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2014 – Ongoing jobless tally

16 October 2014 14 comments

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Unemployment logo

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Continued from: 2013 – Ongoing jobless tally

So by the numbers, for this year,

January

February

March

April

May

June

July

August

September

October

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*

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See also

Reported Job Losses

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*

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Current unemployment statistics

 

December 2013 Quarter

December 2013 quarter Quarterly change Annual change
(000) (Percent)
Employed* 2,297 +1.1 +3.0
Unemployed    147  -1.3  -8.9
Not in the labour force 1,103  -0.5  -1.0
Working-age population 3,547 +0.5 +1.2
(Percent) (Percentage points)
Employment rate  64.7 +0.3  +1.1
Unemployment rate    6.0  -0.2   -0.8
Labour force participation rate  68.9 +0.3  +0.7

All figures are seasonally adjusted. Source: Statistics New Zealand

* Employed: Includes people who worked one hour (or more) per week, whether paid or unpaid.

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March 2014 Quarter

March 2014 quarter Quarterly change Annual change
(000) (Percent)
Employed 2,318 +0.9 +3.7
Unemployed    147   0.0  -1.1
Not in the labour force 1,093   -0.9  -2.9
Working-age population 3,559 +0.3 +1.4
(Percent) (Percentage points)
Employment rate  65.1 +0.4  +1.4
Unemployment rate    6.0   0.0   -0.2
Labour force participation rate  69.3 +0.4  +1.4

 

All figures are seasonally adjusted. Source: Statistics New Zealand

* Employed: Includes people who worked one hour (or more) per week, whether paid or unpaid.

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Additional statistics

Officially unemployed stats;

In the March 2014 quarter compared with the December 2013 quarter:

  • The number of people employed increased by 22,000 people.
  • The employment rate rose 0.4 percentage points, to 65.1 percent.
  • The number of people unemployed was unchanged.
  • The unemployment rate remained unchanged at 6.0 percent.
  • The labour force participation rate increased 0.4 percentage points, to 69.3 percent.

Official unemployment: unchanged

The  under-employment stats;

Over the year, the total number of under-employed people increased by 27,200 to 122,600. As a result, the under-employment rate increased 1.0 percentage points to 5.3 percent.

Official under-employment: up

 

Source

Definitions

Jobless: people who are either officially unemployed, available but not seeking work, or actively seeking but not available for work. The ‘available but not seeking work’ category is made up of the ‘seeking through newspaper only’, ‘discouraged’, and ‘other’ categories.

Under-employment: employed people who work part time (ie usually work less than 30 hours in all jobs) and are willing and available to work more hours than they usually do.

Employed: people in the working-age population who, during the reference week, did one of the following:

  • worked for one hour or more for pay or profit in the context of an employee/employer relationship or self-employment 

  • worked without pay for one hour or more in work which contributed directly to the operation of a farm, business, or professional practice owned or operated by a relative 

  • had a job but were not at work due to: own illness or injury, personal or family responsibilities, bad weather or mechanical breakdown, direct involvement in an industrial dispute, or leave or holiday.

Source

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[To  be periodically up-dated]

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Questionable assumptions ‘bad for small democracies’

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smells like media bullshit

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This item in Fairfax’s Dominion Post caught my eye a few days ago;

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Labour governments bad for small business

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In this story, author John Anthony is reporting on a study by two  academics –  Massey University economics and finance senior lecturer Dr Chris Malone, and associate professor, Hamish Anderson. They came to the astonishing conclusion;

Small listed companies have performed significantly worse under Labour governments over the past 40 years because of major policy changes, a report says.

[...]

“The smaller firms have done abysmally poor during Labour terms of office.”

Funny thing about this article – it’s mostly rubbish. The Labour government in the mid/late 1980s was hardly a traditional left-wing administration as it implemented neo-liberal, free market policies at breakneck speed. It was the government that gave us the term “Rogernomics“.

In essence, it was a Labour government in name only, having been hijacked by future-ACT MPs and neo-liberal cadres. It was a foretaste of how Brash seized power in 2011 after a putsch overthrew Rodney Hide as ACT’s leader.

Yet the heading of the article is utterly misleading;

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Labour governments ‘bad for small business’

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Indeed, anyone glancing at the story would come away with entirely the wrong impression until their attention was caught by this bit;

The main reasons for poor performance in small firms during Labour governments included market under-performance, periods of falling inflation, harsh default-risk and credit conditions and the introduction of deregulation in 1984 that opened up firms to increased foreign competition and exchange rate pressures.

Notable features were the two Labour governments of the 1980s under Prime Minister David Lange.

In the first term from 1984 to 1987 the mean returns were amongst the highest in the sample but in the second term the smaller firms had a mean monthly return of minus 7.2 per cent.

Roger Douglas’s neo-liberal “free” market reforms truly kicked in during Labour’s second term in office (1987-1989) and the academic’s report is not very flattering;

“…in the second term the smaller firms had a mean monthly return of minus 7.2 per cent”.

