Keith Ng: Nat bullshit on inflation and earnings

Written By: - Date published: 7:02 am, October 20th, 2010 - 44 comments
Categories: Economy, national, wages - Tags: , , ,

Keith Ng’s recent post at Public Address is so good I have to reproduce the whole thing here. Keith – tried to get in touch via your contact web form, hope it is OK, if not let us know, thanks. — r0b

Did you know we’re in a recession?

Dear Bill English. Let’s make a deal. I won’t do something stupid, like blame National for the recession, if you don’t do something stupid, like try to claim that all the side-effects of the recession are actually good things that National can take credit for.
—
Bullshit #1: “The lowest annual inflation rate in more than six years confirms that cost of living increases have generally been low… price increases [are] significantly lower across the board under National” – English

I can’t believe that National is trying to claim credit for low inflation.

1) It’s the Reserve Bank’s job to control inflation. If anyone should be taking credit, it’s Alan Bollard, not Bill English.

2) But the current low inflation is not because of anything English has done, it’s not even because of anything that Bollard has done. Prices have not increased much because people haven’t been buying. This is what happens in a recession.

3) If English really wants to stake his government’s reputation on keeping down prices, he’ll need to resign in exactly three months, when the impact of GST flows through to the inflation statistics and they go through the roof.
—
Bullshit #2: “Real after tax average earnings in New Zealand have increased 8.7 per cent since September 2008 – a significant improvement on the 3 per cent total growth over the previous nine years.” – English, in August

“[English] released figures which he claimed showed real after-tax wages had risen under National (from minus 1 per cent from December 2006 to September 2008, to 9 per cent in September 2008 to June 2010).” – English, in October

Let’s think about this for a sec. He’s telling us that wages grew faster during a global recession than economic golden weather. In fact, in August, he claimed that wages grew 13 times faster (on a per year basis) during a recession than during the boom.

Come on. A little more common sense and a little less LSD please.

Why do the numbers look like this? Because English used the average wage for employed workers. During the Clark years, policies like WFF brought more people into the lower end of the workforce. This bought the average down. The people who were already in the workforce didn’t get any poorer – the only thing that actually went down was the average.

When the recession hit, people got laid off, or got bumped down to part-time. Because the low earners tend to get laid off first, when they got taken off the books, this perversely made the average go *up*.

This shows the number of full-time equivalent employees (e.g. Two half-time employees count as one). The last two years saw the biggest dip in employment since Ruth Richardson.

(Source: FTE Employees by Sector, Quarterly Employment Survey, from StatsNZ InfoShare)

A lot of people became unemployed, or less employed. The only thing this bumped up was the average – it didn’t actually make the people who were still employed any richer. This is what happens in a recession. This is what Bill English is taking credit for.

The real statistics on income comes from (duh!) the New Zealand Income Survey. This shows the median weekly pre-tax income. No prizes for spotting the trend here – these have been the worse two years for income since the survey started. This is what happens in a recession.

(Source: Household income by source of household income and household type, NZ Income Survey, from StatsNZ TableBuilder)

So far, I’ve only looked at pre-tax figures. English’s numbers are after tax. How can that be, when National’s tax cuts just started this month? Oh. Turns out English was measuring the effect of Labour’s 2008 tax cuts and National’s April 2009 tax cuts, but doesn’t include the one that has just come into force. 70% of the tax difference came from Labour’s tax cut, and 30% from National’s. So, English is trying to take credit for *that* as well.

This stuff isn’t National’s fault. There was a global recession. People lose their jobs, income takes a hit, consumption slows down. It’s what happens. But all this stuff about how we’ve suddenly become better off because it’s a National government is just a lie. Nothing magically happened when John Key took office.

Please stop making shit up.

Keith Ng

44 comments on “Keith Ng: Nat bullshit on inflation and earnings ”

  • Comments are now closed

  1. M 1
    20 October 2010 at 7:36 am

    Just read this on PA – excellent.

    He’s right – while National didn’t cause the meltdown they sure haven’t done anything to ameliorate the suffering and have not shown any will to do anything to help the average working person.

    Keith’s final line says it all.

    I think that Labour should as part of its election campaign play the song ‘Nowhere Man’ for Johnny.

