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Our innumerate finance minister & friends

Written By: - Date published: 6:05 pm, February 16th, 2010 - 20 comments
Categories: bill english, Economy, education, john banks - Tags: , ,

Here’s the first question from the House today:

“1. CRAIG FOSS (National—Tukituki) to the Minister of Finance: What does the latest GDP data show about New Zealand’s recent growth performance?

Hon BILL ENGLISH (Minister of Finance) : Revised GDP data up to the September quarter of 2009 was released just before Christmas. It revealed that the economy had, for a number of years, been growing more slowly than was previously reported. In fact, GDP output in 2009 was barely above the level 4 years before—that is, 2005. In the 3 years to September 2008 the economy grew, under the revised figures, by less than 1 percent per year through the third term of the last Government and before the impact of the global crisis.

Craig Foss: How should the economy have performed over this time?

Hon BILL ENGLISH: The years 2005-08 were the best of times internationally, and we should have done much better than 0.9 percent growth per year.”

0.9% annual growth from 2006-2008? Just doesn’t feel true, eh? So I checked.

This is what I did. I went to the Stats NZ GDP figures, I added together the revised GDP for the four quarters of the 2006 September year and divided that by the sum of the previous four quarters, then I did the same for the 2007 September year, and the 2008 September year. That’s how you calculate an annual growth % figure.

Here are the answers: 2006: 1.6%, 2007: 2.1%, 2008: 1.5%.  Giving an average of 1.7%. That’s against National’s record of -2.2% for the 2009 September year.

I got to wondering how English came up with his completely false figure. And I reckon he added up the quarterly growth figures from December 2005 to September 2008 and divided by 3. That gives you 0.87%.

Problem is that is nonsense. It isn’t the average GDP growth that year. It isn’t anything. Didn’t anyone ever tell English about compounding growth? This is fourth form stuff. I can’t believe neither English nor his staff saw that they had the maths completely wrong.

English would fail the national standard. Lucky he doesn’t have to sit it eh? He can just be the guy in charge of our finances instead.

Meanwhile, John Key:

Roger Douglas: could he not afford to pay for personal tax cuts by lowering the various expenditures that he opposed while in Opposition, such as the Working for Families programme, which he labelled ‘communism by stealth’?

Hon JOHN KEY: When someone loses 100 percent of what he or she earns, that is communism by stealth…

Um. Who loses 100% of their income? Not anyone getting Working for Families. More maths troubles for the money men?

Hon Phil Goff:Which assurance has greater credibility: the Prime Minister’s promise not to raise GST; the Prime Minister’s promise that he will raise GST but it will be fair to all; or, having been caught out in a conflict of interest on his Tranz Rail shares, his promise to sell his mining shares and his uranium shares?

Hon JOHN KEY: Well, let us sort one thing out. No one thinks Phil Goff is sexy, anyway.

Pathetic. The kind of pathetic little comment we’ve come to expect from this little man. More interested in awards from condom makers than doing his job.

Hon JOHN KEY: Maybe I am the only one with amnesia…

Maybe you are John.

This last one wasn’t in the House but still worth a mention. Paula Bennett blames the media for wanting to know what Whanau Ora is:

“I don’t think there is a misunderstanding,” Ms Bennett said. “I think it’s really kind of clear. I think that misunderstanding has been really built up by the members of the media really. Because we are kind of clear on where it is, what the concept is, how it works for those families that need it most. “

So, umm, is there a misunderstanding or not? You’re “kind of clear” on “where” it is? Because I’ve listened to the interviews, I’ve read the newspapers and the reports, and I have no f#cken clue what it is.

20 comments on “Our innumerate finance minister & friends ”

  1. Lanthanide 1

    Bennett just needs to add in a few ‘likes’, ‘whatevers’ and ‘totallys’ to that quote and she’d be a ringer for a valley girl.

  2. lukas 2

    “English would fail the national standard. Lucky he doesn’t have to sit it eh? He can just be the guy in charge of our finances instead.”

    Is that you coming out in favour of the new standards?

    • Marty G 2.1

      Is that you conceding that the Finance Minister can’t do simple maths and made a boob of himself in parliament today with a patsy question specifically intended to make use of his innumerate numbers?

  3. Ed 3

    I’m not clear on the calculation basis. If you want the percentage increase in GDP from September 2009 to September 2009, why do you not just divide the Sept 2009 figure by the Sept 2008 figure, deduct 1, and multiply the answer by 100 to get a percentage? The quarterly increases could be obtained the same way using the end and start figures. Presumably there are adjustments to get GDP per head of population etc. I am surprised Bill English didn’t get figures from his department, anyway.

    • Marty G 3.1

      Perfectly valid questions Ed

      “If you want the percentage increase in GDP from September 2009 to September 2009, why do you not just divide the Sept 2009 figure by the Sept 2008 figure, deduct 1, and multiply the answer by 100 to get a percentage?”