It is interesting to note that overseas ratings agencies (Standard & Poors, Moodies, and Fitch) also seem to have a somewhat dim view of right-wing governments. Note the credit rating movements during right-wing Labour/National governments compared to the Clark-led Labour government;

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new-zealands-foreign-currency-credit-rating-history2

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Note the credit downgrades (red underlined) in the chart above and detailed belowed;

  1. Standard & Poors: From AA+ in April 1983,  to AA in  December 1986  (Rogernomics Labour)
  2. Standard & Poors: From AA in  December 1986, to AA- in January 1991 (National)
  3. Moodys: From Aa1 Stable Outlook, February 1996, to Aa1 Negative Outlook on 30 January 1998 (National)
  4. Standard & Poors: From AA+ Stable Outlook in January 1996, to AA+ Negative Outlook on 10 September 1998 (National)
  5. Moodys: From Aa1 On Review for Possible Downgrade  on 5 June 1998, to Aa2 Stable Outlook on 24 September 1998 (National)
  6. Fitch: From AA+ Stable Outlook on 28 November 2008, to Aa+ Negative Outlook Reaffirmed on 16 July 2009 (National)
  7. Fitch: From Aa+ Negative Outlook Reaffirmed on 16 July 2009  to AA Stable Outlook on 24 September 2011 (National)
  8. Standard & Poors: From AA+ Negative Outlook Reaffirmed on 22 November 2010 to AA Stable Outlook on 30 September 2011  (National)

Eight credit down-grades under two Right-wing governments.

By contrast, during Clark’s more left-wing Labour administration,  from 2000 to 2008;

  1. Standard & Poors: From AA+ Negative Outlook on 27 March 2000, improved to AA+ Stable Outlook on 7 March  2001
  2. Fitch: From AA on 27 March 2002, improved to AA+ on 16 August 2003
  3. Moodys: From AA2 Stable Outlook on 24 September 1998, improved to Aaa on 21 October 2002
  4. Fitch: From AA on 27 March 2002, improved to AA+ on 16 August 2003

Eight years, four credit upgrades.

As Labour’s economic development spokesperson,  Grant Robertson, stated in the same article,

“The last Labour government ran nine surpluses in a row while having the highest average growth rate of any government for 40 years.”

He’s right. Under Labour’s administration of the economy,

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New Zealand New Zealand Government Debt To GDP 2000-2014

Graph

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New Zealand unemployment rate 2000-2014

Graph

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New Zealand Building Permits 2000-2014

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  • The NZ stock market showed a steady rise, until the 2007/08 Global Financial Crisis;

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New Zealand Stock Market (NZX 50) 2000-2014

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New Zealand GDP 2000-2014

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  • Consumer Confidence vs Business Confidence – showed conflicting results, with consumer confidence staying bouyant whilst business confidence appeared to fall. (It seems bizarre that whilst customers were happy to open their wallets/purses to spend – businesses remained gloomy until nearly two years after the initial effects of the GFC   were felt and the Recession was biting hard. Masochistic tendencies appear at play here?)

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New Zealand business - consumer confidence To GDP 2000-2014

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It seems farcical in the extreme that two academics – with the willing assistance of an uncritical  journalist – have presented “research” which brands the Labour Party as “bad for small business” when the 1984-89 Lange-led administration was an undemocratic aberration that was closer to the ACT Party than the Kirk or Clark governments.

In essence, Malone and Anderson have passed judgement on  governments implementing right wing, neo-liberal economic policies and, rather unsurprisingly,  given them a *fail* mark. But you wouldn’t think it with the headline “Labour governments ‘bad for small business’” and the statement that “smaller firms have done abysmally poor during Labour terms of office”.

But at least this has given  right-wing bloggers some joy – even if those same bloggers have been less than honest at what Malone and Anderson have actually written. But that’s the right wing for you; never let inconvenient truths get in the way of a good propaganda moment.

 

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References

Fairfax media: Labour governments ‘bad for small business’

New Zealand Debt Management Office: New Zealand Sovereign Credit Ratings

New Zealand Debt Management Office: Summary of Direct Public Debt

Trading Economics: New Zealand Government Debt To GDP

National Party: What about the workers?

Statistics NZ: Unemployment Rate Falls to 3.4 Percent

Trading Economics: New Zealand Unemployment Rate

Ministry of Business, Innovation, & Employment: Previous minimum wage rates

Trading Economics: New Zealand Stock Market (NZX 50)

Trading Economics: New Zealand Building Permits

Trading Economics: New Zealand GDP

NZ Treasury: Recent Economic Performance and Outlook

Trading Economics: New Zealand Consumer Confidence

Trading Economics: New Zealand Business Confidence

Kiwiblog: Labour bad for small business


 

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National dance to corporate interests

Above image acknowledgment: Francis Owen/Lurch Left Memes

This blogpost was first published on The Daily Blog on 30 May 2014.

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National spins BS to undermine Labour’s Capital Gains Tax

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bull shit

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The Nats have been at it again; spinning their misleading bullshit to discredit Labour policy.

This time, Revenue Minister Todd McClay, has been busy issuing media statements that there is no need for Labour’s proposed Capital Gains Tax because, well, evidently, we already have one.

On Sunday 25 May, McClay was quoted as stating,

“Where somebody buys a property or buys shares with an intention of the capital gains being accrued … if their intention is to make a gain from the capital, their normal income tax rules apply, and therefore there is a capital gain.”

Earlier in the month, McClay had made the same assertion,

“When people say New Zealand doesn’t have a capital gains tax on property it’s not true – we do have a capital gains tax, and it applies to speculators.”

