Scrap the spending cap

Written By: - Date published: 8:45 am, July 23rd, 2018 - 152 comments
Categories: business, class war, debt / deficit, economy, Economy, grant robertson, jacinda ardern, labour, monetary policy - Tags:

The Government’s self imposed budget responsibility rules have come under fire.  The rules are these:

  1. The Government will deliver a sustainable operating surplus across an economic cycle.
  2. The Government will reduce the level of Net Core Crown Debt to 20% of GDP within five years of taking office.
  3. The Government will prioritise investments to address the long-term financial and sustainability challenges facing New Zealand.
  4. The Government will take a prudent approach to ensure expenditure is phased, controlled, and directed to maximise its benefits. The Government will maintain its expenditure to within the recent historical range of spending to GDP ratio.
  5. The Government will ensure a progressive taxation system that is fair, balanced, and promotes the long-term sustainability and productivity of the economy.

But the rules are being criticised as being too restrictive and preventing the Government from taking the steps that it needs to take to repair the damage from the past decade of indifference.

From Patrick O’Meara at Radio New Zealand:

The government’s being warned it has no chance of fixing run down public services unless it ditches its self-imposed spending rules.

Jacinda Ardern’s Labour-led coalition promised to loosen the fiscal straitjacket of the previous National administration to rebuild public services, and pledged in the Budget to spend an extra $24 billion more over the next four years.

Under its budget responsibility rules, the government pledged to keep spending at 30 percent of GDP, and reduce net debt to 20 percent of GDP by 2022.

But the government’s efforts have fallen short of the expectations of some, who argue it’s not nearly enough.

“If we stick to those caps for anything more than the next couple of years then we won’t get anywhere near solving the infrastructure deficits that we’ve had across this country, built up over the last couple of decades,” BERL chief economist Ganesh Nana said.

“There’s a lot of catching up to be done.”

Salvation Army social policy analyst Alan Johnson said there was a real danger that the crisis in mental health, social housing and well-being of older New Zealanders would become ingrained.

“One of the things with those caps is that they were literally straight out of the National Party rule book, which was disappointing that both the Greens and the Labour Party signed up for them even before the election.

“They are unnecessary and they could be relaxed I think without a massive impact on our credit rating, and the cost of capital and borrowing,” Mr Johnson said.

The cap on expenditure to GDP is very conservative.  This table compiled by the OECD suggests that the 30% cap is much lower than most overseas nations.

The top five nations, all with figures over 50%, are in a variety of different shapes.  Greece is one of them, but the others include Belgium, Denmark, France and Finland. Australia is at 36% and the UK is at 42%.  Our 30% figure appears to be excessively cautious.

The Net Core Crown Debt to GDP figure is also very cautious.  Again from OECD figures suggest that our proposal is very conservative.  Australia is on 64%.  Most nations are on 50% plus.

There is plenty of wriggle room.  Helen Clark and Michael Cullen left the accounts in outstanding shape and National’s parsimonious nature has kept debt relatively low.

But we have a major problem and we have urgent infrastructure that needs to be built.

Labour’s caution is motivated by political concerns rather than economic concerns.  But we live in times where conventional rules should be disregarded.

152 comments on “Scrap the spending cap”

  1. gsays 1

    It’s not as if, by sticking to these rules, business and farming folk are going to see or say that Labour are good stewards of the economy.

    Potentially they will get the worse from both sides: the tax and spend motif will be repeated and the many at the bottom of the inequality heap will not make real gains.

    • Draco T Bastard 1.1

      It’s not as if, by sticking to these rules, business and farming folk are going to see or say that Labour are good stewards of the economy.

      Of course they won’t – especially as the economy continues to limp along and private debt soars.

      • cleangreen 1.1.1

        100% Draco the government need to honour there promises over a “self uimposed spending cap”.
        As if they dont fullfil their promises to restore all “run down public services” then they will just be a one term government.

        It was Jacinda that recently challenged us to keep Labour in check to keep their promises made to us all.

        We are still waiting for their promises made to restore the Gisborne rail system again, so we are checkig this promise made into the cart of promises to be addressed yet by Labour.

        http://gisborneherald.co.nz/localnews/2437884-135/labour-greens-united-on-rail
        QUOTE.
        Labour-Greens united on rail
        Published: August 23, 2016 11:17AM
        ‘Wrong government in place’ to make rail a reality: Labour and Greens.
        Labour-Greens united on rail
        Published: August 23, 2016 11:17AM
        QUOTE;
        ‘Wrong government in place’ to make rail a reality: Labour and Greens.
        THE Labour and Green parties last night committed to re-opening the entire length of the Gisborne to Napier rail line but pointed out that would only happen if the National Party was removed from office.
        but pointed out that would only happen if the National Party was removed from office. UNQUOTE;
        We say to labour;
        We will hold your Government to account here.as Jacinda has requested we do so in her speech at Waitangi day 2018.
        Labour has promised in the Gisborne Herald press to reopen the rail services to Gisborne from Napier in 2016 before the election.
        Please reply to this request for a meeting please as soon as able.

  2. Glenn 2

    Totally agree, scrap the spending cap. If Labour/NZFirst/Greens wants to risk being a one term government then keep the cap on.
    Folk voted for a change yet the money is not there to implement them under the present rules. Increase the spending on improving infrastructure, housing and health and projects we can be proud of … otherwise National will spend it….on tax cuts for their rich mates.

    • dukeofurl 2.1

      The post is incorrect and compares different spending counted by OECD and what is NZ ‘core spending’

      There could be 15% difference as the OECD includes local government spending which is supposed to be around 10% of central government spending ( I tried looking it up but Stats is a mess as they change everything all the time- no wonder they screwed up the census)

      • Craig H 2.1.1

        The Tax Working Group figures said local body rates are about 10% of GDP. Spending is probably close to that, even with the fees.

