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Key tries bad stats to mask pathetic record

Written By: - Date published: 8:44 am, February 9th, 2011 - 39 comments
Categories: john key, wages - Tags: ,

Key’s line was pure spin. An attempt to cover a shockingly poor economic record with fairytale statistics. Here’s John Armstrong doing what Key hoped he would – regurgitate the line unchecked:

“Key also produces figures to show the price of goods and services has risen by 6 per cent since the last election, while the after-tax average wage has actually gone up by 16 per cent.

Thank tax cuts for that. The figures might be right. But they won’t equate with most people’s experience in the nation’s shopping malls.”

‘Might be right?’ John, if you don’t have a lackey that can check these facts, flick us an email.

Here’s how it goes:

2008Q4 2010Q4
Average Weekly Earnings $              791.91 $              838.73
Net income using tax rates in force at the time $              640.86 $              710.75
Consumer Price Index 1072 1137
Inflation-adjusted average weekly wage $              679.72 $              710.75
Change after inflation and tax cuts 4.6%
Minus 2.5% extra GST on net income 2.5%

(incomes and CPI from Stats, tax rates from Treasury)

So, the average wage after tax and inflation has risen 2.5% thanks to those tax cuts (it’s down without them). That’s not the 10% Key is claiming. And it’s not the right figure to use because it’s dragged up artificially by the fact the rich are still getting pay rises, the fact that the rich got big tax cuts, and the fact that those on low incomes are most likely to lose their jobs in the recession and so stop being part of the average.

Averages suck at telling us the ‘typical’ experience and it’s no good if you don’t count families whose breadwinners have lost their jobs in the recession. Fortunately, we can look at the median household income instead.

2008Q4 2010Q4
Median Weekly Household Earnings $          1,257.00 $          1,236.00
Net income on tax rates in force at the time $          1,001.79 $          1,057.29
Consumer Price Index 1061 1099
Inflation-adjusted average weekly wage $          1,037.67 $          1,057.29
Change after inflation and tax cuts 1.9%
Minus 2.5% extra GST on net income -0.4%

(incomes and CPI from Stats, tax rates from Treasury)

And even this measure, which shows household incomes have dropped in real terms even when you count the tax cuts, isn’t wholly satisfactory because it doesn’t show the fact that those below the median have gotten poorer a lot quicker than those above it. There’s no nice way to show that including the effect of tax cuts with the statistics available.

At the end of the day, you don’t have to decide who wins this battle of the statistics. Trust your own eyes: look around you, is the typical Kiwi family really 10% wealthier since Key came to power? Or is Key lying to you to cover his arse?

39 comments on “Key tries bad stats to mask pathetic record ”

  1. ghostwhowalksnz 1

    I bet Key counts the tax cuts Labour gave just before the election as part of ‘his’.
    The trick is to use a figure before Oct 08 as the starting point.

    • lprent 1.1

      I bet Key counts the tax cuts Labour gave just before the election as part of ‘his’.

      Those are in the Q4 2008 figure that Marty was using.

      • tsmithfield 1.1.1

        Why shouldn’t he? After all, Labour only gave them to try and counter National’s tax cut promises. So in a sense, it was National’s tax cuts.

        • ianmac

          Much of what you say TS is interesting. That one is just ridiculous!

          • tsmithfield

            In what way is it ridiculous?

            From a cause and effect standpoint, it is obviously true. National caused Labour to offer tax cuts by forcing Labour to move toward National’s own tax cut promises. If National caused Labour’s tax cuts, then National was responsible for them, so therefore, they were National’s tax cuts on the basis of first cause.

            • Rosy

              I’ll look forward to you claiming Labour had a good world cup (if it goes ok) because they caused it to happen.

              • tsmithfield

                A little different, in that there is a considerable amount of management required after the event has been initiated, so there is plenty of scope for things to go well or badly depending on what has happened in the intervening time.

                In the case of the tax cuts, there was no way in hell that Labour would have offered tax cuts unless they felt under pressure from National’s tax cut promises. Cullen hated tax cuts. For instance, he even cancelled his mean-spirited chewing gum tax. So the argument from first cause is very strong here.

                • Rosy

                  I thought not

                  • tsmithfield

                    Its just you need to be able to draw a direct causal relationship between event A and event B. Thats not so easy to do in the example you provided.

                • ghostwhowalksnz

                  Nationals tax cuts were promised but NOT delivered, remember they were rushed in place in December and mostly repealed 6 months later.

                • Lanthanide

                  No, he didn’t cancel them. He just never passed them because of National making a big deal out of how (supposedly) misery they were.

                  Also, you say that the World Cup is different, because it requires a whole lot of management in place to allow it to be pulled off.

