Thanks Canterbury for the surplus

Written By: - Date published: 1:45 pm, October 14th, 2015 - 91 comments
Categories: bill english, budget 2015, debt / deficit, Economy, economy - Tags:

So the Government books are back in black although for how long we do not know.

From TV3:

The Government’s books are back in surplus, posting a profit after six years of deficits.

Treasury’s final accounts for 2014/15 showed a modest surplus of $414 million.

It is a “surprise surplus” with the official forecast in May’s Budget predicting a deficit of $684 million.

The “billion dollar bounce” means Finance Minister Bill English achieves the Government’s goal of having the books back in surplus by 2014/15.

However, a deteriorating economy means this surplus is likely a one-off, with deficits again likely in the years ahead.

My very quick look at the Treasury release suggests that the surplus appears to depend almost entirely on the Canterbury rebuild occurring more slowly than anticipated.  The prediction was that operating expenses would be $327 million.  Instead of this somehow a surplus of $55 million was posted.  This represents $382 million or 92% of the surplus.

I might be wrong.  I am a lawyer not an accountant.  But the surplus looks like it is pretty well all due to Canterbury.

Canterbury Earthquake recovery

(r0b) Update:

https://twitter.com/grantrobertson1/status/654112276631302145

91 comments on “Thanks Canterbury for the surplus ”

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  1. Amanda Atkinson 1
    14 October 2015 at 2:03 pm

    If an earthquake is good for the economy and the govt books, then lets drop bombs on every town and city and see how that works out. Good grief. So many muppets since the ChCh earthquake saying, oh that will be great for the economy .. look at all the building and construction wow … yeah wow alright, get a friggin brain. Will dropping a bomb on Auckland stimulate the economy, I’m no accountant either, but I think “NO”.

  2. Murray Simmonds 2
    14 October 2015 at 2:14 pm

    Well yeah. As of 2 pm today the NZ Debt Clock was showing $99,668,588,796.

    Interest per second: NZ$152
    Debt per citizen: $21,991

    So a small surplus reported today (Labour managed much larger surpluses WITHOUT the need for borrowing.)

    Hate to be so one-eyed, but this sounds like a ‘Ruck Stir” economy to me.

    • infused 2.1
      15 October 2015 at 9:27 am

      How was the world economy when Labour was in power? I some what remember a massive, world wide bubble that everyone was riding…

      Must have been my imagination.

  3. John Schmidt 3
    14 October 2015 at 2:25 pm

    The financial benefits of the CHCH earthquake is because of insurance money pouring in from overseas underwiters. This only occurred because we are the most insured country in the world which is why this event had world significance. It’s also why insurance has had a rethink on what they now offer in NZ.
    Benefitting from war is not a new concept Japan, Germany and England are examples but in these cases the money came not from insurance but from the USA.

    • dukeofurl 3.1
      14 October 2015 at 2:43 pm

      Most insured ? The US has a similar style to EQC of Federal Flood Insurance to cover inundation and hurricanes. Surely the amounts involved over many states and some major cities ( St Louis is 2mill +) would dwarf little old NZ
      Then there is their farming ‘crop insurance’, where they use private insurers but the premiums are paid by federal government.
      Hate to think what the housing mortage insurance sum insured comes to as well

    • SARAR 3.2
      14 October 2015 at 3:14 pm

      The US $s were a loan only. Not sure if UK has repaid it yet but about 7 years ago they still had some debt. With the GFC I guess it may still be around.

    • One Anonymous Bloke 3.3
      14 October 2015 at 3:47 pm

      we are the most insured country in the world

      By what measure? Certainly not per capita. The OECD has it wrong?

      • Bob 3.3.1
        14 October 2015 at 4:18 pm

        By the look of those numbers they don’t count ACC or EQC as insurance (for a start). ACC alone is approx. $6,000 per head of population
        http://www.acc.co.nz/PRD_EXT_CSMP/groups/external_communications/documents/reports_results/annual_report_2014.pdf

        • dukeofurl 3.3.1.1
          14 October 2015 at 4:26 pm

          OECD numbers are laughable many times. They dont seem to be counting state backed insurance.

          Another case of funny figures from OECD, for Australia they dont count GST as government revenue as it given to the states to spend on roads, schools hospitals, police etc, yet the same GST revenue IS counted in NZ, but it goes to the usual things as in Australia.

        • One Anonymous Bloke 3.3.1.2
          14 October 2015 at 6:05 pm

          That occurred to me too.

          Is being “the most insured nation in the world” a good thing? Or a bad thing? Who can tell?

          Can we at least find out how it’s measured before we start drawing inferences?

