The PREFU is much better than National wanted

Written By: - Date published: 4:33 pm, September 16th, 2020 - 51 comments
Categories: economy, election 2020, grant robertson, helen clark, Judith Collins, labour, uncategorized - Tags:

The Prefu is out!  And I suspect Judith Collins will be quietly cursing the contents although already National’s line is clear, this is the worst PREFU ever.  It is also the only PREFU every formulated at a time the world is experiencing a one in one hundred year pandemic that has caused the deaths of at an absolute minimum nearly a million people but yeah this is all Labour’s fault.

Henry Cooke has prepared this interesting backgrounder.  Some highlights:

  • It is widely-expected to that unemployment will be much lower than 9.8 per cent, because the country got out of lockdown faster than expected and the wage subsidy kept more people in work.
  • Unemployment is expected to stick around for longer, as border restrictions remain in place and the world economy remains in turmoil for longer. It is expected to hit 7.7 per cent in 2021 and then stay above 7 per cent until 2023, when it drops to 6.6 per cent, then to 5.3 per cent the following year.
  • Treasury believes that over the three months between March and June, when the lockdowns were at the strongest, New Zealand’s economy shrunk by 16.3 per cent.
  • Very modest wage growth over the next four years is forecast. In the year to June 2021 wages will only go up by 0.9 per cent, followed by 2.5 per cent the following year, 2.6 per cent the year after, and 2.9 per cent in the year to June 2024.
  • House prices are expected to shrink 4.4 per cent in the year to June 2021 before rapidly rebounding, with 4.7 per cent growth in the year to June 2022, 7.4 per cent the year after, and 8.5 per cent the year following.
  • By June 2024 Treasury expects net core crown debt to reach $201.1b, or about 55.3 per cent of the GDP for that year.  “This may seem very high, but its actually a lot lower than many comparable countries debt levels going into the crisis, let alone following it.”

No doubt National will be using some variant of the decade of deficits claim that it put out last time it was in opposition.  That time it worked, a few people did believe that Helen Clark and Michael Cullen were responsible for the excesses of Wall Street and merchant bankers and the instigators of the global financial crisis.  This time I suspect that these tactics will not work.  Because the majority now realise that this Government and Grant Robertson in particular are canny managers of the economy.

51 comments on “The PREFU is much better than National wanted ”

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  1. millsy 1
    16 September 2020 at 4:39 pm

    National will still use this as an excuse to impose austerity though.

    The sooner this election is over the better

    • stuff the politicians 1.1
      16 September 2020 at 5:03 pm

      I agree millsy.

      Plus, it was a pity that the election was postponed for a month as it has allowed those on the moaning Right to stay on the moan pills a month longer.

    • RosieLee 1.2
      16 September 2020 at 5:25 pm

      National's idea of austerity will be to protect 'business" and the banksters at all costs. ie any austerity which doesn't affect them.

  2. Patricia Bremner 2
    16 September 2020 at 5:18 pm

    I for one will donate to Labour and the Greens today…every little helps counter the big spending Blue lot!!

    • mary_a 2.1
      17 September 2020 at 2:41 pm

      Patricia Bremner @ (2) … good on you. I do the same when I can, financially support Labour and the Greens to help keep the Red and Green sides ticking over.

      • Patricia Bremner 2.1.1
        17 September 2020 at 5:46 pm

        Yes mary_a, I started two automatics a $5 fortnightly to cover my membership of the party and another at a rate that gives enough to make a $1000 per year.. Drip feed works.. a bit like kiwisaver. There are two of us so that makes it easier Cheers.

  3. weka 3
    16 September 2020 at 6:50 pm
    • House prices are expected to shrink 4.4 per cent in the year to June 2021 before rapidly rebounding, with 4.7 per cent growth in the year to June 2022, 7.4 per cent the year after, and 8.5 per cent the year following.

    That's a shame, I was hoping that covid might help us with the housing crisis.

    • Pat 3.1
      16 September 2020 at 6:58 pm

      That is a very optimistic forecast…as is the unemployment number and they are connected.Add in virtually zero wage growth and there is only one way house prices can go, try as they might

    • Graeme 3.2
      16 September 2020 at 7:27 pm

      Unfortunately the consequence of sound management of the situation. Property and construction in Queenstown, and I gather wider Otago are going off. Ok, there's people who are having to sell up because their has gone futt because of the changes (and it was probably a basket case to begin with), but properties are selling, often for very good prices and builders are busy and buying new vehicles. Actually there's lots of new vehicles around town.

