If only smiles were dollars

Written By: - Date published: 10:26 am, May 15th, 2011 - 38 comments
Categories: budget 2011, debt / deficit, tax - Tags: ,

The minor party debate on Q+A was very interesting. Rahui Katene was self-contradictory and vague, like the Maori Party always is. Peter Dunne was pathetic. Roger Douglas slammed the government’s borrowing as did Russel Norman, who pointed out the other three had all voted for National’s debt-increasing tax cuts for the rich.

I might put up some of the transcript once it comes through, but the important points on National’s economic failure were also hit by Bernard Hickey and the Herald editorial today.

Hickey says that National will try to take focus off the record deficit by pointing to strong growth projections:

New Zealand will probably avoid a downgrade in our credit rating because the Budget’s economic growth figures for the next three to four years will look extraordinarily strong.

They will argue the Christchurch earthquake rebuild and a historic boom in commodity prices will power GDP growth to more than 4 per cent over the next two years.

This seems sensible until you look at the track record of these forecasts in the past three years since the global financial crisis.

Every economic forecast by the Treasury underestimated the impact of an epic change in the way New Zealanders think about debt and spending.

In May 2008, Treasury forecast growth rates for the next three years of 1.5 per cent, 2.3 per cent and 3.2 per cent. Instead, we got -1.1 per cent, -0.4 per cent and -0.1 per cent.

That’s why we should all take Thursday’s growth forecasts – and Key’s smiling confidence – with a grain of salt.

Granny’s patience with Key’s bland smiles and big promises is wearing thin too:

In an interview John Key gave to the BBC when he was in London for the royal wedding, Key smiled a lot and insisted that the expert independent commentary about the crises we face was “just people’s opinions”.

That’s a politician’s job – to put a brave face on it. Deep down, Key knows the shape we’re in. But he seems to lack the political will to do anything about it.

Act leader Don Brash, whose public pronouncements have so far been conspicuously devoid of specific policy, got one thing right in his open letter to Key this week: the PM, he said, is frittering away “the greatest reserves of prime ministerial popularity in New Zealand history”.

It’s not too late for Key to prove him wrong. But time is certainly running out.

Borrowed from a comment by Blighty

38 comments on “If only smiles were dollars”

  1. ZeeBop 1

    The GST hike won’t pay for itself, the tax take dropped!
    Petrol and food spikes worsen kiwis spending positions.
    But what’s shocking is the worse their price of petrol, or
    cost of food, milk, etc, the longer the tax changes will
    pay for themselves. But this still did not stop National
    putting the boot in, instead of lowing the cost of
    living, the National party build more roads.

    But its worse. Kiwisaver is getting another renovation!
    Saving for the future has never been more uncertain
    as the government again alter the kiwisaver scheme.

  2. ianmac 2

    From my lowly understanding about how it all works, isn’t the GDP boosted by expenditure such as in the Christchurch rebuild? If so build more prisons and catch and process more crims and this will also boost GDP – er wouldn’t it?

    • Eddie 2.1

      yup. So does paying someone to dig a ditch and fill it in again.

      One of the big problems with GDP is the G – gross. It doesn’t account for destruction of wealth, only its creation. And it measures value by what we pay for stuff.

      • Jim Nald 2.1.1

        Ah, hence the logic with donkey digging a big economic hole for us and then their ‘mum and dad’ cronies and their mates filling in.

        • terryg 2.1.1.1

          I read an article a while back (alas forget where) in which this was pointed out (paraphrasing):

          Economists only consider “Goods” and “Services”.

          to an economist, the ChCh earthwuake is a GOOD thing – look at all the goods and services required afterwards. yay earthquakes (OK I added that bit).

          But they completely fail to even consider the existence of “Bads” and “Disservices”. failure of nuclear powerplants, earthquakes, mass human tragedies are BAD things that do a DISSERVICE to economies. Yes they require a lot of expenditure to fix, but that IS NOT a good thing.