  3. Pat 3

    Theres an excellent case to be made for doing so but there are a couple of things to consider.
    Firstly it will be used as a rock of ‘broken promise’ to beat the coalition with and that will have effect.
    Secondly we have capacity and time restraints that mean the use of any additional funding is unlikely to show effect before the next election.

    My hope is the required detailed planning is done over the next 18 months to enable the Gov to approach the next election with a well presented package that indeed does relax the cap and has a robust defence to the inevitable criticism that will be launched …..if i am disappointed in that hope then I suspect the future for Labour is grim indeed.

    • The Chairman 3.1

      I concur, Pat. There is an excellent case to be made for doing so.

      However, I disagree that it becoming a rock to beat them with will have any great effect. Evident by the overwhelming public support for the catch up work required, Labour will be able to keep the public on board.

      As for capacity and time restraints. In some instances, capacity constraints can be filled from offshore. And filling those capacity constraints will help Labour meet the time restraints, improving their ability to get more done. Therefore, there is scope for them to do more.

      But here’s the kicker, they are currently failing to meet the spending of their own self imposed cap. Only spending about 28% of GDP opposed to the 30% cap they self imposed. Hence, allowing them around another $6 billion to play with without even having to break their own self imposed rules.

      Additionally, it’s my understanding that if Labour fail to spend more now, things will worsen.

      • Pat 3.1.1

        there are restraints in planning also…that work takes time and as evidenced by Hiwibuild hasnt been done prior to election ( a serious failing IMO)….and any training package could easily be met within current cap.

        Its all very well to allocate funds but as Shane Jones is discovering it is somewhat more problematic to purposefully and effectively disperse them.

        Things will likely get worse with delay but they will not necessarily improve with poorly planned and connected spending

        Also they may be projected to remain under cap at the moment but they are exactly that…projections and how confident are you in those tax take and GDP projections?

        • The Chairman 3.1.1.1

          No one is suggesting poorly planned spending. So you can put that concern to bed.

          People are calling for a larger injection to help meet the massive shortfalls faced, better providing the Government with the means to urgently act. We have deepening problems, thus there is no time to delay.

          If there are also planning restraints, they to can largely be overcome by more funding and fast tracking.

          Regardless of their accuracy, as projections are the measure in use, then meeting the cap within those projections is fine. Moreover, as the self imposed cap is so conservative, there is little additional risk if projections turn out worse than projected.

          • Pat 3.1.1.1.1

            Care to nominate a couple of substantial projects that could be implemented in the next 18 months ?

            • Molly 3.1.1.1.1.1

              Yes. Create a transition fund to install an electric vehicle charging infrastructure throughout NZ, particularly in the regions. Small to mid-sized business owners can apply for their business to have a charger on site, and in return they will have an increasing number of vehicles stopping for up to 20min at a time. Great deal for small regional cafes and restaurants, invests in transitioning infrastructure, and encourages the use of non-fossil fuels. Particularly, beneficial for business as tourist buses are encouraged to become fossil free.

              Also, invest in warehouse development of kitset houses, run by the government. Improve design and technology, while training apprentices to build.

              • Pat

                would imagine those sorts of things may be covered under the Climate Change Commissions mandate to develop the pathway to Carbon Zero 2050, thats not planned to be set up until next year although theres an interim committee in place since April…that is a huge body of work that will require a lot of interconnected policy whos work for the immediate is already budgeted for

            • The Chairman 3.1.1.1.1.2

              It’s not about what projects I care to nominate. It’s about Labour doing more (with their own projects) to address our deepening problems. And while there are challenges and hurdles to overcome, it’s about ensuring the money to do more is available.

              The calls for more investment are growing louder, yet Labour aren’t even spending up to their own self imposed cap. Equating to around a $6 billion shortfall in this years spending alone.

              • Pat

                got nothing then huh….aint quite so easy eh?

                • The Chairman

                  Again, Pat. It’s not about what I’ve got. And nobody said it was going to be easy. This is about lack of funding being a problem holding this Government back from better achieving its own objectives in addressing the shortfalls. For which, evidently you have no plausible defence.

                  • Pat

                    it is not about a lack of funding in the short term, as stated previously, it is about a lack of capacity and planning…, the planning is now being done and hopefully that planning will lead to increased capacity for which the required additional funding will then be provided.

                    It is understandable that many wish to see underinvestment in society remedied but it needs to be understood that writing a cheque does not magically create the healthcare workforce, social workers, public transport and housing (to name a few) required….the work that can be done before the next election cycle has been funded….and we will find out in due course whats on offer from that point on.

                    But then again expecting a rational response from an angry electorate may be expecting too much…..especially if theyre determined to be dissatisfied

                    • The Chairman

                      “It is not about a lack of funding in the short term…”

                      Indeed it is.

                      As I mentioned above, more funding can help overcome capacity constraints.

                      For example, the nurses dispute. Paying them more now is required to attract new nurses and maintain experienced ones. Enabling them to build up sufficient staffing levels going forward.

                      People aren’t being irrational here. It’s the Government’s current stance that is flawed.

                      Even you conceded those speaking out have put froward an excellent case.

                      Therefore, to now imply the electorate are irrational and merely angry as if it’s somehow not the Governments fault is an interesting stance for you to now take.

                  • Pat

                    an excellent case for removing the fiscal cap…not the timing of the removal….as seems to constantly pass you by.

                    As to the nurses dispute they have been offered more and there is no reason why additional training placements cannot be instituted within current budget…I note training is 3 years so any future trainees wont be qualified prior to the next election.