      How long this goes on for is to be seen, but so far, apart from the tourism businesses that didn't, or more like wouldn't, see it coming, the town is doing good. No line up of toys for sale on the side of the road, and no mortgagee sales, yet.

      Most of this seems to be coming from retuning ex-pats, and new immigrants going down the residency path. Hearing of some quite spectacular things happening there which could have a very positive impact on our economy locally and nationally.

      We're looking to come out of this pretty well. But there's got to be the build to accomodate it, which I think the government has been trying to get underway.

      Expecting a crisis to get really bad, just to put you on top, is what Judith Collins is trying to do. Managing a crisis well, so that all the good things flock to you is what the current government has done. Those good things will make us stronger and help us to solve a lot of problems in Aotearoa.

      • woodart 3.2.1
        16 September 2020 at 7:41 pm

        your comments can also be applied to foxton and foxton beach.

      • weka 3.2.2
        16 September 2020 at 8:30 pm

        it looks a bit different to people who were struggling before covid, who are struggling more now, and who in no way benefit from increasing house prices. The only thing I can see that will solve the housing crisis is something like covid. We do have other choices, we're just not making them.

        • Descendant Of Smith 3.2.2.1
          17 September 2020 at 9:27 am

          What better time to stimulate the economy by building state houses to reduce the housing crisis. All freed up land should be owned by the state (with nil cost leases) though to make the cost of buying more affordable as you only need to buy the house.

          None of it should go to private owners and especially not developers who can just sit and wait. The real estate agent is even advertising it for sale as a "land banking opportunity"

          https://www.nzherald.co.nz/hawkes-bay-today/news/article.cfm?c_id=1503462&objectid=12365003

          • Descendant Of Smith 3.2.2.1.1
            17 September 2020 at 9:37 am

            More land banking.

            “Quite a lot of these [buyers] are new investors, people who are land banking to take advantage of the unitary plan. They don’t want to leave money in the bank. There’s potential in the land and they just want to hold long term.

            https://www.oneroof.co.nz/news/38427

          • Pat 3.2.2.1.2
            17 September 2020 at 9:51 am

            No need to build more…the shortage is in available and affordable.

            There are almost 2 million dwellings in NZ for a population of 5 million.

            The state can take possession of the private banks non performing assets and make them available at affordable rates …that will also reduce demand for private rentals with the flow on effect into prices generally.

            The only downside will be for the construction/ real estate sector but construction capability can be redeployed to repurposing our infrastructure to zero carbon…the real estate sector? …time to do something productive.

          • weka 3.2.2.1.3
            17 September 2020 at 9:51 am

            that would definitely help. Unfortunately Labour's position is that house prices should keep increasing. They want to increase wage rates as well, but have nothing to offer beneficiaries and those in low wage jobs with poor hours/conditions. I can't see how any believes that benefits will ever be raised high enough to catch up with and then keep up with housing costs. Which means that NZ, including many on the left, are ok with us having permanent, long term people living in serious poverty.

            • Pat 3.2.2.1.3.1
              17 September 2020 at 10:06 am

              'Everyones' position is house prices keep growing ,along with population to drive it but the only logic is to prevent the banks from falling over because they have been allowed to lend to irresponsible levels…its an unsustainable ponzi scheme that will collapse…the sooner the gov take possession of the at risk assets the less it will cost and the sooner the banks will return to sensible lending practices.

      • Patricia Bremner 3.2.3
        17 September 2020 at 11:53 am

        Not according to Judith and Goldsmith. "We are doomed I tell you!! Doomed!!"

        According to Judith we will "all fly to Australia for jobs" even as Australians here can not get home because….. flights/quarantine/caps on returnees in all States…Covid!!

        According to Goldsmith we are doomed to "endless deficits as far as the eye can see" which he plans to "fix" by removing 80billion from circulation as fast as possible.

        What narrow visionless capitalists they are.