    He’s a real nowhere man,
    Sitting in his Nowhere Land,
    Making all his nowhere plans
    for nobody.

    Doesn’t have a point of view,
    Knows not where he’s going to,
    Isn’t he a bit like you and me?

    Nowhere Man please listen,
    You don’t know what you’re missing,
    Nowhere Man, the world is at your command!

    He’s as blind as he can be,
    Just sees what he wants to see,
    Nowhere Man can you see me at all?

    Nowhere Man, don’t worry,
    Take your time, don’t hurry,
    Leave it all till somebody else
    lends you a hand!

    Doesn’t have a point of view,
    Knows not where he’s going to,
    Isn’t he a bit like you and me?

    Nowhere Man please listen,
    you don’t know what you’re missing
    Nowhere Man, the world is at your command!

    He’s a real Nowhere Man,
    Sitting in his Nowhere Land,
    Making all his nowhere plans
    for nobody.
    Making all his nowhere plans
    for nobody.
    Making all his nowhere plans
    for nobody!

      • M 1.1.1
        20 October 2010 at 9:46 am

        Ooops, haven’t been reading TS that long 🙁

        Maybe one of the easiset ways to disarm Key and Bling would be to ask “If we’re doing so well, why isn’t everyone feeling so much richer?”

        Spongebob could do a better job as PM.

    • felix 1.2
      20 October 2010 at 10:40 am

      It’s great idea and a perfectly fitting song but there’s zero chance of Labour (or anyone else) being able to license it for a political ad (or anything else). Same goes for any Beatles material.

      So if you want to use it you’ll have to do it yourself, underground stylez – no legit organisation will be able to touch it.

  2. the sprout 2
    20 October 2010 at 7:45 am

    Keith does this stuff very well.

    I agree National is really exploiting the inumercay of the the public and msm in a systematic way that I haven’t seen in NZ before. I mean, all organizations manipulate stats for PR purposes, but National is doing it so blatantly, day after dat after day.

    • Lazy Susan 2.1
      20 October 2010 at 7:57 am

      I agree, but do you think the MSM are inumerate or complicit here? These things are really not that hard to understand. Surely the concept of a median income is still taught in schools and a few of those flash TV graphics can explain how English is being highly manipulative.

      The truth is that National are manufacturing silver linings when there are none and they know it. The bad news for National and the rest of us is that the global economy is on course for a “double dip” recession – seems kind of appropriate for the Dipton illusionist.

      • Marty G 2.1.1
        20 October 2010 at 8:05 am

        I think for the most part they can’t get their heads around it, so they feel bound to let the government’s claims go unchallenged.

        It’s a problem having economically illiterate people as your main msm political writers when so much of the meat of politics is about the economic impacts of policies. Instead we have people who are good at describing the ‘game’ of politics and the msm economic commentators, who are mostly rightwing.

        • Lazy Susan 2.1.1.1
          20 October 2010 at 8:22 am

          I think for the most part they can’t get their heads around it, so they feel bound to let the government’s claims go unchallenged.

          I think you’re letting the MSM off the hook Marty. All the work is being done for them in numerous articles, such as this one, so I find it hard to believe that they can’t get their heads around this. All they need to do is package it in a way that viewers/readers will understand.

          As for the MSM economic commentators I think there are a couple, both Rod Oram and Bryan Gaynor, who generally do a good job. I wouldn’t describe them as rightwing. Oram particularly has frequently been extremely critical of National. I just think that they consider this stuff is more for the political commentators and opposition than themselves.

          Cunliffe really should be on Key and English’s back and give the MSM some sound bites to work with.

  3. Marty G 3
    20 October 2010 at 7:56 am

    Yeah, I’ve been writing about this but I like the way Keith articulates it.

    If we accept Key and English’s approach we have to believe something very odd: that wages are rising quickly in a time of high unemployment and recession when teachers can’t even get an inflation-matching payrise.

    The government is using the full-time, ordinary time, average wage. They say it’s the ‘official’ measure because it’s the measure used to set the superannuation rate against. But that’s bollocks, just because it’s sued to benchmark super doesn’t mean it’s the correct measure when you’re looking at wages in general.