                    I never apportioned blame for an angry electorate and it is ridiculous of you to attempt to suggest that even had I it was the 8 month old admin I would apportion it to.

                    You are nothing if not consistent Chairman

                    • The Chairman

                      As I highlighted above, the timing is now. Which is evidently passing you by.

                      Nurse are adamant more money than what has already been offered is required.

                      And while additional training placements may be facilitated within the current budget, there isn’t enough funding being offered to attract new nurses and maintain the experienced ones. Which is vital to building and maintain staffing levels and filling those training placements going forward.

                      So once again, you have no plausible argument.

                    • Pat

                      lol…you have made no case for now at all….you havnt addressed one aspect of HOW more funds can be utilised to improve circumstances BEFORE the next election cycle….you continue your one man mission to display faux concern for those impacted by inequality and have nothing practical to offer other than complaint.

                      Keep up the good work

                    • The Chairman

                      Providing nurses with more funding now will improve circumstances before the next election cycle. Allowing voters to see the Government is on the right path albeit if benefits are yet to be fully realised.

                      Additionally, your personal potshot at me merely reaffirms you have no plausible argument.

    • Draco T Bastard 3.2

      Secondly we have capacity and time restraints that mean the use of any additional funding is unlikely to show effect before the next election.

      There are certainly some constraints but available people isn’t really one of them as we have quite a few unemployed that need training.

      My hope is the required detailed planning is done over the next 18 months to enable the Gov to approach the next election with a well presented package that indeed does relax the cap and has a robust defence to the inevitable criticism that will be launched …

      And my hope is that they finally realise how money should work in the country and why that makes foreign ownership/investment bad.

      Your hope hope is more likely to come to pass.

      • Pat 3.2.1

        My hope is at least realistic

        • Draco T Bastard 3.2.1.1

          Considering all the evidence my hope should be realistic but the politicians are still too enamoured of the rich and the failed political-economics of the capitalists and so won’t even go there.

          • Pat 3.2.1.1.1

            as I have said before the problem of politicians is solved by convincing the voting public ..and in all honesty that is where your problem lies, convince the public and the politicians are bound to follow….I;ve yet to see an argument that will do that.

            Whether we like it or not a large proportion of the population are comfortable with their lifestyle and an increasing proportion have known no other.

            • Draco T Bastard 3.2.1.1.1.1

              convince the public and the politicians are bound to follow…

              If that were true then we wouldn’t be signed up to any FTAs, the TPPA wouldn’t have been signed and marijuana would have been legalised years ago.

              There are numerous other policies where the government, of both Labour and National, have failed to do what the people want.

              • Pat

                and yet they keep getting the votes

                • Draco T Bastard

                  Is there really anyone else to vote for?
                  Will any other party make the necessary fundamental changes in policy?
                  Will any other party simply listen to the people?

                  • Pat

                    agree the current options are limited, but in the case of TPP there was the Greens and they barely made the cut, The message would be that if none of the parties are offering the policies then theres a place for a new party or activism within the existing…..neither appears to be occurring (with the exception of a poorly performed TOP)

                    UK Labour are an example of what can happen if the numbers are there….IF.

                • KJT

                  If you look carefully, you will see that it only takes a minority of swinging voters to change the Government.

                  Hence the emotional appeals to the things that parties focus groups, say will motivate swing voters. Evidence free policies like, “tough on crime” and “fiscal responsibility” seem to work with these people.

                  “Representative Democracy”does not reflect the will of the majority, except by accident.

                  • Pat

                    I am well aware that swing voters can change election outcomes…however the impact of those swing voters is diminished with high participation rates AND you will note I’m sure that I mentioned broad based appeal…..representative democracy works when its participated in.

                    It may not provide you with the result you desire but it does deliver what the majority have selected

  4. Rosemary McDonald 4

    I can see there’s a moral imperative to relax the cap, but it would be unconscionable if extra spending went to those private firms who have already profited greatly from lucrative government contracts and their ilk.

    Sort out price gouging and overpriced contracts that allow firms to fail dismally and get away virtually unscathed.

    https://www.radionz.co.nz/news/national/358512/middlemore-failed-to-pursue-millions-in-leaky-building-claim

    Bring back the Ministry of Works,

    Renationalise the power supply.

    • Gosman 4.1

      Yes please relax the spending limit to buy back the entire electricity network. You will spend billions and billions and won’t achieve anything note worthy and will be made to look like chumps.

      • Draco T Bastard 4.1.1

        And all the blame will be on the Key government for selling it against the wishes of the people in the first place.

    • cleangreen 4.2

      1000% correct rosemary;

      Best suggestion for the day is your suggestion here;

      Bring back the Ministry of Works,

      Renationalise the power supply.

  5. Ad 5

    We’re a brittle economy coming off a growth boom. That means save hard for the tough times ahead.

    And we have a state that wants to spend $28b on infrastructure but is struggling to spend it.

    Central govt is being the debt example the private sector should follow.

    Government is on right course.

  6. greywarshark 6

    Yesterday I listened to RadioNZ who had NZ Initiative talking about something. I thought where is Berl and Ganesh Nana with some balanced discussion? So great to hear this today. Let’s hear more from him and Bernard Hickey and I await Rod Oram back on Tuesdays on the citizens’ Nationalk Radio.

  7. James 7

    Why not? What’s one more broken promise ?

    • BM 7.1

      This, it’s not like this government has any credibility left.

      Trash the economy, tax everyone up the wazoo, the way it’s going this is a one-term government and once this one’s gone the left won’t see power again for a very long time.

      COL, you’ve got around 2 years left you may as well go for broke.