        Who would get that 80billion? Bankers Financiers and others, some of whom have affiliations in China. (There, now I'm on their list)

  4. weka 4
    16 September 2020 at 6:51 pm

    Is all this predicated on a broadly effective vaccine?

  5. Graeme 5
    16 September 2020 at 6:51 pm

    The photo of that stand-up in Henry Cooke's piece. The expressions on their faces….

    Has to be a caption post.

  7. Tricledrown 7
    16 September 2020 at 8:56 pm

    Nationals stingy $8 billion a year budget cuts ,spending less is not what is needed now ,a weaker economy can't grow from a lower economic base ,which is going to take longer to pay debt having lower economic activity..

  8. Peter 8
    17 September 2020 at 8:41 am

    Collins' pontifications about the PREFU could have been written weeks ago with just a tidying of specific details yesterday.

    It reminds me of the old expression 'fell down a sewer came up with a gold watch.'

    Collins could have fallen down a pit full of gold watches and she'd come up with handfuls of turds. She did, she has, and the raiment suits her.

    • Grafton Gully 8.1
      17 September 2020 at 7:17 pm

      I understood she said that all NZers need to be involved in growing the economy if they want state funded education and health.

  9. Enough is Enough 9
    17 September 2020 at 9:47 am

    It is an indisputable fact that it is the worst PREFU ever. To be fair to National, I didn't see them blame Labour for that? Did I miss something?

    The question is which parties policies are best to get us out of the economic destruction caused by the covid lockdowns and closed border.

    There is only one answer to that question in my mind – Green Party

    • Red 9.1
      17 September 2020 at 10:47 am

      “There is only one answer to that question in my mind – Green Party“

      All I can say to that is thank god we only have one vote each No problem with Disruptive green initiatives that stand on their own merits re cost benefit, Not possible however if soaked in socialism and pseudo religious fervour

      • Incognito 9.1.1
        17 September 2020 at 11:48 am

        Not possible however if soaked in socialism and pseudo religious fervour

        I see you’re sliding backwards with your biased BS masquerading as assertions.

        We have initiatives here on TS that stand on their own merits re cost benefit but they could be Disruptive to your commenting here. I’m itching to take initiative and I need not much convincing 😉

    • Grafton Gully 9.2
      17 September 2020 at 7:24 pm

      Holy shit you must be fucken joking !! The Greens want to lock land and seabed up for the sake of a few rare endemics when we need the proceeds of mining to pay for lifting the underclass into productivity and prosperity via massive investment in housing, education and preventive healthcare.

  10. Infused 10
    17 September 2020 at 9:55 am

    Did not blame labour? No

    Do the math. At 5bn surpluses at best this will take 60 odd years to pay back without the other 6 odd recessions in this time.

    Your short sighted national jab shows how our of touch you are with how bad this is.

    You either have cuts coming or a shit ton of taxes. I know which one it will be.

    I'd be cashing out early next year and be buying stocks and gold

  11. Sabine 11
    17 September 2020 at 11:01 am
    • It is widely-expected to that unemployment will be much lower than 9.8 per cent, because the country got out of lockdown faster than expected and the wage subsidy kept more people in work.

    does this include the underutilisation rate? does this include those that have given up looking for work? does that include those that don't file for unemployment because they will not get anything cause the partner is 0.50 cnts aboe the limit? IF so, then what ever number we get is wrong and not worth the paper that is printed on.

    • Unemployment is expected to stick around for longer, as border restrictions remain in place and the world economy remains in turmoil for longer. It is expected to hit 7.7 per cent in 2021 and then stay above 7 per cent until 2023, when it drops to 6.6 per cent, then to 5.3 per cent the following year.

    is this taken into account by winz, or are unemployed, under utilitsed etc expected to weekly / daily apply for ghost jobs lest they get sanctioned? Or is that just a feel good point fro those that won't lose their jobs and thus feel like it 'is not that bad as it does not affect me crowd"?

    • Treasury believes that over the three months between March and June, when the lockdowns were at the strongest, New Zealand’s economy shrunk by 16.3 per cent.

    are you saying that Treasure 'believs' it means Treasury is not showing hte actuall factual numbers but rather 'believes' and thus expects us to 'believe'? When will proper data be provided and will proper data be provided?