Which is strange, because when Labour first released it’s CGT (capital gains tax) policy in  2011,  the following were in favour;

The Dominion Post
NBR
Herald on Sunday
Gisborne Herald
Waikato Times
The Greens
The IMF
The OECD
and columnists and commentators,

Paul Little
Mike Hosking
Gordon Campbell
Anthony Hubbard
Patrick Smellie
Vernon Small
Corin Dann
Andrea Vance
John Hartvell
Matthew Hooten
John Roughan
Duncan Garner
John Armstrong
Bernard Hickey
Gareth Morgan

plus 
Academics,  tax experts, economists, and Treasury.

Those opposed to a CGT were National, ACT, and Landlords.  Unsurprisingly, really, when you think about it. National, ACT, and Landlords represent the capitalists and speculators in our society and they would welcome a tax on capital gains like turkeys look forward to Christmas.

So if we already have a Capital Gains Tax – why were so many in favour of introducing a law specifically for it?

This blogger would  hazard a guess that National and ACT oppose a CGT because it would make up for the seven tax cuts since 1986. These seven tax cuts have seriously reduced government revenue and constrained center-left governments from implementing social policies that would return this country to being a decent social democracy.

Imagine if a CGT in five or ten years would deliver sufficient revenue to fully fund a free tertiary education system in this country. It would drive another nail into the coffin of the neo-liberal policy of user-pays.

Hence why National and ACT absolutely loathe Labour’s policy.

If a CGT was introduced, the catch-cry of right wingers – “but where will the money come from!?!?” – will be muted – if not silenced forever.

But is McClay correct? Do we currently have a Capital Gains Tax?

The answer is, ‘Yes’. And ‘No’.

The current taxation policy on capital gains is haphazard; ill-defined; and open to interpretation. This IRD web-page  illustrates how vague the law is on this issue,

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Residential property Whare nohoanga

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Mistaking property dealing for property investment

Property investor is a collective term for property speculators, dealers and investors. However, they are each treated very differently under tax law.

  • Factors to consider when determining your status
  • What is an investor, a speculator and a dealer?
  • If you are not clear on your intentions for buying a property
  • How long do I need to hold the property to make it a capital gain?
  • How many properties can I sell before it is considered taxable?

Factors to consider when determining your status

Three main factors can determine your status as a property buyer for tax purposes:

  • your intention when you buy a property
  • the patterns of your previous property transactions
  • your association to a builder, property dealer or developer.

The category you fall into isn’t determined by what the property is called or how the activity is described. For example, it may be marketed as a “rental investment” with strong “capital gain” potential, but your firm intention or prior pattern is the factor that determines its tax treatment or if you’re involved in or associated with someone in the business of building, dealing, developing or dealing with land.

If you’re an investor you buy a property to use it to generate ongoing rental income and not with any firm intent of resale. The property is a capital asset and any later profit or loss from selling the property is capital and isn’t taxable (apart from clawing back any depreciation, which is now recoverable).

The rules may be different if you’ve been associated with a person or entity involved in the business of building, dealing, developing or sub-dividing land.  

If you buy a property intending to:

  • resell it, or
  • you intend to sell it after making improvements to it

you’re likely to be a speculator or a dealer. Renting your property temporarily doesn’t change your tax treatment either – you’re still a speculator or a dealer.

What is an investor, a speculator and a dealer?

Investor

If you’re an investor you buy a property to use it to generate ongoing rental income and not with any firm intent of resale. The property is a capital asset and any later profit or loss from selling the property is capital and isn’t taxable (apart from clawing back any depreciation, which is now recoverable).

Property investors sometimes refer to a “buy and hold” strategy. This approach is most likely to mean you are a property investor for tax purposes.

Investors will investigate and analyse future revenue streams, and any gain made on the sale of the property is incidental. Their investment is soundly based on a return from the rental income.

Investors pay income tax on their net rental income but generally not on the eventual sale proceeds of the property.

Note

The rules may be different if you’ve been associated with a person or entity involved in the business of building, dealing, developing or sub-dividing land.

Find out about special tax rules for associated persons.

Speculator

You might think profits from selling property are always capital gains so you don’t have to pay tax on them.  But, this isn’t always true. If one of your reasons for buying a property is to resell it, whether you live in it or rent it out, you’re speculating in property and your profit is likely to be taxable. And, if you sell that property at a loss, the loss may be tax-deductible.

If you’re a speculator you buy a property always intending to sell it. The property is treated like “trading stock” and your profit or loss from selling the property is taxable. Speculating can be a one-off purchase and sale of a property.  Speculators may also receive rental income from the property before they sell it.  

Property dealers or speculators will try to determine and analyse the property’s future price movements because that’s what the deal rests on. Any rental income is secondary.

To be a speculator, you need buy only one property with the firm intent of resale.
Dealers and speculators must pay income tax on any gain they make from reselling their property. If they declare a loss, it may be tax-deductible. They must also pay tax on rental income they may earn from the properties.

Dealer

If you’re a dealer you are similar to a speculator buying properties for resale, but you have established a regular pattern of buying and selling. This includes rental properties.

Some property buyers refer to a “buy and flick” strategy. This approach is most likely to mean you are a property speculator or dealer for tax purposes.