  3. Russel Norman, who pointed out the other three had all voted for National’s debt-increasing tax cuts for the rich.

    Alas Norman doesn’t understand that for the ponzi savings scam HE voted for, the government must maintain growth be it by increasing NZs productivity (failing) or by propping up this totally fucked system to the tune of $380 million a week. If the clown didn’t borrow to fill the gap, we would be living in an entirely different world, picture Greece 😉
    I said 2.5 years ago John Key will be the most hated prim minister NZ has ever had, god I hope they win the next election, just watching them all with egg on their faces will be so funny, including all the fools that think voting will change things lol
    Welcome to my world

  4. joe90 4

    I thought Douglas made sense when he talked about the need to settle on a super scheme and to somehow prevent future governments tampering with it.

  5. Bill 5

    Anyone else hear Key (on Radio NZ yesterday) claim he didn’t know what he’d said during the ‘Hard Talk’ interview because he hadn’t seen it yet?

    • Pascal's bookie 5.1

      Classic.

      • Jim Nald 5.1.1

        It is difficult to keep track of what you say to who when you’re bullshitting all over the show.

    • ianmac 5.2

      Really Bill? That would be very funny. 🙂
      I mean sometimes I say to my wife,”What’s wrong?”
      “Nothing,” sniff.
      “Is it something I said?”
      “You should know,” she yells.
      ” What did I say?”
      “Ah-ha!” she says. “So you don’t know what you say. You’re just as bad as John Key!”
      ” Yeah maybe, but I’m just an ordinary bloke and not a Prime Minister,” I whine.
      “Very true.” She forgives me. (But what the hell did I say that was so wrong?)

    • Bill 5.3

      From memory, it was on the ‘Week in Politics’ slot and in response to a question (by Russel Norman?) in Parliament about the state of NZ rivers.

      • todd 5.3.1

        Key claimed he could not recall what he said in the BBC Hardtalk interview, the day after it had occurred. FFS! Surely New Zealand deserves better.

    • felix 5.4

      Yeah I heard that.

      I can’t help wondering if he really doesn’t know what Hard Talk is, and doesn’t realise that they don’t edit out all the stupid bits.

      • Irascible 5.4.1

        I’ve seen the interview three times on BBC news. I can attest that John Key was present in each screening of the programme. The lips moved and the speech slurred in mispronounced and mangled English so it can’t have been a card board cut out.

    • happynz 5.5

      Funny as can be…

  6. Zaphod Beeblebrox 6

    Hickey seems like the only economist so wound up in the ra-ra optimism of ‘just wait for the 4% growth/a recovery is inevitable/all we need to do is BS S&P until things turn in our favour’ line that Key is running at the moment.

    Question for Key- What happens to the budget deficit if we don’t get 4% growth? What does he do then? He could start slash and burn but that will probably just make things worse. Or he could just put taxes back up to where they were- with very little pain to 95% of the population (come to think of it- he could do that now!)

    • ianmac 6.1

      ZB. Wasn’t that the sort of thing promised at the last budget but now it has slid off the debate? The promise then, was that because the economy was going to improve hugely due to the English magic that all good things would flow on over the current year. But the reverse happened.

      • Zaphod Beeblebrox 6.1.1

        Supposedly what didn’t happen this year is going to happen next. This despite record high oil prices and a $800 mill reduction in government spending. Hickey seems to be the only journalist willing to ask the question.

        • Colonial Viper 6.1.1.1

          No net growth in the NZ economy if petrol remains over $2/L.

          What is it today? Around $2.20/L. So the answer is: there will no net growth. Easy 🙂

    • Carol 7.1

      Is this today’s one where Nornman towered over the three Nat flunkies?… literally. I somehow kept noticing that Norman is taller than I had previously realised.

      • felix 7.1.1

        Yeah he towered over them in more ways than one.

        And it’s four Nat flunkies counting Smeagol Holmes.

      • Jum 7.1.2

        Yes, me ‘two’. He won that debate on presentation alone. His comments just added to it.

  7. Rich 8

    Waving scary debt levels and using them to cut spending is a big con.

    Simple Keynesian economics – you borrow in a recession and pay it back in a boom (the last government did a good job on the latter). Our public debt levels are middling for the OECD, and we’ve had a big earthquake, which not all other developed countries have. (besides Japan and Spain, of course). So we should expect to borrow.

    If the government does this, the recession will be shallower and the next boom will be less pronounced, so more people will keep their jobs. The downside of this is that the rich won’t make as much money, because they won’t do as well in the boom and use the recession to sack workers.

    So I understand why National would want to avoid borrowing at the moment (to help their rich mates). But Russell Norman?