          • Tracey 3.3.1.2.1
            15 October 2015 at 7:22 am

            I didn’t think we were the most insured, just better insured than Haiti who had suffered the more recent devastating earthquake

      • dukeofurl 3.3.2
        15 October 2015 at 9:19 am

        The OECD is the Volkswagen of the international set. Great brand name but underneath its more like FIFA

    • Pat 3.4
      14 October 2015 at 5:22 pm

      and in many instances that reinsurance money has not remained in the insured community, or some cases the country….and like the Chinese industrilisation the rebuilding of ChCh is a one off event so what will our economic activity and growth figures be based on when that work is by and large complete?….apart from imported growth via immigration .

      • RedBaronCV 3.4.1
        14 October 2015 at 8:20 pm

        In many instances the money was used to pay off the mortgage on the home first leaving a homeowner with little recourse for making other arrangements if they had no other capital or earning capacity to borrow against

        Gotta look after those poor little banks now

        • Pat 3.4.1.1
          14 October 2015 at 9:59 pm

          yes that happened too…but i was thinking more of the commercial sector….indeed the whole “recovery” has been an exercise in liability transference….those with the wherewithal have avoided the worst, indeed in some cases done very nicely thankyou…but those unaware or unable have been exploited horribly…and the worst of it is that it was the government that in many instances was the main offender, or at the least, facilitator

  4. Ilicit 4
    14 October 2015 at 2:52 pm

    History huh ? Something most politicians are not familiar with. Won’t take long for their lack of education to catch up. Most have longer NZ legacies in NZ than Shonkey, hopefully they’ll soon work that out !!

  5. Puckish Rogue 5
    14 October 2015 at 3:43 pm

    Yeah thats what the voters of NZ will think

    • One Anonymous Bloke 5.1
      14 October 2015 at 3:53 pm

      Nah, they’ll wonder why the nasty party attacked children again. First with the black mould, then with the ruler, then the blaming starts.

      • Puckish Rogue 5.1.1
        14 October 2015 at 4:06 pm

        Nope sorry, they’ll see NZ back in surplus and Labour supporting the TPP and conclude that National and John Key are doing a good job of running NZ

        • Bob 5.1.1.1
          14 October 2015 at 4:21 pm

          +1, much of the talk from Labour for the past 7 years was that National couldn’t run a surplus, now they have, why would you vote them out if that is what the opposition thinks is the measure of a successful government!

          • One Anonymous Bloke 5.1.1.1.1
            14 October 2015 at 4:28 pm

            How many more zombies can you load into that question?

            They’re moaning, and shuffling, and eating brains. They all look like you.

          • Halfcrown 5.1.1.1.2
            14 October 2015 at 6:35 pm

            Remind me again
            How many years have the National party been the government
            How many years has the Double Dipping Dickhead from Dipton run a surplus
            How many years has it taken for the same said dickhead to reach a Holographic surplus.
            How many years was Cullen the finance minister
            How many years did he have a surplus

            And don’t say that National had to deal with the GFC
            Also what is our current debt level.

            About doing a good job running the country The double Dipping Dickhead from Dipton could not organise a piss up in a brewery.

            • Halfcrown 5.1.1.1.2.1
              14 October 2015 at 7:30 pm

              I should have added :-

              How many years was Cullen the finance minister
              How many years did he have a surplus AND paid up the vast debt left by the Shitley government.

            • infused 5.1.1.1.2.2
              15 October 2015 at 9:30 am

              National had to deal with the GFC.

              You can’t just be a tard and ignore that fact. Labour was riding a bubble, National rode the exact opposite.

              • dv …
                15 October 2015 at 9:41 am

                National had to deal with the GFC.

                So they immediately gave tax cuts and bailed out SCF

                And to date borrowed

                NZ$ 100,077,332,624

                Now they have a surplus of 400mil which is 0.000000216216% of GDP

                NO wonder they are so excited about the 1% the TPPP gives us!!!!!!!

          • Tracey 5.1.1.1.3
            15 October 2015 at 7:25 am

            7 years and smoke and mirrors accounting, and the withdrawal of support from the most vulnerable. GO National supporters, be proud and hope you or yours suffer no permanent injuries, get born with disabilities, or lose their jobs having never been paid enough to put aside a crisis fund..

        • dukeofurl 5.1.1.2
          14 October 2015 at 4:23 pm

          Back in Surplus ? Its not a cash surplus as they are borrowing another $5-6 billion this year to pay all the bills. And thats before hes played poker with Canterbury ( and god knows what other budgets) to shift money into other years

          Ive noticed the maintenance on the road surfaces on Auckland motorways has been reduced as there are potholes in a few places and many others the top layer is cracking up fast.

          • Sacha 5.1.1.2.1
            15 October 2015 at 8:31 pm

            “And thats before hes played poker with Canterbury ( and god knows what other budgets) to shift money into other years”

            Done already to get this result.

