism in the 80’s their vote dropped to 14%.

                National has had to keep and adopt, or pretend to adopt many “socialist” policies to stay in power.

                The only party that is open about anti welfare and privitisation, “free market” policies, ACT, has to be thrown electoral lifelines.
                Whereas Greens are consistently over 11% despite relentless anti Green propaganda.

                This suggests to me that the majority of New Zealanders want a fair country where we look after people, capitalism is democratically managed for equity and sustainability, and we have democratic control.

                The overwhelming endorsement for MMP is because we wanted to prevent Governments going nuts like 1984 Labour and 1990 National.

                I suggest, the lack of votes for a Democratic socialist alternative is because it has not been offered.

          • Adrian Thornton 10.2.2.1.3
            4 December 2016 at 6:03 pm

            @red-blooded, Sorry I believe you are wrong.
            As I am sure you well know, Left/progressive political parties in America/the UK, New Zealand and others have been, (approx 25 years ago) co opted by a few radical economic extremists, who have exposed the citizens to their dogma of unfettered greed and want. This was all well and fine for about 20 years, but any economy based solely on endless growth, forcing it’s workers compete with third world labour, bullying it’s citizens into becoming speculating, gambling addicts, not savers and trading their houses like used cars etc, is not going to end well.
            And it isn’t.
            Look at the States, The Democratic party has just suffered the most humiliating defeat in it’s history, the Party itself, exposed as a cesspool of political corruption and nepotism, totally and utterly out of touch with working America and the poor.
            Hillary could hardly fill a school hall at times, Sanders, a self described Socialist was consistently getting 20.000 and more people at his rallies.
            Remember Sanders got 12.2 million primary votes opposed to Trump who got 13.3, but with his own party actively acting against him, and the media all but ignoring him…
            Witness the UK, Labour basically kicked out of Scotland, the citizens so disgusted with it’s non functioning centrist Labour, that the Socialist Jeremy Corbyn swept to power in the leadership race, facing not only the wrath of the very structures and power of his own party, but ALL UK media…and he not only won, he also built the UK Labour party into the biggest Left Party in Europe.
            Do you really think that we live in such a bubble in NZ, that at some point soon, we on the Left will not face similar challenges and questions?
            Of course we will, and NZ labour would look just as insipid, hollow and bereft of a sane political ideology as the Third way UK Labour Party and the Democrats did…unless we Turn Labour Left!

            • red-blooded 10.2.2.1.3.1
              4 December 2016 at 7:03 pm

              Adrian, the UK and US are both stuck with FPP and the resultant two-party dynamic that forces people with little in common to coexist in one party and squabble over its direction. I’m not saying that this doesn’t happen here at all, but it’s certainly less embedded. Why? Because there are different parties to represent different belief systems and people who don’t see eye to eye can split into new parties. Witness Labour, New Labour, The Alliance, The Greens, The Māori Party, Mana, ACT… Ditto National, NZ First, ACT (they came from both parties), The Conservatives, The Christian Alliance…

              Sanders enjoyed a following in the US, but he didn’t win the nomination. Get over it. Corbyn enjoys a following in the UK, but whether he can win an election is still very much in doubt. Good luck to him. Neither is particularly relevant to NZ, simply because we use a different system.

              A final word: if you want Labour to go further left, then get involved and try to persuade its members that this is the direction to take. If you just want to sit on the sidelines and opine, don’t be too surprised if your injunctions fail to resonate.

              • Adrian Thornton …
                4 December 2016 at 8:49 pm

                @red-blooded, OK, great point on the FPP vs MMP, this certainly has resulted a dilution of a strong single opposition voice.
                However I am still certain a passionate inspired and coherent voice from the Left, espousing those old Left values and ideals around equality for all, fair pay for all, a political party that actually promotes itself proudly as a party that really cares and respects all of it’s citizens, all this communicated with real authenticity and conviction, would resonate in communities of both above and below the medium wage, and maybe even that fickle middle class, it certainly would mobilize most of their children and grandchildren that is for sure.

                As far as Sanders goes, I am over it, I was just making a point, and please don’t start on the doubts around Corbyn’s electability, what more do you want from a Labour leader? He saves a redundant Labour party from political oblivion and ignites it with real political commitment from a whole new generation of voters, and you still can’t cut him some slack, that my friend, is very strange.

                Lastly, I and my wife are already very active politically, I choose not to be involved in the local Labour party because we have two serious centrists here, Anna Lorke, the promoter and advocate of immigrant labour, and that notorious third way, free market proponent and friend of Mattew Hooteen, Stuart Nash.
                However our book shop is the center of quite an active local political awareness, and daily discussions and debates are routine, I am also active in a more, shall we say, direct action way, so yes I am very involved.
                Thanks for the debate.

    • Matthew Whitehead 10.3
      4 December 2016 at 2:39 pm

      Yep. This is why I go around calling them out as centrists in other posts.

      Labour needs a bigger economic difference from National than it’s currently calling for.

  11. Incognito 11
    4 December 2016 at 12:42 pm

    Of course, Treasury’s long-term forecasts are wrong. People seem to think that these models somehow hit their target like a cruise missile like hitting the bull’s-eye – some people should know better.

    It is intrinsic to all models to carry errors of estimate, just like political polls. However, the function of Treasury’s Long-Term Fiscal Position is to provide information to policy makers to change the trajectory when/where necessary; this is the whole point of these forecasts – they are not meant to hit the ‘bull’s-eye’ or whatever.