  8. Why on earth would they back down on their core economic belief?

    There’s a part of me almost feels sorry for Labour. I get the impression they were voted in by people so desperate for change that they voted for what they (i)want(i/) Labour to be…not what Labour clearly announced as actual policy. ie Centrism, fiscal austerity and embracing, enabling and entrenching some ‘interesting’ theories on the ‘Future of Work’

    Then again, they did fudge and obfuscate over some pretty important policies like TPP…so in actual fact I don’t feel too badly.

    Just a little sad for the bemused middle classes, and a gut wrenching sickness for those people becoming further entrenched in poverty and hopelessness with even less hope for a Government led economic system that enables social mobility.

    • dukeofurl 8.1

      They said they would renegotiate the TPP to account for some core issues and they did

      Did you not read the actual promise?

      It is important that trade agreements are carefully negotiated, and that provisions in theseagreements do not undercut the regulatory sovereignty of New Zealand.
      Labour opposes the sale of our farms, homes, state-owned enterprises, and monopoly infrastructure to overseas buyers. Investment protocols in trade agreements should not prevent a future government controlling such sales.
      The current National government traded away these rights in NZ’s Free Trade Agreement with South Korea and in the proposed Trans Pacific Partnership. Ceding this was wrong in principle. It was also unnecessary, given that other countries including Australia retained their rights to do so.
      Labour will renegotiate theseprovisions

      if you have an ‘ultra’ view on these things thats fine but dont use that to say its fudges. Dont forget the TPP was done and dusted, all finished . It was only because US refused to ratify that we had a second chance

      • Siobhan 8.1.1

        Erm, thats EXACTLY my point.
        I know there policoes.
        And you know their policies.
        Bully for us.
        A number of otherwise aware people I know seem to have been under the impression Labour ‘wouldn’t sign’..

        possibly the source of their confusion is explained by the following chart…

        https://thestandard.org.nz/the-new-government-and-the-tppa-11/

        • dukeofurl 8.1.1.1

          Wheres the item ‘where some people’ were under the impression labour wouldnt sign ?
          Yes I know people and Im one of them , half read lots of things and form impressions from that. We can often project what we want onto what others are saying- to be honest political parties can be skilled at those almost there commitments.
          But I dont see ‘wouldnt sign’ while you probably see it ‘everywhere’

          • Siobhan 8.1.1.1.1

            Sorry bad linkage…I’m trying to show the chart halfway down the page…”citizens campaign group It’s Our Future released their own ten bottom lines, and a report card on the various political parties”, which indicates a lack of clarity on some points from Labour.

            For the third time..I absolutely knew they would sign, and that they said they would sign..there are people who dreamed up the belief they wouldn’t.

            Just like there are some people who think Labour will back away from ‘austerity’ budget constraints.

            Again, and I can’t stress this enough..wishful thinking was a big player in this last election. And Labour were happy to allow the ‘positive/lets just do this’ vibe to take centre stage rather than the reality of policy.

            If some groups are now disappointed, that’s down to their own delusions about what the current Labour Party stand for.

            • dukeofurl 8.1.1.1.1.1

              Dont know that there is big voices out there now saying
              “we didnt want you to do this’

              Sure if big bad Monster Corp comes over from US and then wants to sue us, then maybe it will become an issue again, but really dont know why you are even concerned right now.
              To me there are bigger issues to resolve than should be’s/could be’s from last year.

            • Grey Area 8.1.1.1.1.2

              Siobhan +1

  9. Blazer 9

    Steve Keen -barking mad or the real deal?Looks compelling to me.

    • Draco T Bastard 9.1

      A quick and accurate summary of the true position that government should be in.

    • corodale 9.2

      They should be begging folk like Keen to join a Royal Commission to investigate Prosperity, but call the report “Progressive Austerity” or some crap, so as not to draw too much attention from goons.

  10. dukeofurl 10

    Those graphs dont seem right. They state they are ‘General government spending’
    while labours promise was more nuanced
    core Crown spending is managed around a trend of 30% of GDP.’

    The charts dont even show the 2015 numbers for NZ to see where we are now.

    There seems to be a definition of ‘Core Crown Expenses’
    https://treasury.govt.nz/publications/model/functional-classification-core-crown-expenses

    The gist of it is ‘ This is an accrual measure of expenses and includes non-cash items such as depreciation on physical assets.’

    The OECD defintion of general government spending is this:
    General government spending generally consists of central, state and local governments, and social security fund
    https://data.oecd.org/gga/general-government-spending.htm

    So it includes local government spending, as the other items are central government in NZ ( but not always in other countries)

    So that is the problem, using OECD numbers and labours promise is apples to oranges as it doesnt account for
    1) accrual spending is less than cash spending
    2) local government spending ( 11% of government spend)

    • mickysavage 10.1

      You might be right about local government spend. I can’t access the document they are relying on. Local government spend was about 4% of GDP so it would not make a major difference.

  11. Draco T Bastard 11

    1. The Government will deliver a sustainable operating surplus across an economic cycle.
    2. The Government will reduce the level of Net Core Crown Debt to 20% of GDP within five years of taking office.
    3. The Government will prioritise investments to address the long-term financial and sustainability challenges facing New Zealand.
    4. The Government will take a prudent approach to ensure expenditure is phased, controlled, and directed to maximise its benefits. The Government will maintain its expenditure to within the recent historical range of spending to GDP ratio.
    5. The Government will ensure a progressive taxation system that is fair, balanced, and promotes the long-term sustainability and productivity of the economy.