        • One Anonymous Bloke 5.1.1.3
          14 October 2015 at 4:24 pm

          I don’t think we’re so stupid, no matter how “on message” you are.

        • Stuart Munro 5.1.1.4
          14 October 2015 at 4:29 pm

          No mate, they’ll look at their pitiful pay packets, wish they could afford a few beers and stay home and watch TV.

          No-one is fooled – they know we’re on the bones of our arses and Bill and John never had anything to offer but lies. They just prefer not to think about it.

        • leftie 5.1.1.5
          14 October 2015 at 4:47 pm

          @Puckish Rogue & Bob.

          NZ is not back in surplus, in fact, NZ hasn’t been in surplus since the Labour government got voted out in 2008.
          What we are seeing is artificial, robbing Peter to pay Paul is not achieving a true surplus, particularly, given the UNPRECEDENTED level of DEBT National have and are still clocking up.

          • Bob 5.1.1.5.1
            14 October 2015 at 5:36 pm

            We didn’t always see NZ in surplus back then either, if you don’t think their was robbing Peter to pay Paul going on then you may need to open the other eye.
            I don’t think running a surplus is the be all and end all, in fact I think National was right to run a deficit rather than going into full austerity.

            What I was pointing out is that Labour have hammered on about National not reaching surplus for 7 years, now they have (at least that is what the books show), so Labour have to deal with the fact the set National up for a win in the public eyes.

            EDIT: Also, are they really UNPRECEDENTED levels of DEBT? Check out the table here (increase the timeframe to max): http://www.tradingeconomics.com/new-zealand/government-debt-to-gdp

            • Halfcrown 5.1.1.5.1.1
              14 October 2015 at 7:10 pm

              “I don’t think running a surplus is the be all and end all, in fact I think National was right to run a deficit rather than going into full austerity.”

              Yeah only when National does it, I remember Bolger telling us that every man women and child in this country owed $5000 and it was the end of the world. If the shoe had been on the other foot you would be one of the first howling your head off about it.
              Remember when all the clowns on the right were having a go at Cullen MUST HAVE MORE TAX CUTS and National the stupid shits gave tax cuts which the country could ill afford to the high earners forcing the costs on others through increasing GST (I will not raise GST) at a time when the world was going into the biggest financial meltdown known.
              That is why sunshine, we are now well and truly stuffed as a country as it will take decades for the debt to be reduced to a manageable level.
              Austerity is here already for some through this incompetent supported by the media pack of clowns of a government lead by the Fucking Spiv. The Fucking Spiv may con you and a lot of other New Zealander’s but he and the media certainly does not con me with this shit about a surplus.

              • leftie …
                14 October 2015 at 8:16 pm

                @Halfcrown

                +1000

              • Tracey …
                15 October 2015 at 7:27 am

                and having robbed the vulnerable the tax cut dangle appears. Fucking merciless magicians

              • Bob …
                15 October 2015 at 9:21 am

                “Yeah only when National does it, I remember Bolger telling us that every man women and child in this country owed $5000 and it was the end of the world. If the shoe had been on the other foot you would be one of the first howling your head off about it.”
                Bullshit, I never voted for Bolger, in fact I voted Jeanette Fitzsimons and the Greens at that election (I was in the Coromandel electorate), so there is your first assumption fucked.
                Secondly, I think Cullen was wrong to run 9 straight surpluses, mainly because private debt soared while the public debt shrunk. The Government is in a much better position to pay back debt, so National was right to call for tax cuts at that point, or even better, Cullen could have spent on infrastructure (like the Auckland rail loop for example) to put money back into the economy rather than squirrel it away at the expense of the general population.

                “That is why sunshine, we are now well and truly stuffed as a country as it will take decades for the debt to be reduced to a manageable level.”
                Wrong AGAIN, we aren’t stuffed, debt is at around 35% of GDP, that is one of the lowest levels in the developed world!!! (as I linked to above)

                “Austerity is here already for some through this incompetent supported by the media pack of clowns of a government lead by the Fucking Spiv”
                Bullshit, you need to get out of this country every now and then, Europe is fucked, if you want to see what austerity really looks like, take a visit, don’t talk bullshit.

                As for Maui and Leftie, I expect them to buy your drivel, but Tracey? Come on.

                • leftie …
                  15 October 2015 at 10:27 am

                  @Bob

                  You are wildly crazy to think deficits are better for the country than surpluses. Running deficits, particularly like National are doing, are motivated by a more insidious agenda of greed and power, and it is never for the betterment of the country or the people. Have to say that you are the first person I have ever read that has said that kind of nonsense.