    This measure ignores:
    part-time workers,
    over-time
    changes in employment levels that not only mean those people are earning less as they lose their jobs but the average wage of the those remaining employed will tend to rise

    If you want to measure how wages are moving, you’ve got to do the median for the whole working age population.

    • the sprout 3.1
      20 October 2010 at 8:17 am

      i think that like Goebbels, this government is finding that the need to lie through their teeth increases as the amount of reality-based positive news becomes more and more scarce.

      misrepresenting the numbers is an easy way to achieve that, especially when they know the msm is inumerate or complicit as suggested above.

      this observation from Claire Trevett today is the norm:

      “The pair engaged in the tango of jiggery pokery statistics…”
      http://www.nzherald.co.nz/politics/news/article.cfm?c_id=280&objectid=10681755

      wow ‘jiggery pokery’, that sure is some mighty fancy analysis there Claire. you didn’t go to the LSE for your degree per chance?

      • Marty G 3.1.1
        20 October 2010 at 8:42 am

        yeah I saw that too. Says to me that the whole debate over the numbers goes over her head and she just switches off until something ‘political’ happens.

        If they can’t even follow the debate, how can they offer any insight into which argument is more valid?

        Of course, the myth of ‘objective’ journalism means they don’t offer judgements on policy anyway, just scorekeeping in the ‘game’ of politics.

        • Carol 3.1.1.1
          20 October 2010 at 9:19 am

          But Trevett (intentionally or unintentionally), fails to really identify the significance of the game-change that happened in parliament yesterday.

          IMO, the “shambles” in question time yesterday was the result of increasingly desperate tactics from National, as they realise that the momentum is swinging in Labour’s favour (especially after the weekend conference). It is becoming increasingly obvious that the Key government is not very competent, and has no solutions to the GFC, and the challenges facing NZ now & in the future. They over-rely on spin and PR, and have nothing to offer except their adherence to neo-liberalism, which is a theory on the way out.

          Lockwood Smith got cross, not because of the routine use of “patsy” questions”, but because, in their desperation, National blatantly crossed the line to use such questions to attack Labour – a desperate move by Nat.

          I am thinking that this is most likely to be the beginning of the end for Key. Sure he has high “popularity”. But he lacks political skills, and has no way of re-evaluating an economic theory-in-crisis, because he was totally constructed by and through that philosophy.

          As evident in Ng’s analysis, the spin and PR surface is wearing thin. I think it’s highly likely that National and Key will begin to slide down the polls from here on. And if that happens and leads to a big drop, would National do a Gillard and roll Key before the next election?

          Anyway, I think the next year will be fascinating, and far from totally predictable.

          • Colonial Viper 3.1.1.1.1
            20 October 2010 at 9:25 am

            Gawd I hope you’re right and English gets another shot at the title. G 😀 FF 2 😀 11!!! (thanks Spud!)

  4. burt 4
    20 October 2010 at 8:10 am

    Your kidding me – the same recession that started before the global economic crisis while the rest of the world was still basking in the golden economic weather is still with us… Better not vote for the productivity killing red team in 2011 then.

    Remember people; VOTE ABL – Anything but Labour.

    • bbfloyd 4.1
      20 October 2010 at 8:26 am

      Burt.. i’m glad it was you who said that about the recession. anyone else and i might have had to take it seriously..

    • Marty G 4.2
      20 October 2010 at 8:49 am

      “the same recession that started before the global economic crisis while the rest of the world was still basking in the golden economic weather”

      Burt, you’re not honestly repeating another of English’s lies in a post that exposes what a liar English is?

      New Zealand entered the recession in the same quarter (Q1 2008) as the US, Ireland, Sweden, Norway etc and only a quarter ahead of the rest of the world.

      The sparks for the recession: the oil price spike and the sub-prime crisis had started the quarter before in Q4 2007.

      You’re still the dumbest commentator here, burt.

      • Colonial Viper 4.2.1
        20 October 2010 at 9:22 am

        And I should say, Ganesh Nana counts the real meat of the GFC hitting world financial markets from September 2008. He made a point of it in his presentation saying that Treasury hacks were still determined to suppress the risk of growth fueled inflation as late as June 2008. Yeah I guess there’s not much risk there now, well done team.