    1. The government, if operating correctly, would never have a surplus and the deficit should never exceed the growth in the economy
    2. The government should never be in debt because it can create the money that it needs.
    3. A country should never have financial issues as the government can create money
    4. Government expenditure should be based upon what needs to be done, if the resources are available and if we have the people to do it thus used to ensure full employment. Government expenditure can be used to make the resources available of course by developing local sources.
    5. I’m enthusiastic for the government to put in place 100% taxation on incomes over the PMs. Unfortunately, I doubt that the government would do something that progressive as they’re stuck in the delusional idea that taxation should never be above 50% and they even like mentioning the possibility of even going that high. Thus we can assume that they won’t really put in place the necessary progressive taxation.

    One through four can be done through a Sovereign Money system while taking money creation off of the private banks and banning foreign ownership/investment.

    • Gosman 11.1

      Why has NO country on the planet been able to implement successfully what you advocate Draco?

      • Draco T Bastard 11.1.1

        They have. The US Greenback, and their Colonial Scrip. The UK’s sticks and other well run systems around the world. The problem is that our representatives keep selling us out to the capitalists.

        • Gosman 11.1.1.1

          But if it worked so well then there would be little resistance to it.

          • dukeofurl 11.1.1.1.1

            Why not go for a jog down 1935 lane again. But we dont live in that world anymore

          • Draco T Bastard 11.1.1.1.2

            There is massive resistance to it from the capitalists who get their unearned income from the present failed system. They wouldn’t be rich and powerful any more even if they had lots of money.

            And the politicians are owned by the capitalists.

            • Gosman 11.1.1.1.2.1

              Nice conspiracy theory there . Even if true it does mean my side of the political divide is much better at ruining your side of the political divide’s plans. That must really annoy you that you have these amazing ideas that will lead to prosperity for the vast majority of the population but they keep getting nixed by people who think like me. You know this will happen yet you can’t stop it and every place your ideas (or a variation of them) is attempted the same thing happens over and over again.

              • Adrian Thornton

                @Gosman, It is incredible to me that you would actually feel proud to support an ideology based on greed, exploitation and extraction…and here I was thinking that the human project was evolution, you know , slowly evolving toward something higher, unfortunately, during this ‘selfish’ epoch, your ideology drags us backwards towards the primeval mud pool….well done.

                • Gosman

                  People who think like me run the World. People like you Adrian keep failing to change the World.

                  • No you are wrong…very wrong, ‘people who think like me’ gave the world most what is good about it as a human citizen….
                    All Worker rights.
                    All Women’s rights.
                    All Children’s rights.
                    All Disabled rights.
                    All animal rights
                    Fought to end slavery.
                    In Fact the defense of the very air you breath, water you drink and the planet you inhabit is mainly done by ‘people who think like me’.

                    had the long term vision to build the infrastructure of public hospitals, schools and housing etc that has been the backbone of western democracy over the last 100 years.

                    But then your ideology is so short term, so selfish that none of this would ever occur to a hollowed out husk of a human as you seem to be so proud to be.

              • Draco T Bastard

                Not a conspiracy theory but research.

                • corodale

                  Certainly it is a conspiracy. The FED, ECB, etc don’t plan in public, they conspire behind closed doors, and dictate policy without democratic controls. Careful with reseach, most of those publishers (Pearsons et al) are owned by Black Rock et al, which is chaired by board members of FED banks. It’s a small circle up there.

      • Tricledrown 11.1.2

        Gooseman China

  12. The Chairman 12

    The calls to lift Government spending restrictions are getting louder.

    Nurses, teachers, and others in the public sector want more money. The Salvation Army, BERL, Action Against Poverty and others are all calling for the Government to loosen their fiscal straitjacket.

    Can Jacinda hear them? Will she show leadership and take action?

    Will she insist her finance minister at least meet their own self imposed spending cap? Is she going to make a captain call or is she happy to let Grant hold the party back?

    No surprises, National are opposed to Labour lifting their self imposed cap.

    • dukeofurl 12.1

      Jacinda ?

      The cabinet makes these calls collectively

      • The Chairman 12.1.1

        The call made was 30% of GDP. Jacinda is party leader, therefore one would expect her to show leadership and get her finance minister to tow the line.

  13. adam 13

    Repeal the Reserve Bank Act, stop the tinkering.

    • Grey Area 13.1

      From the party which has never apologised for Rogernomics? Doubt it.

    • Gosman 13.2

      They have already altered it significantly. Why would repealing it help?

      • adam 13.2.1

        *sigh* Gossy for someone who supports capitalism you are rather weak on the function of legislation to support capitalism and its working. I thought some basics on how laws enable this construct of a market would be somthing you’d understand, instead a silly question. *sigh*

        • Gosman 13.2.1.1

          Following your logic we were less Capitalist before the Reserve Bank Act was passed. How did this manifest itself?

          • adam 13.2.1.1.1

            Really, you don’t know the difference between a mixed economy and a regressive one?

            You’re showing a real lack of understanding of basic economic ideas here Gossy.

            • Gosman 13.2.1.1.1.1

              Umm… we are still a mixed economy.

              • adam

                *sigh* come on Gossy, this is a regressive economy. You have never lived in a mixed economy have you? There is a facade of a mixed economy, hell even Bismarck knew you need give somthing.

                Anyone who runs with the delusion that this is a mixed economy need their head examined. It has things which look like a mixed economy, but the reality is somthing quite different these days. There is no universal health care, and there is no continuous knowledge development education. Two things which underpin a mixed economy.

                So your delusions to drag NZ further to the right economically are that, delusional. Next you’ll tell me there are things like free markets and fairies at the end of the garden.

                • Gosman

                  I suggest that it is your subjective bias that classifies this as a “regressive economy” nothing objective. At what stage does a mixed economy become a “regressive” one?

                • Gosman

                  What is “continuous knowledge development education.”?