                  It is purposefully misleading to include private debt with public debt, for the simple reason that governments have no control over private individual debt. Another point to note is , that during the Labour years, unemployment was quite low and people could afford to take on more debt.
                  Within 6 months of coming into office National wiped out the surplus left by Labour and sent New Zealand into structural deficit where it has remained ever since.
                  National were irresponsible to have tax cuts, that as it turned out, only their well heeled friends enjoyed. The rest of the populous got hammered with the broken promise of a GST hike that technically wiped out any gain that the average person may have had, not to mention the other slew of tax hikes such as in petrol etc. National have shown no restraints in running up the biggest Government debt this country has ever seen, because they know they won’t be made responsible and that they won’t be the ones that will have to pay it back. What do you expect with a greedy narcissistic derivatives trader, who doesn’t give a stuff, at the helm?

                • Halfcrown …
                  15 October 2015 at 9:25 pm

                  I am sad that you found my point of view as drivel. However it is a free country(at the moment) and I would defend your point of view. We have one thing in common though, and that is you think I talk divel and I think you talk fucking crap.

                  Now please accept my point of view to your ramblings
                  First I think you write nothing but a pile of shit. Quoting a very famous investigatiive journalist, no not Hoskins, Henry or dickhead Gower but Pilger who famously said once “let me re-construct your response.”

                  “Bullshit, I never voted for Bolger, in fact I voted Jeanette Fitzsimons and the Greens at that election (I was in the Coromandel electorate), so there is your first assumption fucked.”

                  I never ever suggested that you voted National and if you voted for the greens that is your problem, as we all have our crosses to bear. I could not give a shit if you voted for the fucking man in the moon, stop the tree hugging for a few minutes and read what I wrote. and you find your assumption is also well and truly fucked.

                  “Secondly, I think Cullen was wrong to run 9 straight surpluses, mainly because private debt soared while the public debt shrunk.” The Government is in a much better position to pay back debt,

                  Two points here
                  1. As the Private debt is now at about the same level when Cullen was making surpluses, are you trying to tell us
                  a. Cullen with a surplus and high private debt. =bad
                  b. English with LARGE borrowings and a high private debt high= Good.
                  “The Government is in a much better position to pay back debt,”

                  And when will that be? I know the debt is only about 30% GDP and better than some countries, but with the contuning borrowing, and the falling price for our produce, plus the lousy result of the TPPA, how long do you think it will be before we end up like Greece.

                  “Bullshit, you need to get out of this country every now and then, Europe is fucked, if you want to see what austerity really looks like, take a visit, don’t talk bullshit.”

                  Not another possibly BIG OE suffererer . Done the big OE. Got pissed at the Oktober Fest, and The Church run with the bulls and now returned to NZ knowing every fucking thing.
                  Do not patronise me Pal, I have worked and lived in quite a few countries than you possibly had hot dinners. About austerity you would not know what austerity was if it smacked you in the face. I have lived in poverty as a kid and have seen some of the most appalling conditions people live in, which I pray I will never ever see in NZ.

              • Craig H …
                16 October 2015 at 7:34 pm

                Tax cuts are a huge mistake when the economy is in overheating mode anyway – just increases inflation substantially, followed by interest rates, so all the tax cuts go into Aussie bank profits.

                (there may be some hyperbole above…)

            • leftie 5.1.1.5.1.2
              14 October 2015 at 8:11 pm

              @Bob

              “National was right to run a deficit rather than going into full austerity.” Are you for real? What a load of rubbish.

              Looks like you should open both of your eyes. We did indeed see surpluses back then, 9 consecutive budget surpluses in fact. Labour paid down debt AND posted budget surpluses, they didn’t need to rob Peter to pay Paul like National are doing.
              Do you forget that it was National who obsessively hammered the public with the promise of surpluses for the last 7 years until April 2015 when they uncharacteristically went quiet? The opposition are right to pull National up on it, that’s their job, after all it was National itself who made it a weapon for the opposition to wield.

              BTW, you are being misleading. Apart from ignoring events that were occurring at the time, GDP fluctuates, and was a lot lower than it is today. The reality, that one cannot ignore, is that the amount of money New Zealand owes, which is massively more today than what it has ever been. I stand by my statement that National have and are still clocking up an unprecedented level of debt.

              • Bob …
                15 October 2015 at 9:25 am

                “Looks like you should open both of your eyes. We did indeed see surpluses back then, 9 consecutive budget surpluses in fact. Labour paid down debt AND posted budget surpluses, they didn’t need to rob Peter to pay Paul like National are doing.”
                Bullshit leftie, Labour robbed the general population to make the government debt levels look good. That is robbing Peter, Paul, Mary and everyone else to try to make them look good for 9 years: http://www.rbnz.govt.nz/statistics/key_graphs/household_debt/

                The rest of your drivel just points to the fact you don’t understand what Labour did above.