Dealers and speculators must pay income tax on any gain they make from reselling their property. If they declare a loss, it may be tax-deductible. They must also pay tax on rental income they may earn from the properties.

If you are not clear on your intentions for buying a property

Read our guide Buying and selling residential property (IR313)

If you’re buying and selling property other than a private family home, we recommend you get advice from a tax advisor with expertise in this area.

How long do I need to hold the property to make it a capital gain?

There is no time limit. If you buy a property with the firm intention of resale, it doesn’t matter how long you hold it – the gain on resale will be taxable (and any loss may be tax-deductible).

Example

You buy a property with a firm plan to resell it for a profit. The property market falls and you decide to hold onto it instead. You rent it out for 15 years and then sell it when the prices are again rising rapidly. Any gain on that sale 15 years later is likely to be taxable.

How many properties can I sell before it is considered taxable?

There is no set number of properties you can have before they become taxable. In some cases the first property bought and sold may be taxable if you bought it for resale. In other cases there could be a number of factors to take into consideration, such as having a regular pattern of buying and selling property, before a property is taxable.

The factors that may be looked at will vary because each taxpayer’s circumstances are different. For example, buying one property every two years may be considered a regular pattern for one individual and not another.

Find out more about what tax you should be paying

 

Date published: 30 Jul 2010

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Note the difference between Investor, Speculator, and Dealer;

  • Speculators and Dealers  are liable to pay tax on gains made from selling property.
  • But an Investor is not liable to pay tax on realised gains.

The difference is open to interpretation, behaviour, and intent. Though how an IRD official can know the intent of someone purchasing a  property remains a mystery. Telepathy? Time travel? A hot-line to one of our gods?

The issue is not made any clearer on another IRD web page;

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Selling property

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The things you need to consider when selling your investment property, selling your rental property or selling the family home.

What happens when you sell your family home

Selling a family/private home usually has no tax consequence. However there are some circumstances where you may have to pay tax.

What happens when you sell your investment property

Generally, you don’t need to pay tax when you sell your investment property except for any depreciation recovered. However, each time you sell a property it is important to consider if you are still a residential investor or are now a dealer.

What happens when you sell your rental property

Generally, you don’t need to pay tax when you sell your rental property except for any depreciation recovered. However, each time you sell a rental property it is important to consider if you are still a residential rental investor or are now a dealer.

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Obviously, there is no one-law-for-all.  (Something which the ACT Party might like to consider, in it’s “one-law-for-all” policy, as it insists on dumping  Treaty of Waitangi  settlement claims.)

When John Key gave justification to amend statutes governing the GCSB, and extended the spy agency’s powers so it could spy on all New Zealanders and Permanent residents, he claimed that the original  Government Communications Security Bureau Act 2003 was “not fit for purpose“.

When a tax law is so ill-defined that it is open to interpretation of “behaviour” and “intent”, then I submit that the current law on capital gains is “not fit for purpose”.

The National government can squeal all it likes, but the time has come for a capital gains tax and to close the Homer Tunnel-sized loop-holes that bedevil  the current law.

After all, if we already have a Capital Gains Tax as Revenue Minister Todd McClay insists – then he won’t mind terribly much if the law is tightened up. We’d be formalising what McClay says already exists.

Right?

That’s making it “fit for purpose”.

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References

Radio NZ:  Parties at odds over capital gains tax

MSN News: IRD targets `high end’ tax dodgers

Tumeke: John Key’s dagger and his 4 Horsemen of the Capital Gains Tax

IRD: Residential Property – Mistaking property dealing for property investment

IRD: Residential Property – Selling property

National Party: Draft intelligence community legislation released

 

Previous related blogpost

A Capital Gains Tax?  (14 July 2011)

ACT intending a “serious assault”?  (17 July 2011)

 


 

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Skipping voting is not rebellion its surrender

Above image acknowledgment: Francis Owen/Lurch Left Memes

This blogpost was first published on The Daily Blog on 26 May 2014.

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Budget 2014 – Why we will soon owe $70 billion under this government…

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NZ Government overseas debt 1993 to 2012

Graphic courtesy of The Daily Blog

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A few reasons why our debt skyrocketed from 2008 onwards…

1. The Global Financial Crisis, which reduced corporate turnover and export receipts, thereby lowering the company tax take;

2. Two tax cuts (2009 and 2010) reduced government revenue, thereby necessitating borrowing more from offshore  to make up the difference. In essence, we borrowed from other peoples’ saving to put more money in our (mostly top incomer earners) pockets.

Using Parliament Library information, the Greens have estimated that this involved borrowing an extra couple of billion each year.

3. National could have kept Debt down by investing in job creation. Key’s cycleway project was promised to create 4,500 new jobs  – it failed spectacularly.

Instead, job creation was largely left to “the market”, which itself was having to engage in mass redundancies for businesses to survive the economic downturn.

This meant more expenditure on unemployed which went from 3.4% in 2008 to 7.3% by 2012 (currently sitting at 6% for the last two Quarters).

Ironically, part of our current economic “boom” is predicated on the Christchurch re-build – evidence that had National engaged in a mass housing construction programme in 2009, after it held it’s mostly ineffectual “Jobs Summit”, we would have;

A. Maintained higher employment,

B. Paid out less in welfare,

C. Persuaded more New Zealanders to stay home and not go to Australia to find work,

D. Addressed the current housing crisis we now have.

As usual, National’s short-sightedness; irresponsible 2008 election year tax-cut bribes; and misguided reliance on market forces resulted in New Zealand borrowing more than we really needed to.