    • Very modest wage growth over the next four years is forecast. In the year to June 2021 wages will only go up by 0.9 per cent, followed by 2.5 per cent the following year, 2.6 per cent the year after, and 2.9 per cent in the year to June 2024.

    who would have thought that if people can't employ it matters really not that wages go up? So essentially the great 'income raises via the min wage' is not gonna do a single thing for the next three years. Lol.

    • House prices are expected to shrink 4.4 per cent in the year to June 2021 before rapidly rebounding, with 4.7 per cent growth in the year to June 2022, 7.4 per cent the year after, and 8.5 per cent the year following.

    Seriously do the critters in parliament actually believe this?

    https://www.globalpropertyguide.com/news-strong-house-price-rises-continue-in-new-zealand-4103

    New Zealand’s house prices continue to rise strongly, as the impact of the ban on non-resident foreign homebuyers wanes. Median house prices rose by 7.67% (inflation-adjusted) during the year to Q2 2020, following y-o-y rises of 10.87% in Q1 2020, 10.28% in Q4 2019, 5.82% in Q3, and 2.74% in Q2. Yet on a quarterly basis, real house prices fell by 3.45% in Q2 2020.

    really whom are they kidding? What ever they are smoking or drinking its good, can we have some of that stuff?

    • By June 2024 Treasury expects net core crown debt to reach $201.1b, or about 55.3 per cent of the GDP for that year. “This may seem very high, but its actually a lot lower than many comparable countries debt levels going into the crisis, let alone following it.”

    seriously who cares? Print the money to pay the debt, and btw, why call it debt?

    One has to be very removed from the actuall reality lived by the 3/4 of the country that are not able ot work from home, or work at all for that matter to consider this pile of 'good news' good news. At best one can say its 'feel good propaganda' at best its a badly hidden pack of 'mis truths and creative 'interpretation of the situation on the ground'.

    as for National who cares what they think? OR am i to consider National now as a real contender for the vote?

    • infused 11.1
      17 September 2020 at 11:17 am

      no it doesn't include under utilization which is 12%.

      • Sabine 11.1.1
        17 September 2020 at 11:42 am

        well at the last count, when unemployment was at 4% which dates back to June. So now we have September, i guess this number – under utilisation will have gone up by a bit as well.

        https://www.stats.govt.nz/information-releases/labour-market-statistics-june-2020-quarter

        Key facts

        Labour market at a glance

        • Unemployment rate fell to 4.0 percent.
        • Underutilisation rate rose to 12.0 percent.
        • Employment rate fell to 66.9 percent.
        • Filled jobs fell 0.5 percent.
        • Average weekly earnings (including overtime) fell 2.8 percent
        • Wage rates increased 2.1 percent annually.
      • lprent 11.1.2
        17 September 2020 at 12:40 pm

        no it doesn’t include under utilization which is 12%.

        Hi profoundly economically ignorant fool.

        The under utilisation rate in December 2019 was 10%.

        Just to give some context in December 2009 the National government managed to have 15% under-utilisation. In June 2012, the National government had 14.6% underutilization. How shocking to you this would be if you weren’t a profound dumbarse party hack.

        The last time that NZ had 10% underutilization was back in June 2008 with a Labour government. After that National could never manage to keep it below 12% – presumably because they are incompetent managers of the economy and couldn’t create the required work.

        I realize that n your role of stupid National supporter and hack, you have to say stupid things – but pleazzze – don’t be quite this thick. It diminishes the reputation of all damn stupid political operatives.

        • Infused 11.1.2.1
          17 September 2020 at 6:18 pm

          What are you talking about you uncoherent old fool. I said its 12% and its sitting on the stats website

          Maybe read before you open your mouth next time

          • Incognito 11.1.2.1.1
            17 September 2020 at 11:07 pm

            How could Lprent have missed that 12.0% is beyond me unless you have missed his point, which is more likely. I’ll leave it to him to explain it to you in subtle terms.

            I have made a note of your ageism though. That was really uncalled for.

  12. Red 12
    17 September 2020 at 11:16 am

    “seriously who cares? Print the money to pay the debt, and btw, why call it debt?