                • leftie …
                  15 October 2015 at 9:55 am

                  @Bob

                  Rubbish. I don’t think you understand the drivel you post. As mentioned further down the page, it is purposefully misleading to include private debt with public debt, for the simple reason that governments have no control over private individual debt. Another point to note is , that during the Labour years, unemployment was quite low and people could afford to take on more debt.

        • Tracey 5.1.1.6
          15 October 2015 at 7:23 am

          Which is sad, cos it is not a genuine reflection of their work or the state of the nation. But lying pays it seems. And is rewarded

  6. Sacha 6
    14 October 2015 at 5:15 pm

    The increase in SOE dividends including Housing NZ would also have helped massage the books. Unsustainable, naturally. All a confidence game. The underspend of special education budgets highlighted by Chris Hipkins disgusts me.

    • RedBaronCV 6.1
      14 October 2015 at 8:24 pm

      And the Soe dividends contributed to the Solid Energy debacle with the remaining assets that make money being sold and their workforces under threat

      They have also heavily massaged the ACC pot and levies – reductions to business owners of course

      • Sacha 6.1.1
        14 October 2015 at 8:57 pm

        Yep. If you are a left government you really cannot afford to leave large funds lying around for future right govts to pillage. Labour royally stuffed up with not legislating ACC back to pay as you go in 99.

  7. tc 7
    14 October 2015 at 7:49 pm

    How much more would the generators have contributed if they hadn’t flogged off half also.

  8. RedBaronCV 8
    14 October 2015 at 8:26 pm

    And with a suplus like that it will only take a mere 200 years to pay back that debt. We are fast running out of wriggle room which is a very bad place to be

  9. Gavin 9
    14 October 2015 at 9:46 pm

    Cameron Preston had an interesting article yesterday, that is worth looking into.

    http://www.interest.co.nz/opinion/78074/cameron-preston-questions-whether-governments-using-risky-gambling-movements-interest

    Some of the ACC investing team have been using ACC funds to take massive positions in derivatives, and with a bit of market help, it is suggested, from the PM, have turned a profit of $4.4billion from those, as far as the OBEGAL books are concerned. But this is a shaky way of improving government ‘revenue’ for the budget position, and puts the ACC funds in a scary position, should the markets turn the wrong way.

    Maybe John hasn’t left the trading desk after all. He’s still at it, just on a bigger scale, and not with his own money.

    • mickysavage 9.1
      14 October 2015 at 9:55 pm

      Thanks Gavin. This sort of detail is now obviously beyond the ability of the MSM to comment on and alternate views are more and more important.

      • Gavin 9.1.1
        14 October 2015 at 10:38 pm

        I had a new look at the article, and Treasury have responded to it. The $4.4bill from ACC winnings doesn’t impact on the OBEGAL figure. ACC only made $81mill of the surplus, less than the previous year. The Reserve Bank’s profits of $510mill from its exchange rate trading, is also not included. BUT, actuarial gains/losses from EQC are treated differently since 2007, and has resulted in providing a boost to OBEGAL funds of (a total of?) $1.5bill over the last three years (including this one). Treasury didn’t dispute that.

        As everyone is commenting, it’s a shaky and probably unreal budget surplus, but like everything this govt does, perception is reality, they are experts at that.

        • Grindlebottom 9.1.1.1
          14 October 2015 at 11:38 pm

          I had a look at the article, and Treasury’s comments. Try as I might I couldn’t really understand it: most of it went straight over my head. That’s why this government gets away with it. Most people just don’t “get” economics arguments so when there are accusations and excuses from experts we have no idea who’s right.

        • dukeofurl 9.1.1.2
          15 October 2015 at 8:12 am

          Isnt one of the reason for taking a big bet on derivatives is that there is “insurance” available ?
          But we saw how that turned out with the Portuguese bank that went under ( with $100 mill of Cullen fund money), where the government there made a late change to the details before the bank went under and Goldman Sachs didnt have to pay out the ‘insurance’ ( my suspicions are the Portuguese government was encouraged in making these technical changes which benefited GS by over a billion$ by the obvious means)

    • leftie 9.2
      15 October 2015 at 5:00 am

      Thanks Gavin + 1000

  10. Nic the NZer 10
    14 October 2015 at 10:58 pm

    I see the consensus view is still promoted that the budget ‘surplus’ is a worth while policy goal. So there you go, the government just achieved a worth while policy goal, we must all try to achieve more (and more) surpluses in future its the only supportable policy don’t you know? All parties must sign up to achieve budget surplus, and promote their fiscal responsibility credentials in public in order to be electable.