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References

NZ Herald: Govt borrowing $380m a week

Scoop media: Govt’s 2010 tax cuts costing $2 billion and counting

NZ Parliament: Government Proposals—Cycleway and Nine-day Working Fortnight

NZ Herald: Cycleway jobs fall short

Statistics NZ: Employment and Unemployment – March 2008 Quarter

Statistics NZ: Household Labour Force Survey: September 2012 quarter

Fairfax NZ: Jobs summit ‘fails to deliver’

TVNZ News: OECD report shows housing crisis in NZ – Labour

TVNZ News: Christchurch rental crisis ‘best left to market’ – Govt

Additional

Fairfax media: Public debt climbs by $27m a day

Fairfax media: Budget 2014: The essential guide

Previous related blogposts

Can we do it? Bloody oath we can!

 

 


 

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The Cost of Living

Above image acknowledgment: Francis Owen/Lurch Left Memes

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Budget 2014 – How has National exposed itself in Election Year?

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2014 election

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Right Wing blogger and National Party apparatchik, David Farrar, wrote in the Dominion Post on the day after the Budget,

“By contrast I expect debate on the New Zealand Budget to be over by Monday morning.”

Really?!

Don’t you believe it, sunshine.

National’s sixth budget contained spending on;

  • $171.8 million to extend paid parental leave (PPL):
    • Additional four weeks, starting with a two-week extension from 1 April 2015, and another two weeks from 1 April 2016.
    • Extend eligibility of paid parental leave to caregivers other than parents (for example, “Home for Life” caregivers), and to extend parental leave payments to people in less-regular jobs or who recently changed jobs.
  • $42.3 million to increase the parental tax credit (PTC) from $150 a week to $220 a week, and increase the payment period from eight to 10 weeks, from 1 April 2015.
  • $155.7 million to help early childhood centres remain affordable and increase participation towards the 98 per cent target.
  • $33.2 million in 2014/15 to help vulnerable children, including eight new Children’s Teams to identify and work with at-risk children, screening of people who work with children, and additional resources to support children in care.
  • $90 million to provide free GP visits and prescriptions for children aged under 13, starting on 1 July 2015.

(Source: Treasury)

 

It was perhaps the last item – free healthcare for Under 13s – that took the media, public, and Opposition by surprise. As others have stated, it was a policy lifted straight from the policy pages of Labour, Greens, or Mana.

Other increases in  funding included increased funding ($10.4 million) for sexual violence services

Sexual violence services have been critically under-funded since 2012 and many were forced to cut back on staffing as funding dried up in Wellington, Auckland, and elsewhere. It is fairly evident that funding increases for child healthcare, parental leave,  and sexual violence services have all been left for 2014.

Which conveniently also happens to be election year.

As far as cynical self-interest goes, these Budget funding-measures are an obvious – if utterly crude – attempt at  currying public favour as Election Day bears down on this government.

Why was funding for sexual violence community groups not made available earlier, so that full staffing levels and services for survivors could be maintained? $10.4 million dollars out of a Government revenue of $64.1 billion is not massive by any standard. In fact, it is just a shade under one year’s worth of Ministerial travel, at $11 million.

By comparison, National gave a  tax-payer funded bail-out of $30 million to the Rio Tinto  aluminium smelter last August – three times what was eventually budgetted for sexual violence services.

Even the $2 million of taxpayer’s money paid  by National to a Golf Tournament over the last three years would have assisted these much-needed groups  keep their services intact and skilled counsellors employed,  until this month’s Budget.

Leaving critical funding till Election Year is tantamount to abusing the victims of sexual violence all over again.

The same could be said of funding free healthcare for Under 13s. If it is a good idea now – why was it not a good idea two years ago?

It’s not as if John Key did not acknowledge the growing under-class in this country only three years ago;

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Key admits underclass still growing

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And a year later, this staggering headline appeared in the media – a story few of us would ever believe would happen here, in Gods Own;

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Hungry kids scavenge pig slops

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Little wonder then, that Dr Nikki Turner, from the  Child Poverty Action Group, was less than impressed by National’s sudden transformation into a quasi-social democratic party with a newly-cloned heart, and a belated attempt to improve children’s health;

A child lobby group says free doctors’ visits and prescriptions will make little difference to reducing child poverty without also improving the incomes and the housing conditions of the very poor.

“Without adequate income, without adequate warmth and housing, we’re not going to (make) a lot of difference at this stage to our children’s health.”

Indeed. Without addressing the core causes of poverty-related diseases, National’s free health-care plan is simply a  multi-million dollar band-aid. The root causes of those diseases will still be present in many households up and down the country.

If Key and English thought that their band-aid solutions would be gratefully accepted by an uncritical, compliant media and public, they were mistaken.

An un-named author of an editorial in the Dominion Post on 16 May stated,

“This is a deliberately bland and even boring Budget. The Government has clearly decided that grey and safe is its best hope in election year. The only surprise was free doctors’ visits for under-13-year-olds. Middle New Zealand will welcome it, as it will many of the other, carefully telegraphed, handouts. More paid parental leave: who could object? A bit more help with childcare costs: why not?”