                • Gosman

                  In what way is our health care system not universal?

                  • adam

                    Do you read?

                    • Gosman

                      Yes. In what way is our health system not universal?

                    • adam

                      Again, do you read? Never heard of waiting lists or Phamac? What about doctors fees or prescription fees?

                      It’s like talking to an idiot.

                    • Gosman

                      We have always had Doctor’s fees and waiting lists on the Public health system. Does that mean we have always been a “Regressive economy”?

                      https://www.parliament.nz/en/pb/research-papers/document/00PLSocRP09031/new-zealand-health-system-reforms

                      https://teara.govt.nz/en/primary-health-care

                    • adam

                      Your lies are outstanding. Never paid for a doctor before 1989. Never had any prescription fees either till the 5th national government.

                    • Gosman

                      Check my link

                      “A two-tier health system had developed, where hospital care was free but GPs charged high fees. From the 1970s governments tried to change this. From 1992 they subsidised GP visits for poorer people through community services cards.”

                      People paid for GP visits pre 1984.

                      If you have evidence to the contrary then produce it.

                    • adam

                      Did you live here pre 1984? I know you did not, so you don’t really know how it worked do you. You have this idea of it but no understanding. GP visits were free for the under 18, as with dental.

                      Also anyone with a disability had access to a doctor with no fee. Admittedly the list of doctors for disabled was limited, and this was folded into the hospital budget at the time.

                      Also there was ACC, which covered a chunk of doctors visits pre 1984.

                      And I see you ran from prescriptions.

                      Come on Gossy, if you didn’t realise we been living in a regressive economy since the introduction of the Reserve Bank Act your more of an ideology than I thought.

                    • Gosman

                      You claimed that noone paid for Doctors fees. Now you are claiming some people did but many different. However what level of payment for Doctors visits stop the Health care system being universal?

                    • adam

                      Back to questions…

                      Oh dear I point out you were wrong and this is the response, poor Gossy.

                    • Gosman

                      You didn’t point out I was wrong. I stated that people paid for Doctors vists pre 1984 and provided a link to that. I never stated that EVERYBODY paid for Doctors visits pre 1984. It was you who argued that they didn’t. You still haven’t shown that Doctor’s visits did not cost anybody pre 1984.

                • Gosman

                  Additionally, why do you think those two things you mention are indicative of a mixed economy?

                  • adam

                    Argue, or make a statement sometime can you? Or are you just being an idiot because you can? I’m at ad hominem because of this way you chose to argue, which is like talking to a two year old.

                    Make a point Gossy, use your words.

                    • Gosman

                      My argument is that those two things you mention are in no way indicative of a mixed economy and even if they were, by your own definition, we have never been a mixed economy and neither has most of the the rest of the World.

                    • adam

                      Oh so you can use your words. How about you do that in the future with me rather than acting like a complete idiot?

                    • Gosman

                      No, I ask you to justify your nonsense by asking you questions about your position. As I pointed out your views have no basis in reality. We have NEVER had a Universal health care system based on your own definition and as for continuously obtaining knowledge that is just gobbledygook you made up. There is no basis for claiming either one of those two things are what defines a mixed economy. You just unilaterally decided to use them with no logical reason.

                    • adam

                      Wow, you can construct more than one sentence.

                      Bloody nora – break out the ticker tape!

                      By the way, your the one who argues for nonsuch, free markets and capitalism. What next Gossy faires and gnolls?

                    • Gosman

                      I have never argued for nonsuch. I don’t even know what nonsuch is.

    • corodale 13.3

      Jane Kelsey covers this clearly in her book Fire Economcy. There are four or so major Acts to change, plus international agreements. This would require a minimum of several terms of govt under democratic Select Committe process. A credit rating dark age. And equally brutal and prolonged media attack. Direct control from Finance Minister in response to National Crisis (eg. housing, poverty) is about the only way. Independant foreign policy is a good start. And this term of austerity will also help, to beat the public down into a mood for anarchy.

  14. the other pat 14

    “here is plenty of wriggle room. Helen Clark and Michael Cullen left the accounts in outstanding shape and National’s parsimonious nature has kept debt relatively low.”
    um am i getting types of debt confused?….clarke and co left us with 8 bill in debt and the natzi party left us 100 billion and yeah i know there was earthquakes…..

  15. SaveNZ 15

    Better the government and councils borrows cheaper than use PPP’s which are expensive and restrictive and takes away control from the public. The tubes in London tried private PPP’s and now getting rid of them as they did not work.

    NZ is a small country we can not afford to pay massive premiums to private businesses for ‘accounting’ purposes.

    (In UK call PPP’s, PFI’s)

    “UK PFI debt now stands at over £300bn for projects with an original capital cost of £55bn”

    https://www.theguardian.com/commentisfree/2017/aug/30/pfi-britain-hospital-trust-debt-burden-tax

    “Conservatively estimated, the trusts appear to be paying a risk premium of about 30% of the total construction costs, just to get the hospitals built on time and to budget, a sum that considerably exceeds the evidence about past cost overruns.”

    For roads:

    This report: https://image.guim.co.uk/sys-files/Society/documents/2004/11/24/PFI.pdf

    found that PPP “contracts are considerably more expensive than the cost of conventional procurement”, resulting in higher returns for the companies running the PPP’s compared to their industry peers.

    While hard to compare because of the opaque nature of many contracts and large amounts of subcontracting out, it looked like the actual cost of capital of the PPP’s was 11% compared to Treasure borrowing of 4.5% i.e. 6.5% higher. This is supposed to represent the cost of risk transfer but in practice there was no risk transfer so it’s money for nothing.