    Obviously a few sacrifices are required to achieve such a laudable goal, and these sacrifices must continue in order to achieve future surplus. Some sacrifices in no particular order,
    * Underfunding of education (to continue).
    * Underfunding of health (to continue).
    * Slowing down of the Canterbury rebuild.
    * Housing NZ funding drawn down and not re-invested (to continue).
    * Selloffs of housing NZ stock (without replacement).
    * Spending gap in the economy leading to 5%+ unemployment rate (to continue).
    * Continued high levels of unemployment lead to low wage growth (to continue).
    * Lack of investment resulting in NZ economy not over the previous recession by the time dairy price crash arrives.
    * NZ economy largely reliant on export sector for GDP growth (due to lack of investment in alternative domestic industries).
    * NZ population heavily indebted, with low personal savings rates (note surpluses drain savings out of the economy directly) (to continue).
    * Growth of NZ GDP still strongly tied to growth of NZ housing bubble.
    * Lack of domestic savings results in lack of domestic investment (to continue).
    …

    What are the benefits the nation just accrued due to the surplus achieved?

    • leftie 10.1
      15 October 2015 at 4:56 am

      @Nic the NZer

      None.

      • Nic the NZer 10.1.1
        15 October 2015 at 8:59 am

        If there are no benefits why is it a policy goal of the country?

        Even the Cullen surpluses had negative consequences. The left seems to think they were somehow different (and desirable) but private debt went up massively over the period (and NZ formed a massive housing bubble) and if you understand the mechanism this is basically related to govt surplus draining savings out of the economy at this time.

        A labour led govt will achieve the same results basically (despite branding labour austerity as kinder) and should reject surplus as a policy goal.

        • leftie 10.1.1.1
          15 October 2015 at 9:47 am

          @Nic the NZer

          I was referring to National’s pseudo surplus, and that will have no benefit to the country at all.
          The rest of your comment is just rubbish, and it is purposefully misleading to include private debt with public debt, for the simple reason that governments have no control over private individual debt. Another point to note is , that during the Labour years, unemployment was quite low and people could afford to take on more debt.
          A true surplus like the 9 produced by the previous Labour government over their 9 year tenure had enormous benefits for the country, for a start it helped New Zealand weather the GFC.

          • Bob 10.1.1.1.1
            15 October 2015 at 1:08 pm

            “for the simple reason that governments have no control over private individual debt”
            Yeah, the same way the Government has no control over employment…
            If you think the Government has no control over individual debt you are very much wrong. Tax rates (both on savings and on income), public spending rates (i.e. spend money into the economy rather than tax and save, also known as a ‘surplus’), and initiatives like Kiwisaver are all ways the government can affect private debt.

            • leftie 10.1.1.1.1.1
              15 October 2015 at 5:47 pm

              The fact is that governments do NOT have control over individual private debt, are you that dim that you do not understand what that means?

              • Nic the NZer …
                15 October 2015 at 7:02 pm

                No, Bob is spot on. The govt doesn’t control private debt sure, but it influences a number of factors which further influence private debt,

                These include the amount of peoples private income which they are able to keep after taxation (e.g private savings).
                The level of employment, which the government can increase by hiring people, which influences private income.
                There are also factors around the kind of regulations which the govt places on the financial sector, which might influence the level of borrowing.

                By the same tokens we could say the govt doesn’t control its own budget deficit (because the amount of tax it collects is determined by economic activity in the private sector at that time). Even its expenditure is some what out of its hands because the government sets the benefit rates, pension rates etc… but doesn’t control how many people apply for those.

                Calling the surplus ‘pseudo’ is a bit of a dumb argument, because the pseudo part has precisely no meaning. Cullen achieved accounting entries recording a surplus, so now did English. Neither is more ‘pseudo’ than the other in any sense that you can explain.

                As for the sentiment that the surpluses helped NZ weather the GFC, this is both ignorant and incorrect. The main impact on the NZ economy from the GFC was the bursting of the NZ housing bubble. This primarily spread onto the highly de-regulated finance company sector which had been chasing that bubble. But regulating that sector sooner would have had the same impact as it shrinking by itself due to the bubble bursting. The economy saw both budget deficits and a mild recession when the bubble burst, but Cullen was simply fortunate this process didn’t start on his watch (which is why he was able to record some surpluses).

                Given consensus knowledge around that time its hardly surprising that Cullen didn’t regulate this sector, but allowing this bubble to expand actually increased the impacts of it bursting on the NZ economy when it did. Far from helping NZ weather the GFC, the governments in-actions were a part of the cause. With hindsight we can at least say this was a mistake and must therefore conclude that the surpluses were not appropriate also with hindsight.

                • Pat …
                  15 October 2015 at 7:38 pm

                  “As for the sentiment that the surpluses helped NZ weather the GFC, this is both ignorant and incorrect. The main impact on the NZ economy from the GFC was the bursting of the NZ housing bubble. This primarily spread onto the highly de-regulated finance company sector which had been chasing that bubble.”