    Should have started with above and would have been been an effective filter to stop reading now

    The economic / financial ignorance in that statement unfortunately is not unique in NZ

    • Sabine 12.1
      17 September 2020 at 12:35 pm

      I know , it is not conventional and could carry risks, mainly of inflation.

      https://www.economicshelp.org/blog/634/economics/the-problem-with-printing-money/

      But this is equally bullshit as an excuse of not to do so

      Printing money and national debt

      Governments borrow by selling government bonds/gilts to the private sector. Bonds are a form of saving. People buy government because they assume a government bond is a safe investment. However, this assumes that inflation will remain low.

      • If governments print money to pay off the national debt, inflation could rise. This increase in inflation would reduce the value of bonds.
      • If inflation increases, people will not want to hold bonds because their value is falling. Therefore, the government will find it difficult to sell bonds to finance the national debt. They will have to pay higher interest rates to attract investors.
      • If the government print too much money and inflation get out of hand, investors will not trust the government and it will be hard for the government to borrow anything at all.
      • Therefore, printing money could create more problems than it solves.

      Or if you don't like calling it 'print money' how about a 'debt jubilee'?

      • new view 12.1.1
        17 September 2020 at 1:16 pm

        Sabine. Interest rates will go negative next year. That means the banks will be awash with cash that’s costing them money they’ll want to lend out as much as possible. People will borrow even more to purchase a house that doesn’t exist. House prices will keep rising. You want the government to print money that will create inflation. I’m lost as to how it would affect the whole mess except for increasing mortgage rates and the cost of living for everyone. Weka thought that Covid might bring prices down but I can’t see how without those who need housing not getting housed.

        • Sabine 12.1.1.1
          17 September 2020 at 1:24 pm

          The banks are already lending money like there is no tomorrow (and maybe there isn'tr 🙂 ) to people buying houses, thus the rise in house prices currently. 🙂

          No mate, i want the government to increase the welfare benefits, and the unemployment benefits to about 480.00NZD per week – essentially covid wage subsidy after Paye. And i would like them to print money for that.
          I also would like to increase the kiddie benefit of $ 60 to go to kids older then three years (i mean of course the kid could try to get a job, but currently its not really a seekers market)
          I would also like to see the government stop punishing people who are unemployed for having partenrs and give them the full amount htey would be getting if they were single, it really is not nice to have to live of one wage in general, but even less nice if you have to ask your partner for money to buy something, and you don’t have money in your own name.
          I would like to increase the rate of pay for the retired community, and increase the winter payment so that it covers all of winter.
          Maybe throw in a Ham and some fruit pies for christmas.

          Not that that would ever happen, But that is what i would like to see, and chances are that some of that money would actually trickle upwards.

          But then that is not gonna happen as we were already told.
          it is really important tho that cheap money goes to the very wealthy who don't need it, so that they get to buy up what ever is there to be bought or build a chrystal garden for the poor misunderstood kidlings of the very very rich. .

        • Pat 12.1.1.2
          17 September 2020 at 1:29 pm

          So banks are going to lend vast sums of unserviceable funds to the unemployed, the working poor and non existent migrants are they?….think last time that happened they blew up the banking system which governments have been propping up since.

          The banks are rapidly running out of willing/capable borrowers…otherwise known as the base of the ever growing pyramid ….indeed the pool is going to be further reduced by those who lose their jobs/hours and negative interest rates arnt going to make any difference to that dynamic

  13. Climaction 13
    17 September 2020 at 11:58 am

    It's not worst case, but it's nothing to be proud of.

    It shows Labour squandered the gains made since the GFC before covid even begun to be an imposition.

    Labour haven't delivered on any major policy promise made in 2017, and now they want NZ to vote them back in based on the fact we aren't in the worst case scenario?

    • Incognito 13.1
      17 September 2020 at 12:23 pm

      They decriminalised abortion, as promised. They also launched the Pike River Recovery Agency and they made the necessary Law change for re-entry, which was an election promise by Andrew Little. Your ignorance and bias are showing, as usual.

      Please stay on-topic of the OP.

    • mary_a 13.2
      17 September 2020 at 2:58 pm

      Climaction (13) … Just a little reminder to bring you up to date in case you have forgotten. NZ like the rest of the world is in the middle of a pandemic called Covid-19, which has had a big impact on economies! Nothing is, or will be the same from this time on.

      We should be thankful, we have a government which has some humanity, by considering NZers well being first and foremost.