                  Really that’s no different from tax cuts – it requires management of the entire economy of New Zealand for 8 years before tax-cuts by Labour were affordable. If Labour hadn’t managed the economy so well, the tax-cuts wouldn’t have happened.

                  • tsmithfield

                    “If Labour hadn’t managed the economy so well, the tax-cuts wouldn’t have happened”

                    You can’t say that is necessarily so. Tax cuts might have occurred because the economy was in terrible shape and needed stimulus.

                    However, it is very clear that Cullen hated tax cuts and that Labour were not in the slightest bit interested until National inspired the nation with their promises for tax cuts and left Labour having to follow suit.

                    • ghostwhowalksnz

                      The reason Cullen didnt like tax cuts was because the economy was overheated from 2005 onwards. Of course when the GFC kicked in from Sep 2007 , the tax cuts were part of the stimulus and that was a good idea when they are properly structured.
                      National is now OPPOSED to the first $5000 being tax free.

        • Bright Red

          That’s actually the stupidest thing I’ve seen you write. Next you’ll be crediting Japan with investing the nuclear bomb, after all the yanks only built it because the Japs brought them into the war.

          We could go back further if you like and credit the tax cuts to Seddon, who introduced progressive income tax in NZ in the first place.

          • tsmithfield

            Not at all. If a direct line of causation can be demonstrated then it is necessarily true. Basic physics really.

            • Lanthanide

              There is a direct line of causation between the Japanese bombing Pearl Harbour and the Americans bombing Hiroshima. So it’s necessarily true that the Japanese should take credit for the atomic bomb – basic physics really.

              • tsmithfield

                Not a direct line in that case. There are a myriad of ways the war could have gone after that event depending on decisions from both sides. Also, the A Bomb depended on external events such as discoveries in physics etc occurring at the right time. So the line of causation is not at all clear. Certainly, Japan’s bombing of Pearl Harbour contributed to the eventual A bombing of Hiroshima, but it was not the direct cause. And, you couldn’t say that the bombing of Hiroshima may not have occurred anyway, given that the Japanese may have found some other way to initiate the war.

                However, in the tax cut scenario, there was absolutely no way that Labour would have given tax cuts if the Nats hadn’t been promising them first. The evidence is clear from Cullen’s extreme reluctance on tax cuts. Therefore, there is a direct line of causation. So, it is perfectly reasonable to say that on a cause and effect basis that National caused Labour to offer tax cuts.

                • Pascal's bookie

                  The evidence is clear from Cullen’s extreme reluctance on tax cuts. Therefore, there is a direct line of causation.

                  No where near true actually. You would need to show that Cullen wouldn’t normally cut taxes when faced with the economy of 2008.

                  Could be any number of reasons for the tax cuts. Stimulus for one. Is it possible that Cullen was influenced by Keynes? I’d say it’s likely.

                  See also, cuts to the business rate.

                  It looks like Cullen would cut taxes for economic reasons if he thouight there were economic reasons to do so. You confuse this with the National party who have an ideological preference for tax cuts under any condition, and assume that Cullen must be the same, except in reverse.

                  So much for any generalised ‘extreme reluctance on tax cuts’

                  We do know how he repsonded to Nat pressure to cut taxes in 05 though, when the election was going to be tight. So there is some actual evidence against your thesis.

                  • tsmithfield

                    PB: “We do know how he repsonded to Nat pressure to cut taxes in 05 though, when the election was going to be tight. So there is some actual evidence against your thesis”

                    You have provided further evidence of how much Cullen hated cutting taxes, and refused to do so, banking on winning a tight electoral race instead.

                    However, in the last election, Labour was being trounced in the polls, so tax cuts were offered by Labour in absolute desperation, despite Cullen’s hatred for tax cuts.

                    So I think you have provided further evidence to back up my point, not refute it.

                    • Pascal's bookie

                      So your argument is that Cullen didn’t cut taxes when it could have made a difference in a tight race, but did when it wouldn’t make any difference?

                      You’re an idiot. And floundering.

                      Fact is there are other reasons that he may have cut taxes, and there are other times when he did cut taxes. Against those facts, your stupidity can pound all day, but it won’t fool anyone.

                    • tsmithfield

                      Here is a TVNZ article from back in the day

                      The focus will be on how big any tax cuts are and whether they will be generous enough to stave off an onslaught from National, who earlier this week said they would base their tax cut policy on the one they held at the last election.

                      Clearly the tax cuts from Labour were in response to an “onslaught from National”. Clearly, National caused Labour’s tax cuts.

                      Your move.

                    • Pascal's bookie

                      And what is that supposed to prove? A journalist saying what ‘the focus’ will be on is alsmost as stupid as your own pie eyed imaginings of what was going on.