                  ??????????
                  http://www.interest.co.nz/charts/real-estate/median-price-reinz

                  cant see any housing bubble burst here.

                  • leftie …
                    15 October 2015 at 9:32 pm

                    @Pat
                    I do not know where Nic the NZer got that idea that the housing bubble had burst.

                    • Pat …
                      15 October 2015 at 9:46 pm

                      would appear to have a number of those…from planet Key perhaps?

                    • Nic the NZer …
                      16 October 2015 at 12:55 pm

                      Your analysis is pretty simplistic, and a denial of economic history. You can see a significant shift in those charts for many regions (but not Auckland).

                      In any case its fairly well established that many of the finance company failures in NZ were due to their lending to property developers whose business collapsed following the GFC.

                      If you want to deny that happened then you should probably indicate an alternative class of investments which collapsed and which finance companies were exposed to. Finance companies were about 8% of the lending market at the time, so obviously the profile of housing data as it effects their market can be quite different to the median or average of the whole market.

                • leftie …
                  15 October 2015 at 9:28 pm

                  @Nic the NZer

                  Surpluses were not appropriate? what a load of bullshit.

                  You have contracted yourself, so Bob cannot be spot on when you have admitted that “govt doesn’t control private debt”
                  Do you understand that if an individual decides to take on more debt, that is not the government’s decision, it is the decision of that individual?

                  Look up the meaning of the word pseudo, then you will understand. I have already described on other posts that this is not a true surplus, certainly not with the unprecedented level of government debt National are racking up.

                  • Nic the NZer …
                    16 October 2015 at 1:26 pm

                    If I have contradicted myself you will have to indicate the two statements which were in contradiction.

                    I am guessing the supposed contradiction hangs on the question of does the government running a surplus drain savings out of the private sector or influence growth in private debt. But you keep making the claim that a government can not influence private debt levels, in contradiction to examples which both me and Bob have provided of the government influencing private debt levels, your simply incorrect about this.

                  • Nic the NZer …
                    16 October 2015 at 1:46 pm

                    “Do you understand that if an individual decides to take on more debt, that is not the government’s decision, it is the decision of that individual?”

                    As I said before this is a terrible criteria for arguing that things are in or out of the governments control. Take for example benefit payments. I can say the government doesn’t control its spending on benefits, the government doesn’t control its spending on benefits because that’s an individual decision to apply for a benefit or not to apply for one. So there you go the government has absolutely no influence over its expenditure on benefits (by your logic).

                    Or take for example tax. The government has no control over how much tax it collects. The government has no control over that because its an individual decision what you say in your tax returns and therefore how much tax you submit (again by your logic).

                    In reality there are a range of ways that the government influences the economy, including on employment and private debt, so its a question of how influential those effects are. The amount of taxation and spending the government does has an effect on how much income (above taxation) the private sector has and has an impact on both saving and debt levels. Also as I indicated the government can influence lending regulations in various ways.

                    When you are willing to recognize plain facts such as this it might be possible to continue the discussion, otherwise it seems pointless to discuss reality with someone who is denying it.

                • Pat …
                  16 October 2015 at 1:22 pm

                  “Reserve Bank Governor Alan Bollard would reflect that,

                  At the end of 2006 and in early 2007, we started to hear about property finance companies in trouble. Most were very small, and as individual failures they did not greatly concern us. But in the second half of 2007, bigger finance companies started to fall like flies. As each one entered into liquidation, receivership or moratorium, media speculation turned to the next. We saw angry scenes of elderly debenture holders haranguing hapless managers at meetings. The pattern seemed clear: poor governance, spider-web company structures, vulnerable business models, mismatched balance sheets, bad management and inadequate supervision by the trustee companies.[13]”

                  • Nic the NZer …
                    16 October 2015 at 1:30 pm

                    Try again, which investments which they were into went bad?

                    These factors might have caused them to make bad investments but they still need to have made some bad investments. Also why did this happen in co-incidence with the GFC. All of this governance stuff was happening well before that.

                    • Pat …
                      16 October 2015 at 1:47 pm

                      lol.God loves a trier….if you read (carefully) you will note the cause is given as poor governance, bad practice…if I recall there were resulting actions around fraudulent behaviour….however even more key is the fact it started in 2006….BEFORE the GFC….at the time i recall many of the failed companies were leanding to high risk borrowers in the auto trade (i,e, boy racers) with high default rates….as to dodgy business practice , we shant mention Hanover.

                      As to your mythical property bubble burst, if you know how to read a graph (the bottom one will show you the trend over time) you would know a bubble burst would produce a near vertical line downwards in the trend….the graph shows a steady growth with a slight flattening around the time of the GFC..created by the lack of certainty and loan provision while the banks worked out what was going to happen ,then all returned to normal (here at least)….the most you could say is the credit tightening caused by the GFC caused problems for some finance companies but there was no property crash,

                      but dont worry I expect you will get your property bubble burst sometime soon.