      That is what you would do if you had the annual figures for the Sept 2009 and Sept 2008 years. But we don’t, the figures are given by quarter. GDP figures are usually quotes quarter on quarter (ie how big was last quarter compared to the quarter before) or year on year (how much was last year compared to the year before). English is clearly talking about annual growth “In the 3 years to September 2008 the economy grew, under the revised figures, by less than 1 percent per year” ie year on year.

      Comparing quarter to same quarter of previous year will give you a misleading result if the you’re after year on year growth because you’re just comparing the size of GDP of a quarter within each of the two years, and GDP does not grow smoothly within years.

      Think of it this way, there’s a river flowing at varying but generally growing rate. You want to know how much more water flowed down the river today than yesterday. You can measure the entire flow 24/7. Do you a) measure the flow for all of today then divide by all the flow for yesterday or b) measure the flow from 12-6 today and compare it to the flow from 12-6 yesterday?

      Since you need annual GDP to compare year on year as English claims to have done, you need to add together the quarters in each year as I did then do the calculation as you describe.

      I wouldn’t be so quick to assume that English got his numbers from Treasury a) they wouldn’t have made this fuck up b) it has the feeling of something someone ‘discovered’ and they decided to use for a little political hit

      hmmm. I did the calcs and it ame out at 0.9% Could be English’s office compared September quarters to each other. That would be as useless as adding together the quarterly growth figures. It simply does not tell you the annual GDP growth.

      • sk 3.1.1

        Marty G, just checked your numbers and you are correct. If you look at calendar years 2006-08, growth averaged 1.2%, but Mr English cited the 3 years to September 2008, which is 1.7% (not the 1.5% you cite).

        But the broader point is that New Zealand has been performing poorly since 2006 (outside of a short-lived bounce in 2007). So what does this government plan? A GST hike that will hit the bottom 50% who spend the highest proportion of their income Just nutty . ..

      • Ed 3.1.2

        Thanks – that is much clearer. There is a tendency to talk about ‘figures’ without qualifying them adequately – a dollar change is not the same as a percentage change and neither are the same as a cumulative total – but they are all ‘figures’. We should expect our Finance Minister to be able to not only get the numbers right, but to be clear which figure he was talking about. He does have a tough job though – trying to meet unrealistic promises while at the same time only being allowed to put up legislation that benefits the wealthy must be very frustrating, if personally rewarding.

  4. lukas 4

    “Hon JOHN KEY: Maybe I am the only one with amnesia ”

    Might help to put into context for readers who did not see/hear QT today what that was about and the point of order called by Trevor Mallard that the comment was made in response of.

  5. Stephen Whittington 5

    I think you are wrong on the Working for Families issue. The effective marginal tax rates for some are above 100%. Now, it is true that that includes the marginal taxation on the dollar, but I think it was fairly clear what he meant.

    See page 30 of the Briefing to the Incoming Revenue Minister: http://taxpolicy.ird.govt.nz/publications/files/IRBIM2008.pdf

    • Marty G 5.1

      Right, technically, but not what Key is talking about.

      Does point out something important though. the highest marginal tax rates are faced by people trying to get into work, reducing those abatement rates should be the focus, not sending more to the well-off

  6. How about this from our prime snake oil salesman.

    From today

    “it is an extremely complex calculation, but if one looks at the net effect of raising GST, lowering personal taxes right across the board—the top, lower, and middle end—and taking into consideration the other moves the Government is making, it will make the bulk of New Zealanders either better off or a lot better off, and on a straight GST income tax no one will be worse off. ”

    So we can replace one tax with another tax and everyone will be better off!!

    Can Key keep replacing taxes so that we can eventually become super rich??

    Captcha – misleading!!!!

  7. George.com 7

    Here is a possible explanation.

    1.6% + 2.1% + 1.5% = 5.2% across 3 years. The time Labour was in government. Now, take 5.2% and subtract 2.2%, the amount National shrunk the economy in 2009, and you get 3%.

    Divide 3% by 3 (years labour was in power) and you get 1% per annum. That is fairly close to what English states.

    Divide 3% by 4 (years – labour 3 years and Nationals one) and you get .75% per annum. Thats fairly close to Englishs figure.

    If you add 3% and 3% and then divide by 7 years, you get .85% per annum. Almost smack on Englishs claim.

    So, essentially, English took the successful growth under Labour, subtracted the amount English himself managed to shrink the economy, and divided by a sample of years and chose a consensus figure.

    The end result is, of course, Labours mishandling of the economy, rather than Englishs maths.

  8. Rob 8

    Key to me appeared b the losing 100% of the income by stealth to be a democracy which taxed its population 100%. i.e. communism by stealth is simply communism…
    Good blog though 🙂

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