    • deservingpoor 8.1

      “Simple Keynesian economics – you borrow in a recession and pay it back in a boom”

      That’s what I find so desperately frustrating about the entire recession debate. There really shouldn’t need to be any debate about that. We know it works, its been done before, its what got the world out of the great depression and kept it out of depression until it became trendy to reject Keynsian economics.

      Instead now we have smile & wave and Don Brash arguing the same slash and burn solutions that Herbert Hoover tried and failed miserably with in the 30’s. We know those policies failed, they’re what made the great depression great and they’re what pushed unemployment up to 15% here in the 90s.

      It will be a happy day when the NZ public finally wake up and cry bullshit.
      I’m not holding my breath.

      • Colonial Viper 8.1.1

        This is worth viewing

        Governments used to take from the wealthy + go into debt during slow downs to spend it on public works and direct public employment. This would boost the whole economy.

        These days governments have been co-opted by corporations and banks.

        When governments go into debt now to rescue the economy they firstly take from the poor and the middle class, then spend the resources gained on banks, corporations, and the wealthy, not on the public.

        That’s the reality of our modern capitalist world today.

    • rosy 8.2

      The same effect on the other side of the world – Germany and France are surging ahead while the UK is in the doldrums

      Germany has enjoyed a rapid recovery from its worst recession since the second world war and has clawed back lost ground, with GDP now at the level it was at before the financial crisis.

      In contrast, the UK economy remains smaller than before the downturn began, and the latest Bank of England forecasts suggest that Britain’s economy will not reach its pre-recession size until the second quarter of 2012.

      …contrary to widespread perceptions, “the German story is not one of export-led growth. Ever since the start of the Lehman crisis, German domestic demand has performed much better than net exports”.

      • Jum 8.2.1

        All this proves, Rosy, is that those government’s, including ours, planned it that way – Germany and France to go ahead, Ashcroft’s UK and NZ to be ground down ready for the plucking.

        • Colonial Viper 8.2.1.1

          is that those government’s, including ours, planned it that way – Germany and France to go ahead

          French socialist movements and union movements, and German workers unions are far more powerful than anything similar we have here or they have in the UK.

          I believe that explains why those countries have come out of this better. Bear in mind that unions and corporations working together in Germany have been one of the roots of ongoing German economic strength, even after the very hard years of reunification.

          That and the fact that Germany has engineers and scientists throughout the upper echelons of their government. In fact Angela Merkel is a PhD qualified nuclear researcher.

          • Zaphod Beeblebrox 8.2.1.1.1

            Don’t have to look that far. have a look accross the ditch! Never went into recession and will not have any federal deficit in 2013 (not that they need to pay it down that quick).

            NZ has really missed the boat on this and now has the worst of all worlds. Increasing deficits, negative real growth, a de-skilling workforce, increasing inflation, crumbling infrastructure. Just dumb.

            • rosy 8.2.1.1.1.1

              Yes. The short-sighted will only look at the current conditions in Australia and say ‘mine more’. But Australia never bought into the neo-liberal agenda in the same way as the US, UK and NZ. And they voted out the PM that tried to tamper with their union rights. I don’t understand why we’re so madly believing in policies that have no record of success when alternatives are staring at us.

              • Jum

                Greed, my dear Rosy, greed, but I’m sure that

                ‘we’re so madly’

                does not include you and me.

                • rosy

                  You’re right, of course Jum. A collective ‘we’ for the prevailing national mood.

  8. seeker 9

    @ Rosy and Jum 8 02pm and 11 04pm (well said)

    “I don’t understand why we’re so madly believing in policies that have no record of success…”
    “Greed, my dear Rosy, greed, ”

    “That nice Mr Key is rich and National, he must surely understand money and will make us rich too,” said the short sighted, ‘inividualistic,’ shallow thinking voter with extrinsic aspirations.
    Unfortunately that voter might have to wise up to the fact that “John Key couldn’t organise a piss up in a brewery- but he sure can promise one.”

    So glad Blighty’s pertinent comment has hit the widescreen (brilliant Eddie)- I think it should go global throughout NZ.

  9. deemac 10

    but Rosy, those policies worked very well – if you are rich! to hell with the rest of us…

  10. randal 11

    Thomas Carlyle in the 19thc said England had become a nation of fools but we seem to have become a nation of imbeciles.

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