                    • Nic the NZer …
                      16 October 2015 at 3:02 pm

                      “if you know how to read a graph (the bottom one will show you the trend over time) you would know a bubble burst would produce a near vertical line downwards in the trend”

                      I guess we both agree there was a property bubble collapse in the US, so you should be able to find at least one US property chart matching your description? I doubt it.

                      I didn’t see any discussion of auto lending associated with the finance company collapse (though there is discussion associating it with a property bubble), but that would be a good example if it actually happened.

                    • Nic the NZer …
                      16 October 2015 at 8:55 pm

                      Hang on, your trying to make your case by deception now. All the charts you just posted are deflated in some way, its hardly surprising that the un-adjusted median house price charts you originally posted don’t look similar, they are different kinds of data.

                      On the other hand the interest chart showing median house prices deflated by median income looks a lot like the first chart in the aei link (they are the same kinds of charts).
                      http://www.interest.co.nz/property/house-price-income-multiples

                      And the RBNZ house price annual percentage change looks pretty similar to the second chart in the aei link (again matching kinds of charts).
                      http://www.rbnz.govt.nz/statistics/key_graphs/house_prices_values/

                      So by your own criteria there was a property bubble crash (not as large as the US one) in NZ as I already indicated.

                    • Pat …
                      16 October 2015 at 9:14 pm

                      good grief

  11. Pat 11
    14 October 2015 at 11:24 pm

    “The Opposition is there not just to sit and wait till they get power again,. Its job is to illustrate competence and improve the performance of the government. This is particularly the role in times of crises and emergency. Sometimes this means supporting the government when you’d rather not, and other times this means challenging them strongly to improve. Sometimes the government needs this challenge to push back against forces within their own special interest groups.”

    http://publicaddress.net/speaker/11-ways-the-opposition-has-failed-christchurch/

    • leftie 11.1
      15 October 2015 at 4:55 am

      @Pat

      How about the thousands of ways the National government has failed Christchurch, who reward Gerry Brownlee with a massive majority at last year’s election.

  12. Neil 12
    15 October 2015 at 7:14 am

    Excuse my ignorance, but how can they have a surplus when the country is in debt to the tune of $100 billion odd?
    The way I see it is that if I owe lets say for arguments sake $1000 & only have $10 in the bank, I definitely don’t have a surplus. Given that ,its impossible to be in surplus.

    • dukeofurl 12.1
      15 October 2015 at 8:06 am

      Its even more misleading than than that, its not even a surplus when you count money raised against money spent, its an over $6 bill deficit.
      The treasury figures show for the 2015-16 year they will be borrowing over $8 bill ( some of the borrowing is to repay old loans – with new loans)

      Media Statement: 2015/16 Domestic Bond Programme Set at $8.0 Billion
      http://www.nzdmo.govt.nz/publications/mediastatements/debtprogramme/2015-05-21
      This is longer term money as they also borrow short term ( less than a year) to cover ups and downs of payments/spending during the year.

      In broad terms the “surplus” refers only to things like operational spending, it excludes capital spending ( capex), this is how a company operates for taxation purposes and the result is gives a ‘profit figure’ more easily ( accountants might add more detail to this explanation)

    • Bob 12.2
      15 October 2015 at 9:31 am

      It is an operating surplus, in-comings exceed outgoings. That ‘apparently’ means the government is heading in the right direction (although that is far too simplistic, and as far as the last 10 surpluses this country has run, it is wrong).

    • Neil 12.3
      15 October 2015 at 11:30 pm

      But surely one must pay off debt, before one can have a surplus? After all the meaning of surplus is “An amount or quantity in excess of what is needed”.
      So if we have an excess of money then surely we would not be owing the 100 billion odd that we are in debt by.
      The way I look at is that one must pay off all debt, before one can say they have a surplus. The way it sounds to me is that the books are being cooked, if we are in debt & there is a surplus according to English.
      If I was owed money & the person that owed it to me was running around saying they had an excess of money, I would surely be asking some serious questions as to why the debt owed to me hadn’t been paid back in full plus any interest owing.
      In my mind one must have paid all debt off before one can truly say they have an excess of money surplus to requirements.

      • Craig H 12.3.1
        16 October 2015 at 7:42 pm

        Surplus is often used as a synonym for profit by non-profit organisations. The surplus is a profit (effectively) – that we have debt to pay back with said surplus/profit doesn’t change the fact that it was a profit. That we achieved the profit by underpaying some expenses, and therefore will have a loss (deficit) next year also doesn’t change the fact that it’s a profit this year, highly misleading though it is.

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