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Nats warn of credit downgrade

Written By: - Date published: 7:39 am, October 1st, 2011 - 17 comments
Categories: debt / deficit, economy, national - Tags: ,

The 2009 budget was another piece of well managed political theatre by National. Reneging on their irresponsible election bribe tax cuts, and knowing that they wouldn’t have anything much positive to sell, they set up the threat of a credit downgrade as the litmus test of success.

Before the budget Key confidently predicted that the political humiliation of a downgrade would be avoided.  Eddie started us off with a few choice quotes yesterday, here’s another from Key:

“If a downgrade were to happen, it would add 1-2% of interest on the amount the government borrows, which is around $600 million each year.

This, says Key, is to be avoided at all costs.  “That’s every homeowner, every business, everybody paying 2% more. That would be irresponsible in my view for the government not to act,” Key says. [emphasis added]

To make sure of the outcome, Bill English consulted with the ratings agencies (to the extent that even Tory commentators raised the alarm about Who’s writing the budget?).  Sure enough post budget the agencies duly held their ratings, and the government got to enjoy the mission accomplished spin.  They were still posturing (in well scripted uniformity) about avoiding a downgrade in debate on the 10th of August 2011:

STUART NASH (Labour) to the Minister of Finance: In what way is New Zealand “better placed to withstand” a financial crisis than 3 years ago given that before he came in to office the Government was running a surplus and core Crown net debt was just 1 percent of GDP and now the Government is running record deficits and net debt is 20 percent of GDP?  …

Hon BILL ENGLISH: I think it [the government’s credit rating] is on negative outlook, and that is remarkably better than the downgrade we would have faced if we had not changed the damaging and wasteful policies of the previous Labour Government. …

TIM MACINDOE (National—Hamilton West) : … Have those members not noticed what is happening in Europe, America, and elsewhere at the present time? Do the phrases “debt crisis” and “credit downgrade” mean nothing to them? …

AMY ADAMS (National—Selwyn) : … Of course, more recently we have watched the old superpower America teeter on the brink of complete collapse, and we have seen its economy not only downgraded recently, but also put on further negative watch. That tells us how important it is that we can present to the world the face of a strong economy that has its books in order, its debts under control, and, most important, is being led by a Government that knows how to run a strong economy and knows how important it is to keep the accounts in good order and keep us in good shape. We have seen over the three Budgets delivered by the John Key – led Government a story of returning this country to the strong position it deserves to be in, putting us on the front foot and putting us in a position where we are economically competitive internationally and where the world and the lending markets know we are a good bet. …

DAVID BENNETT (National—Hamilton East) : … What the Labour plan would deliver is more debt. Is more debt a good thing to have at this time? Labour should ask the Americans what more debt means. More debt means we get downgraded. When we get downgraded, what does that mean? That means we are going to be in a situation where we have higher interest rates for our people. The people in New Zealand do not want higher interest rates. …

Hon JUDITH COLLINS (Minister of Police) :… Well, we have seen this week in the United States what happens when a nation’s credit rating goes down. We have seen what happens. What happens is that interest rates go up—interest rates for the job creators, interest rates for mum and dad investors, interest rates for homeowners, interest rates for people with mortgages, and interest rates that translate through to everybody’s pocket. … There is not a word from the Opposition about how this Budget prevented a downgrade of our credit rating, which would have affected every New Zealander in some way. …

JAMI-LEE ROSS (National—Botany) : … They think that more debt will solve all those issues. Well, it will not. It will put us in a situation where we would have a credit rating downgrade if we continued along the debt projection that the last Labour Government left us with. It would be a shambles. … High debt levels would lead to a credit rating downgrade, and that would lead us back to the area of high interest rates for New Zealand homeowners. …

Fast forward to September and the Nats have suffered not one, but two separate credit downgrades.  I wonder how they’re going to explain away their boastful posturing and dire warnings now.  With a smile and a wave perhaps?

17 comments on “Nats warn of credit downgrade ”

  1. Irascible 1

    The finger puppet that is Key will, with Dipton, claim that this credit rating fail mark is not their fault but a result of being bullied by (1) economic policies outside of their collective ability, (2) fault lines in NZ geography, (3) The RWC impact on the economy, (4) the actions of insurance companies and finally (5) God. Thus, despite the posturing in earlier PR controlled “budgets” about the dire consequences of a credit rating downgrade on a policy less government this downgrade is to be seen as meaningless and an endorsement of the policy to sell off the country’s assets to appease the corporates who have contributed to the national debt but are not responsible.

  2. mik e 2

    Nats under blinglish New Zealands worst finance minister of modern times manges less than 1% growth in five years as finance minister .The double dipton managed double dip in credit ratings 1998 and 2011,now we have double dip recession from the double dipstick

  3. Afewknowthetruth 3

    Never a word of discussion about the fundamentally flawed system of fractional reserve banking and creation of money out of thin air to pay interest on the previous money created out of thin air, of course. The public debate has to be steered well away from all the fundamentals and focused firmly on the symptoms (or on the irrelevant).

    The whole bankers’ Ponzi scheme (which gave the facade of working in the past) is in the process of imploding, since the energy needed for economic activitiy is in decline due to peak oil (something else that is a taboo subject in official circles).

    Perpetual growth on a finite planet always was an absurd notion but while there were resources to be converted into waste at a profit, growth was possible. Now that particular game is very close to over.

    The role of central government is to attempt to maintian the myths that underpin the economic system for as long as possible whilst ‘shafting’ the common people. As things get generally worse, the lies we are told by politicians and mainstream economists will get bigger and bigger -that’s guaranteed! They will keep offering the false hope of ‘recovery’ for as long as the dumbed-down public believe the lies.

    One of the greatest problems for anyone telling the truth at this stage is that a large portion of the general populace wants to believe the lies

    • Ari 3.1

      The problem of peak oil is not so much that there’s not enough oil, but rather that what’s left is too expensive to fuel the economy the way it did before and will cause price shocks, even if we wanted to pollute the atmosphere with it.

  4. randal 4

    John Keys says he cant talk about it in public because the electoral commission says it is politicing. Now who the hell is running this country.Standard and Poors, the electoral commission or monnbeam the friggin cat.

  5. tc 5

    The hollow men are running da country…..obvious ain’t it !

    • side show bob 5.1

      “the hollow men are running the country”, Maybe but they beat the hell out of lunatic gay females who can’t keep their mindless musings to themselves. Mad butcher, I don’t think so, New Zealander’s know full well whose mad and what party the dropkicks belong to.

      • Draco T Bastard 5.1.1

        The lunatic females seem to be in NAct as well and the Mad Butcher does, as evidenced by his support of NAct, appear to be as mad as a hatter.

  6. Tombstone 6

    It’s about time our gutless media started to ask some serious questions of John Key because he’s running this country into the ground and getting away with it – the situation is getting dire and Key is at the helm. The excuses and deliberate attempts to avoid the hard questions has to stop and the media needs to grow a spine and start earning their keep.

  7. In interviews during the campaign, Key and English need to be asked, repeatedly, why a credit downgrade was such a dire prospect and an indication of bad economic management previously but now, presumably, was something ‘unavoidable’ (by ‘good’ economic management – i.e., their own), ‘a consequence of international economic conditions’, etc..

     

  8. Paul 8

    The Film ‘Money as Debt’ by Paul Grignon shows how the fractional-reserve banking system is not sustainable.

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