  14. Maurice 14
    17 September 2020 at 1:44 pm

    So people seriously believe that National wanted this to be even worse … so they could be elected to try and 'sort it out'?

    I very much doubt they want to be elected at all by their recent and not to distant behaviour – perhaps they just want Labour/Greens to be saddled with the most difficult job in governance we have seen in the last fifty or sixty years (or perhaps longer!).

    • Stephen D 14.1
      17 September 2020 at 3:23 pm

      Judith is running a decidedly lacklustre campaign. Combine that with uncosted farcical policies they have no intention of implementing, and it does look like they've given up. Or really do not want to be in government for a couple of more terms while they sort their shit out.

  15. Sabine 15
    17 September 2020 at 2:06 pm

    a write up by the Stuff – surely some will find issues with it,

    https://www.stuff.co.nz/national/politics/300109230/election-2020-high-unemployment-high-house-prices-and-a-social-crisis-on-the-books

    OPINION: For all the economic bluster – and there was a lot of it – Wednesday’s big story was not an economic crisis, it was a social one.

    The scary stuff – the stuff that should be keeping our politicians up at night – is not what is happening on the Government’s books: it is the stuff happening on the balance sheets of individuals and households………..

    Long-term unemployment is the big one. The last time Treasury opened the accounts, in May, it was picking an ugly couple of years of unemployment, rising to 9.8 per cent before tracking down to 5.7 per cent by 2022 and 4.8 per cent by 2024.

    This new set of forecasts kick the recovery out by years. Unemployment will still be 7 per cent in 2023 and it won’t get down to 4.8 per cent until 2027………….

    Underneath that number is a world of social pain.

    The unemployment rate for Māori can be as high as double the general unemployment rate while the unemployment rate for women goes up faster than the unemployment rate for men and stays higher for longer.

    Bar one quarter in 2018, the unemployment rate for women has not hit 4 per cent since 2008, the year the iPhone arrived in New Zealand……

    Labour, meanwhile, careful not to rock the boat, is trying to pretend these numbers are unavoidable; some certainly might be – the Covid recession is not their fault – but long-term high unemployment and out-of-control house prices are within the ambit of their control.

    The party has staked its re-election on a slogan of Let’s Keep Moving. New Zealanders would do well to ask: which way?

    or where too? A ditch nearby for those that fall into the cracks to never ever be mentioned again?

    https://www.stuff.co.nz/national/politics/300109230/election-2020-high-unemployment-high-house-prices-and-a-social-crisis-on-the-books

  16. karol121 16
    17 September 2020 at 2:57 pm

    Perhaps the seemingly perpetual deflation the rights have been dreading and the not so rights have been dreaming of.

    But in any case;

    UP THE WORKERS, UP THE MOTHERS, UP THE CHILDREN AND UP THE BENEFICIARIES WHO ARE ALL THE BACKBONE OF LA SOCIETE.

    AND DAMNATION TO THOSE WHO SUPPORT THE TREASON OF THE INTELLECTUALS,(whatever form it takes).

    Whew! Where are those Minties? I need one.

  17. McFlock 17
    17 September 2020 at 3:31 pm

    So the PREFU expected -16% GDP in the second quarter, and the next day the announcement is -12%?

    What's the point of it if they can barely ballpark tomorrow, let alone the coming years?

    • Red 17.1
      17 September 2020 at 7:16 pm

      Agree most economist have not got a bloody clue if they did they would put there money where there mouth is and make billons on their market predictions, fk the could not even predict the GFC. The doom and gloomers usually have their 15 minutes of fame as they tend to be right once in their life

      End of day you just need to trust the productive capacity of human beings and markets, while we are here we are not going to sit around and do nothing. The other key is government facilitate this process not create a lot of friction or stasis

      [Fixed typo in e-mail address]

      • Grafton Gully 17.1.1
        17 September 2020 at 8:32 pm

        Your final paragraph is what I think too but how does a government facilitate the process ? Ardern appeals to the team of five million which denies the huge disparities, Collins appeals to small business to lead the way but historically many fail (maybe it has been too easy to start a business in NZ with few or no employees)

        https://www.callaghaninnovation.govt.nz/f-word/failure-facts-and-figures

        and the Greens achievements don't find popular appeal.