    “In conclusion, the road projects appear to be costing more than expected as reflected in net present costs that are higher than those identified by the Highways Agency (Haynes and Roden 1999), owing to rising traffic and contract changes. It is, however, impossible to know at this point whether or not VFM (value for money) has been or is indeed likely to be achieved because the expensive element of the service contract relates to maintenance that generally will not be required for many years.”

    Overall, for both roads and hospitals they concluded there was no risk transfer and not value for money.

  16. Michelle 16

    I agree with some that have said we need to spend we need to spend wisely not willy nilly. It has become increasingly obvious we need to spend big and much of the money will go directly back into the economy and businesses which can only be good. I know we need to make sure we have money for disasters/emergencies and a contingency plan. And we can do this to but for the first time I think we should borrow if we have to, while rates are low. I don’t like borrowing or having any debt myself like many other NZers I have a mortgage and that is enough debt for me I don’t like to buy things I cant pay for I prefer to either go without or buy second hand and make do. But people need more money to survive and we are not a poor country. I think our government can take the lead by starting with paying our public servants more, fixing our run down infrastructure, investing in research and development, investing in clean green technology, investing in innovative ideas, product and services, investing in modern education to upskill NZers and prepare them for the future. Our government needs to help make our country cleaner, greener and lets be the leaders like we use to be. I have faith in NZers I believe with the right investment, leadership and plan we can do what ever we set our minds to, we have done it before and we can do it again. Lets not waste any time.

    • SaveNZ 16.1

      If the government spend the money wisely on employing Kiwi tax payers on good wages and conditions to deliver quality service, all will be well. This has worked before for many governments.

      But now we are changing the equation, to the untried neoliberal Nat Lite way and spend money on overseas private companies to bringing in cheap labour that in subcontracted after subcontracted, with low wages and poor workmanship while the workers drive up house price and rents, take up hospital beds add to congestion and so forth, while creating poor quality products aka buildings that the rate payers then need to pay to remediate a decade later, then that government money is not well spent and actually creating bankruptcy of public services as they pay to do it, then again to remediate it, while creating low wage, high living economies.

      If they need these skilled workers for construction, why are they not paying them skilled rates aka $100k… (actually $120 – $180k so they can afford that ‘affordable Kiwibuild house, sarc) everything is a drive to the bottom, with the middle classes as the insurer’s of the risk not the corporations. If they had to pay $100k+ for a experienced construction worker then guess what makes those Kiwi apprentices look like good value.

      And HELPS decent construction firms win the contracts who have well paid experienced people, NOT the dross who undercut, relying on cutting corners or immigration scams…

      We actually have human resource firms trafficking people who are coming to NZ without even a job so that firm can ‘mark up’ their labour for profit… it’s not a good look for people who work in this country when this is becoming widespread!

      • Gosman 16.1.1

        “If the government spend the money wisely on employing Kiwi tax payers on good wages and conditions to deliver quality service, all will be well. This has worked before for many governments.”

        Which governments did this work well for?

    • Gosman 16.2

      “It has become increasingly obvious we need to spend big and much of the money will go directly back into the economy and businesses which can only be good.”

      Not at all. Sometimes having massive government spending going directly in to the economy can be very bad indeed.

      • SaveNZ 16.2.1

        Using low wages to control inflation is leading to poverty and us becoming 3rd world. Not only that, our constant foreign investment is keeping our interest rates higher than other western countries.

        Better ways are needed than 60% of people being given low wages, while other’s make a killing and speculate on our currency for a start as well as poverty and bad living conditions creating a burgeoning prison population. Meanwhile the western world has the opposite problem in many cases aka deflation.

      • corodale 16.2.2

        This Govt would make profitable investments. This is obvious to all the genuine folk at this sociallist blog. The last 9 years seem to have left you rather synical. The majority of MPs in this govt are actually genuine intellent humanitarians, a fresh change, so be happy.

        • Gosman 16.2.2.1

          I am sure everybody who invests THINKS they will make profitable investments. What will LIKELY happen is that Politicians won’t be able to help themselves to invest for political rather than economic gain. This means the investments are unlikely to be profitable long term.

  17. cleangreen 17

    What’s wrong with using prison labour to re-build our rail lines and roads again as they did in other tight times folks?
    Makes sense when against National was always saying “it is not viable”.
    Well paying contractors may not be viable, but using ‘indentured prisoners labour’ the state taxpayers are already paying them would definitely be a ‘viable’ case.

    • SaveNZ 17.1

      I would not mind as long as it was only voluntary labour aka prisoners who wanted to do it, and for minor offence prisoners only and strictly controlled. At least prisoners already have a place to live and not adding to the housing crisis!

  18. UncookedSelachimorpha 18

    Problem is, most of the discussion is completely divorced from any comprehension of how government finance and economies actually work.


    Why the federal budget is not like a household budget:

    “Until people understand the basic realities of monetary economics we cannot have a meaningful discussion of government finances. Rather than worrying about deficits and surpluses we should be asking whether the economy would benefit from greater or lesser government expenditure or taxation. “

    Repeat after me: the Australian economy is not like a household budget:

    “The federal government does not need anybody else’s money in the form of taxation or borrowing in order to spend. They can create money. The reason they tax and borrow is to take money out of the economy so that their spending does not cause inflation or affect official interest rates. In other words, taxation and government debt are tools for economic management, not for revenue raising.”

    • Gosman 18.1

      Yes, that is what they all think until it all turns in to a Hyper-inflationary mess.

      • Tricledrown 18.1.1

        Gooseman so where is that hyper inflation going to come from when we have an open economy and inflation is what most economies want to happen to encourage savings over borrowing.
        Poor wage growth leads to more borrowing and speculation.