        • Pascal's bookie 4.2.1.1
          20 October 2010 at 9:32 am

          hey Burt, care to comment on what the fed reserve was doing for much of 07-08 and how that relates to your oft repeated bullshit?

          Cheers.

      • felix 4.2.2
        20 October 2010 at 10:44 am

        “Burt, you’re not honestly repeating another of English’s lies in a post that exposes what a liar English is?”

        Not honestly, no.

    • George.com 4.3
      20 October 2010 at 9:43 pm

      Burt, you are absolutely an ABL – anyone but Labour. You’d vote for a party of 50 Rodney Hides & David Garretts if your only other choice was Labour.

  5. Jim MacDonald 5
    20 October 2010 at 8:50 am

    Dipton is taking us all for dipsticks.

  6. freedom 6
    20 October 2010 at 8:53 am

    reality is shown to us in many forms, though i believe the massively increasing numbers of people unable to pay their bills says a whole lot more than how much they earned.

    • Pascal's bookie 6.1
      20 October 2010 at 9:36 am

      I hear from English that this is just a sign of how confident people are about being able to pay their bills in the future.

  7. xy 7
    20 October 2010 at 9:13 am

    I don’t understand why you’d copy and paste the entire article instead of excerpting and linking – surely it’d be more polite to do that while you wait for a response to your question!

    It really strikes me as bad form to do this, especially the way you’ve titled it.

    • Colonial Viper 7.1
      20 October 2010 at 9:23 am

      Yeah, would’ve been nicer to take this more cautious approach. Hope KN is cool with it.

    • r0b 7.2
      20 October 2010 at 9:34 am

      I don’t understand why you’d copy and paste the entire article

      Because I think it’s so good and I want more people to read it, the whole thing.

      instead of excerpting and linking

      It is linked twice – once at the top, once at the bottom.

      surely it’d be more polite to do that while you wait for a response to your question!

      No response to the contact form “email” – how long does one wait? It’s a very timely piece, I hope it gets widely noticed and discussed. I hope the note at the top of the post is clear, and I will certainly respond to any communication from Keith.

      It really strikes me as bad form to do this, especially the way you’ve titled it.

      My apologies to anyone offended. The title was to make it clear right from the start who wrote the piece, and I think it is a fair and accurate summary of the piece.

  8. ianmac 8
    20 October 2010 at 10:26 am

    It seems incredible that with a country of such high literacy, so many can be fooled by so few. It seems as though English can be Muldoon-like and flash a few graphs around, cherry-pick the stats and convince the country that we are in safe hands. Car salesman?

  9. M 9
    20 October 2010 at 11:12 am

    Don’t know if anyone has seen the Hitler parodies re the financial crises but maybe someone could make one about Key and Bling desperately lying to keep support shored up.

  10. MikeG 10
    20 October 2010 at 12:10 pm

    The new Blingish Economic Theory:
    Savings have increased under National + Interest rates have decreased under National = The more we decrease interest rates, the more savings will increase.

  11. George.com 11
    20 October 2010 at 9:47 pm

    So National want to claim credit for low inflation. Never mind the fact that the global recession has given us that. That is a desperate move, even for National. Still if National do want to claim credit for low inflation they can also get the credit for:

    a massive increase in unemployment
    growing government debt
    falling house prices
    ongoing mortgagee foreclosures
    failing businesses
    stagnant wage levels
    SCF failure

    I lokk forward to English putting out the press release announcing that the unemployed, homeless, bankrupt etc can thank National.

  12. Jan 12
    20 October 2010 at 10:42 pm

    I listen to Morning Report and am always surprised when Bill’s boss can’t differentiate between incidents, instances incidence and incidences(sic) so perhaps the bar on providing analysis satisfactory to allow for providing a “good news” press release isn’t very high. ;-). I’m surprised at the MSM is quite so lazy though – shame on them that volunteers have to do this – and good on Keith!

    Check out the similarities between the Beehive Story and the NZ Herald press release. Cut/Paste CUT /Paste Submit / Approve – not a skerrick of thought or reflection in the whole Herald article.
    http://www.beehive.govt.nz/release/lowest+inflation+six+years+good+families
    http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10681451

    ANTI-SPAM unusual!

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