                      In any case, all that quote is saying is that tax cuts are the only thing National had going for them. Which was true enough, but it doesn’t follow that Cullen’s tax cuts were ’caused’ by National.

                      Good grief. Re: your idiocy, I rest my case

          • tsmithfield

            See my reply above about Japan.

            You can’t really go back as far as you think and claim direct causation. That is because you need to demonstrate, for example, that the tax cuts have only occurred because Sedon introduced income tax. However, you can’t say that because if Seddon hadn’t introduced income tax, someone else probably would have.

    • Bright Red 1.2

      that’s probably how he gets a higher figure than Marty does, by counting stuff that occured before he was PM.

      Reminds me of Goff in Parliament yesterday:

      “You know what the Prime Minister’s big claim to fame was in the beginning of his speech? The Rugby World Cup… all his own work. (laughter). Helen Clark got us the World Cup. Trevor Mallard got us the World Cup”

  2. Deadly_NZ 2

    The little pic used for this article shows what he thinks of the ‘little people’

  3. Colonial Viper 3

    I wonder if Key’s bad stats is going to help pay for the median household’s 1kg of cheese, 4L of milk, and 20L petrol today.

    No, didn’t think so.

  4. Craig Glen Eden 4

    Goff did a good job yesterday in the house. Key should have gone early with the election he may well be the highest polling for preferred Prime Minister but I dont think he will be in Government come 2012. All the bullshit is coming home to roost the next few months are going to be interesting as more and more people start seeing the effects of the do nothing smile and wave Prime Minster.
    You can get along with bullshit stats and positive puke stories for a time but when Kiwis household incomes go backwards sooner or later they are going to think this smells like crap, tastes like crap John Key you are crap.

    • ghostwhowalksnz 4.1

      Key cant go early, the double dip recession is starting to bite, they are hoping to talk up the aspiration a lot more before November. Its laughable but hes allowed to get away with it. Liz Hurley any one, I guess she will be a VIP guest at the RWC for sure

  5. Adrian 5

    Key is doing everything he can to lose, or is it just extreme hubris mired in stupidity. This morning Tuku Morgan floated the idea of iwi getting a large share of any assets going up for sale. Quite apart from the pros and cons for their argument, if it gets noisy before Nov 26 the Nats can kiss goodbye to another 5 or 6% who see this as the cost of keeping the MP on side. I feel as if getting rid of Key and co is becoming easyier by the day.

    • marsman 5.1

      Great,then Key can use his new C.V. for his next job:
      John Key
      Currency Raider
      Asset Stripper.
      Liar for Hire
      Anti-spam word : leaving !!!!!!

  6. Goes along with this gem from the Dipton dipshit…

    “People are saving harder and paying down debt quicker than we thought,” said English.

    “They’re not rushing back to the shops. New Zealanders are being careful with their spending …”


    Uhh Bill…we’re not saving or paying down debt or rushing back to the shops cos we’re broke as and pretty much living hand to mouth by the skin of our arses, you fucken idiot !!!

    • Lanthanide 6.1

      “People are saving harder and paying down debt quicker than we thought,” said English. ”

      Or, actually, the “tax switch” didn’t work out quite as you’d planned. Worked out pretty good for the top 5% of course, but they aren’t the movers and shakers of the national GDP figure.

    • KJT 6.2

      People are cutting spending and paying down debt so they can afford to move to Australia if there are enough lunatics still willing to vote NACT back in.
      Like “turkeys voting for Christmas”.

  7. SPC 7

    It’s wrong to presume that all income at the average level is spent (some is saved) or that all spending attracts GST (mortgage payments do not) – so there cannot be a 2.5% deduction for GST. More like 2%.

    So it’s a 4.6% on the average income and 1.9% on the median income gain before a 2% GST cost.

    Of course the gain for some is eaten up in the lower rent income with the change in depreciation rules etc.

    The other point to note is that the reason that some feel poor, is because the cost of their necessities has gone up faster than the average CPI figure and because of a projected cost of child care/education coming up.

  8. Irascible 8

    I presume Bill English’s claim that NZers are now saving, thanks to GST increases, mythical tax cuts for the workers, a miserly 25c hour increase to minimum wage and increased costs for all government services combined with reduced efficiency, will now be converted into Key’s claim that when he hocks of the people’s assets they’ll use these savings to buy their property back before his foreign asset stripping mates get their cheque books open?

  9. dunners 9

    You made some errors in your caluctions.

    You counted the gst rise twice – once in the inflation figure, then you counted it a second time.

    And you used the gst rise of 2.5%, and for some reason took that off 100% of wages.

    But people don’t spend 100% of wages on gst items. Those on low incomes spend a significant amount on non-gst items like rent or mortgage payments.

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