The same editorial went on,

“The other glaring black hole in the Budget is the housing crisis. More and more New Zealanders cannot afford a house, and the Government’s response is muted and inadequate. The Budget promises to remove tariffs on building supplies, a sensible step following revelations about the high price of such materials here compared with Australia. But the change will cut only a few thousand dollars from the price of a house.

Much bolder moves will be needed, including a capital gains tax. But National’s caution here is a drawback, not an advantage. Sometimes problems are serious and need action. National seems to believe it will be enough to cut red tape and remove some of the planning obstacles in the way of housing. It won’t.”

This is where John Key and Bill English have mis-calculated badly, and which no one (?) has picked up.

After all, if a problem with children’s health was not critical, why would a fiscally conservative government fund free doctor’s visits to the tune of $90 million? Indeed, as Trevor McGlinchey for the NZ Council of  Christian Social Services said, on 16 May,

“In providing $500 million of support for children and families over four years the Government has recognised many of our families are suffering.”

The key-word here is “recognised“.

In funding free healthcare, National has admitted to anyone who will take notice that a problem of some magnitude exists in this country. They can no longer hide behind platitudes.

As the above editorial went on to state,

“At present there is little rage about poverty, inequality and the housing crisis. These problems are raw and real but voters are patient and only a minority of voters now seem to actually hate National. It will probably take another term before a majority is truly fed up with Key and his band. In the meantime, this bland document may be a document for the times.”

The author of that piece is being optimistic. By acknowledging that a problem exists; by acknowledging that state funding is required; and by acknowledging that a “radical” (for National, this is radical stuff) solution is required – they have left themselves wide open in this election campaign.

A campaign manager with a posse of motivated, clued-up, and capable strategists, will be able to use this in the up-coming election campaign. Like a game of chess, in trying to show how “clever” they were in manipulating public perception, National have left their “social policy flank” exposed and vulnerable.

So much for Kiwiblogger Mr Farrar’s misplaced optimism that “I expect debate on the New Zealand Budget to be over by Monday morning”.

Quite the contrary, David.

By shining a bright, $90 million spotlight on this problem, they can no longer deny that it exists or is “improving”.

It’s only just begun.

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Postscript #1

The cost of financing this country’s $59 billion debt is shown in this Dominion Post graphic;

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Revenue and expenses 2014 budget new zealand government

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The cost of financing our debt is shown to to $3.9 billion, per year.

Two years ago, the Green Party used Parliamentary Library information to estimate the cost of the 2009 and 2010 tax cuts;

“The Green Party has today revealed that the National Government has so far had to borrow an additional $2 billion dollars to fund their 2010 tax cut package for upper income earners.

New information prepared for the Green Party by the Parliamentary Library show that the estimated lost tax revenues from National’s 2010 tax cut package are between $1.6–$2.2 billion. The lost revenue calculation includes company and personal income tax revenues offset by increases in GST.”

The cost of those tax cuts is  roughly the equivalent of what we are now paying to service our overall debt.

So much for National’s “prudent fiscal managing” of the government’s books.

Postscript#2

Someone at the Dominion Post seems to have a rather shocking memory. At the bottom of Page A4, in their 16 May edition, this item was published;

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Past budgets 2009 - Dominion Post - 16 May 2014

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Promised tax-cuts in 2009 were not “axed”. As this IRD page explained;

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IRD technical tax area 2009 

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Key even made this helpful suggestion to those who did not want their tax cuts to donate them to charity,

“I am just as sure there are many who are in a position to donate some of that extra income”.

Which would make it hard to donate non-existent tax cuts, as the author of the Dominion Post article claimed.

Postscript #3

This graph from Treasury (with a minor enhancement by this blogger) shows our borrowings from 2003 to 2013, with subsequent estimations.

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Treasury New Zealand debt

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According to the graph, we can see how Labour paid down the country’s sovereign debt, leaving New  Zealand well-placed to weather the on-coming Global Financial Crisis and resulting recession. Something even Key and English have had to admit on occasion;

“The level of public debt in New Zealand was $8 billion when National came into office in 2008. It’s now $53 billion, and it’s forecast to rise to $72 billion in 2016. Without selling minority shares in five companies, it would rise to $78 billion. Our total investment liabilities, which cover both public and private liabilities, are $150 billion – one of the worst in the world because of the high levels of private debt in New Zealand.”

Indeed.

 

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References

Dominion Post: English spreads the lolly far and wide

NZ Treasury:  Key Facts for Taxpayers (Part 1)

NZ Herald: Budget 2014 – Building products tariffs lifted temporarily

Manawatu Standard: Boost for rape crisis services welcomed

Fairfax media:  Rape crisis line forced to cut staff

Dominion Post: Wellington rape centre forced to cut hours

NZ Treasury: Government Revenue

Fairfax media: MPs’ travel costs rise

NZ Herald: PM defends $30m payout to Rio Tinto

NZ Herald: Golf event tots up $2m in Govt aid

NZ Herald:  Key admits underclass still growing

Fairfax media: Hungry kids scavenge pig slops

Radio NZ: Child lobby sceptical of budget moves

Dominion Post: Editorial – The crowd goes mild at Budget

Parliament: Inequality—Assets and Income

Scoop media: Govt’s 2010 tax cuts costing $2 billion and counting

Dominion Post: Child poverty still not being corrected

IRD: [2009] Tax cuts for individuals

Otago Daily Times: Key says donate tax cuts to charity

NZ Treasury:  Net debt peaks as a share of GDP in 2014/15

National.co.nz: Mixed Ownership

Previous related blogposts

Letter to the Editor: playing politics with rape victims, National-style

Letter to the Editor: $3000 offer to the Unemployed is a joke – and not a very funny one!