        • Gosman 18.1.1.1

          Inflation does not encourage savings over borrowing. In fact the opposite can occur.

          • Tricledrown 18.1.1.1.1

            Gooseman you know nothing except how to disagree with everyone including yourself.
            The Japanese economy trying to reinflate their economy to get some growth.
            US economy is experiencing inflation from growth.

      • Nic the NZer 18.1.2

        Hyper inflations are supply side phenomena. That is why economies under sanctions are the ones which exhibit extreme inflation rates.

        • Pat 18.1.2.1

          something not to be discounted in a world of diminishing resources and fiat currency….especially in a net import economy.

        • Gosman 18.1.2.2

          No they aren’t. This is just made up explanation to explain the outcome of bad fiscal and monetary policies by a nation. Please explain how sanctions lead to Hyper-inflation.

          • Nic the NZer 18.1.2.2.1

            Have you never seen the inflation rates in countries under sanctions? Recently for example Iran. Often abates with sanction lifting too.

            • Gosman 18.1.2.2.1.1

              Ummm… you are mistaking causation with correlation.

              Please explain HOW sanctions lead to hyper-inflation because I can give you plenty of examples of countries under sanctions regimes where they don’t suffer hyper-inflation.

              https://www.jstor.org/stable/25602947?seq=1#page_scan_tab_contents

              • Pat

                “Can’ lead to (hyper)inflation….simple supply and demand, especially for necessities….reduce supply and you essentially create a bidding war…countries under sanction may not produce all necessities although sanctions are usually targeted to mitigate this risk.

              • Nic the NZer

                Sure, so sanctions restrict availability of certain goods. This leads to price hikes by suppliers who ration their ability to on supply those goods. Price hikes are counted under inflation.

                No, I did not say sanctions always cause hyper-inflation. But there have been many examples of countries hitting around the 50% per anum mark for multiple years.

  19. Michael 19

    Labour may be in office but it is not in power. The Budget Responsibility Rules are a neoliberal straitjacket that Labour (and the Greens) donned voluntarily in an effort to suck up to the “business community” last year. While the fatcats (and the narrow-minded, grasping and venal collection that comprise our “small-business community”) spurned Labour’s overtures, they will insist that the government takes no action to relieve pressing social problems because to do so will “damage business confidence”. Labour is hoist on its own petard: by wanting to appear friends to everyone, it ends up satisfying no one.

  20. Cynical Jester 20

    I don’t understand why we have a labour led govt if they won’t do things that labour led govts are elected to do, and don’t blame NZF it’s labours own cowardice

    When this government was formed it promised systemic change. So far it has a D- score on delivering change. I’m tired of speeches and promises and so is the electorate. Homelessness and mental health has been basically untouched by this government.

    It’s a case of dammed if you do and dammed if you don’t.

    I’d rather a one term government that really tried to change things rather than a government that is more interested in staying in power like this government.

    They might be voted out if they ditch it, they might be voted out if they don’t. Labour has wasted nearly a third of this term (the only guaranteed term they have ) trying to be a continuation of the Clark years. Pull finger and do something. Noone wants Jacinda to be like Helen Clark, my generation voted for change , so let’s ACTUALLY do this no more speeches , no more promises just do it or you must change your name to the Liberal party and keep the status quo. Labour govts are reforming governments so stop acting like National and let’s do this…

    • greywarshark 20.1

      CynicalJester
      We have reached High Noone i think. Time to step out into the street, face the problems, look them in the eye (which Labour has had time to do)and take them on and vanquish them. Do one of those fancy comedic fights where the guy looks like he’s going to adopt some ritual moves for attack, and while he is waving one hand in the air, he punches his opponent in the stomach with the other while he isn’t paying attention, or kicks his legs from under him.

      Sp come on Labour,. come up with your practical, pragmatic moves and confuse the monster with some theatrical moves that excite the snoring or anoyed citizens. The monster? – (probably a bunch of bureaucrats highly paid to be Sir Humphreys). If necessary use the Troy horse subterfuge and surprise. ‘No-one expects the Spanish Inquisition’ said the Pythons. Or turn the political game into a French farce where they do get to bed together and give us some laughs. Do a Winston, he just laughed at everyone and said you don’t know what you are talking about to opposition, and went ahead and got some of his projects through.

      Do something Labour, we paid our moneys and took our chances, but now we expect you to deliver the goods and to do that you must play at being real politicians.

    • Draco T Bastard 20.2

      +111

  21. Craig H 21

    Labour and the Greens agreed to the fiscal straitjacket to basically alleviate business concerns, and now business are whining like little so-and-sos because Labour are going to act like its name and enact labour-friendly employment law amendments. Stuff ’em, says I – cast off the straitjacket and make business really whine.

    • Gosman 21.1

      Why did Labour and The Greens want to alleviate business concerns in the first place?

  22. Nic the NZer 22

    Mickey once again profers the myth that Labours prior surpluses were a bastion of economic responsibility. The truth is rather more of a mixed bag.

    When the government is running a surplus it is, by accounting, reducing the income of the non government sector (e.g the economy). If the economy is going to have income growth then (ignoring the external sector, which wasn’t helping at the time) this additional spending must be coming from a rising private sector debt level. So the surpluses happen on the basis of rising debt on a shrinking income.

    Surpluses and deficits are a political game. Truely wise economic management looks at the impact of government spending on the overall economy (and society).

  23. corodale 23

    V.good little article. “Labour’s caution is motivated by political concerns rather than economic concerns…”

    Yes, its the image of responsable-house-keeper that will sway voters to re-elect her, now in the mid-term.

    If she can admit she was wrong about austerity, close to election, she can show she is human and developing, still worthy of a second chance. The Govt will then be ready with the experience to apply real change.

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