Letter to Radio NZ: $3000 offer to the Unemployed is a joke – and not a very funny one (v.2)

 

 

 


 

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Skipping voting is not rebellion its surrender

Above image acknowledgment: Francis Owen/Lurch Left Memes

This blogpost was first published on The Daily Blog on 18 May 2014.

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National, The Economy, and coming Speed Wobbles – March Update

23 March 2014 2 comments

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The Nationalmobile

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On 1 March, in a previous blogpost, I raised the following issues;

1. The Reserve Bank has indicated that  it will begin to increase the OCR (Official Cash Rate) this year. Most economists  are expecting the OCR to rise a quarter of a percentage point on March 13.

Confirmed. True to it’s word and as clearly signalled, on 13 March the Reserve Bank  raised the Official Cash Rate (OCR) from 2.5% to 2.75%.

2. An increase in the OCR will inevitably flow through to mortgage rates, increasing repayments.  As mortgaged home owners pay more in repayments, this will impact on discretionary spending; reducing consumer activity, and flow through to lower business turn-over.

Confirmed. The ANZ Bank  has already  announced it will increase its floating and flexible home loan rates .25 percentage points to 5.99% on 17 March. Expect other banks to follow suit. Other bank rate rises will be signalled here.

This will inevitably dampen consumer spending and reduce economic activity.

3. An increase in the OCR will inevitably also mean a higher dollar, as currency speculators rush to buy the Kiwi. Whilst this may be good for importers – it is not so good for exporters.

Confirmed, as the NZ Herald reported;

The New Zealand dollar jumped to a five-month high after the Reserve Bank raised the benchmark interest rate as expected and signalled further hikes are on the way.

The kiwi rose as high as 85.26 US cents, from 84.73 cents immediately before the Reserve Bank’s 9am statement. The local currency recently traded at 85.20 cents.”

And in another Herald story,

By raising rates, the Reserve Bank aims to tame both inflationary pressures and house price increases but also runs the risk of elevating an exchange rate it already considers too high, making exports less competitive.”

For a nation that bases it’s economy on exporting, a rising Kiwi Dollar will bring inevitable problems of higher debt and greater trade imbalance. It means we are not paying our way in the world and inevitably there will be a “Crunch Day” of tragi-Greek proportions.

On that day, the public will blame politicians.

Politicians will blame each other.

And the Left will shake it’s head in exasperation – it’s admonitions that this was all predictable as a natural consequence of unconstrained consumerism coupled with rampant capitalism –  lost in the shrill clamour of pointless blame-gaming.

As BERL economist, Ganesh Nana, said on The Nation on 15 March, we’ve been down this road before and not learned a single lesson  from these experiences.

4. As economic activity and consumer demand falls, expect businesses not to hire more staff and for fresh  redundancies to add to the unemployment rate. Unemployment will either stay steady later this year, or even increase.

On-going…

5. As interest rates rise, in tandem with the Reserve Bank’s policy on restricting low-home deposits, expect home ownership to fall even further. This will increase demand for rentals, which, in turn will push up rents. Higher rents will also dampen consumer spending.

Confirmed. The Reserve Bank  has reported that there has “been some moderation in the housing market. Restrictions on high loan-to-value ratio mortgage lending are starting to ease pressure, and rising interest rates will have a further moderating influence...”

Expect home ownership levels to fall even further as interest rates rise further; rents increase (thereby making it harder for low income families to save); and mortgagee sales to rise as well.

Interestingly, when in Opposition, National Party leader, John Key lambasted the Labour Government for a high OCR leading to high interest rates. In a desk-thumping speech, on 29 January 2008, he railed,

Why, after eight years of Labour, are we paying the second-highest interest rates in the developed world?

[...]

Why can’t our hardworking kids afford to buy their own house?…

[...]

Mortgage rates are rocketing upwards…

[...]

We know Kiwis are suffocating under the burden of rising mortgage payments and interest rates…”

It seems that Mr Key should now begin to be answering his own questions.

6. As the global economy picks up and demand for oil increases, expect petrol prices to increase. This will have a flow-through effect within our local economy; higher fuel prices will lead to higher prices for consumer goods and services. This, in turn, will force the Reserve Bank to ratchet up interest rates (the OCR) even further.

Whilst fuel prices remained steady during the worst of the GFC, they have begun edging upward again as the global economy improves and demand for energy grows.

Our high Kiwi Dollar will mitigate the worst of rising crude-oil prices – but only temporarily. Once other Central Banks begin to rise their OCRs, expect the value of the Kiwi Dollar to fall as speculators sell the Kiwi in preference to harder currencies.

This will be good for exporters.

But will be a negative impact on imports – such as oil. Prices will rise as the Kiwi Dollar falls. Count on it.

7. As businesses face ongoing pressures (described above), there will be continuing  pressure to dampen down wage increases (except for a minority of job skills, in the Christchurch area). For many businesses, the choice they offer their staff will be stark; pay rise or redundancies?

Data suggests that wages are not keeping pace with GDP Growth;

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Wages

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NZ average hourly wages 2012 - 2014

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GDP

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NZ GDP Growth Rate 2012 - 2014

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8. Expect one or more credit rating agencies (Fitch, Moodies, Standard and Poors) to put New Zealand on a negative credit watch.

On-going…

9. According to a recent (21 February) Roy Morgan poll, 42%  of respondents still considered the economy their main priority of concern. 21% considered social issues as their main concern.This should serve as a stark warning to National that people will “vote with their hip wallets or purses” and if a significant number of voters believe that they are not benefitting from any supposed economic recovery, they will be grumpy voters that walk into the ballot booth.

There is no reason to think otherwise on this issue. Voters who are spending more on mortgage or rent are less inclined to be happy consumers.Especially as mortgage rates are expected to rise even further, according to Bernard Hickey’s assessment of Governor Graeme Wheeler’s statement,

Wheeler said in early December he expected to raise the OCR by 2.25% by early 2016, which would lift variable mortgage rates to around 8% by then. The bank forecast interest rate rises of around 1% this year and a similar amount next year.”

Home owners paying 7% to 8% on their mortgage will not be happy-chappies and chapettes. They will be grumpy. The 2009 and 2010 tax cuts will be a dim memory and any attempt by Key to remind voters of those cuts will not be warmly received. Especially as any minute gain for workers was more than swallowed up by the rise in GST, ACC, government user-pays charges, and now their mortgages and rents.

If only a small percentage of grumpy voters change their voting away from National (or stay home) – that will mean a critical drop in support for a right-wing bloc. One or two percentage points is all that is required to change the government.

10. National has predicated its reputation as a “prudent fiscal manager”  on returning the government’s books to surplus by 2014/15. As Bill English stated  just late last year,

We remain on track to surplus in 2014/15, although it will still be a challenge to actually reach surplus in that financial year.”

[...]

On top of which is the $61 billion dollar Elephant in the room; the government debt racked up by National since taking office in 2008. As Brian Fallow wrote in the Herald in 2011,

The concern about government debt is not so much about its level, but the pace at which it is increasing. In June 2008 net government debt was $10 billion, or 5.6 per cent of GDP, and gross debt $31 billon, or 17.2 per cent of GDP.”

A lower tax-take, reported by Treasury on 11 March puts serious doubt on National’s ability to return to “remain on track to surplus in 2014/15″;

  • Total unconsolidated tax receipts for the seven months ended January 2014,  $143 million (0.4%) below the 2013 Half Year Economic and Fiscal Update (2013 HYEFU) forecast…
  • Total unconsolidated tax revenue for the seven months ended January 2014,  $459 million (1.1%) below the 2013 Half Year Economic and Fiscal Update (2013 HYEFU) forecast…
  • GST $250 million below forecast,
  • Net individuals’ taxes $191 million below forecast,
  • Customs and excise duties $156 million below forecast

The March Treasury report follows from a February report showing a similar “smaller than forecast tax take across the board“,

The Crown’s operating balance before gains and losses (obegal) was a deficit of $1.79 billion in the six months ended December 31, $380 million wider than forecast in its Dec. 17 half-year economic and fiscal update, and down from a shortfall of $3.19 billion a year earlier. Core tax revenue was $602 million below forecast at $29.18 billion.

[...]

The smaller tax take was across the board, with GST 2.3 per cent below forecast at $7.5 billion, source deductions for personal income tax 1.2 per cent below forecast at $11.71 billion, and total corporate tax 4.9 per cent below expectations at $3.56 billion.

As I wrote on 1 March, should National fail in that single-minded obsession, the public will not take kindly to any excuses from Key, English, et al. Not when tax payer’s money has been sprayed around with largesse by way of corporate welfarism. Throwing millions at Rio Tinto, Warner Bros, China Southern Airlines, Canterbury Finance, etc, will be hard to justify when National has to borrow further to balance the books.

Any economic “recovery” is fragile; dependent on overseas factors; and will bring new problems. Little wonder that Key brought the election date forward by two months. Mortgage rates by the end of the year will be nudging 7%.

Not much of a Christmas present for New Zealanders.

As such, Labour must begin to attack Key’s government in this area. This will be a grand opportunity for the Left to finally drive a stake through the “heart” of National’s undeserved reputation as  being a “responsible economic manager”.

National remains utterly vulnerable during this year’s election.

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References

Interest.co.nz:  Bernard Hickey looks at what the Reserve Bank’s OCR decision means for mortgage rates and house prices

Radio NZ: Reserve Bank warns of more interest rate rises

Interest.co.nz: Mortgages

NZ Herald: Dollar jumps on OCR hike + video

NZ Herald: New Zealand raises interest rate to 2.75 percent

Reserve Bank: Reserve Bank raises OCR to 2.75 percent

John Key: SPEECH: 2008: A Fresh Start for New Zealand

Interest.co.nz: Oil and Petrol

tradingeconomics.com: Wages

tradingeconomics.com: GDP

Roy Morgan: Economic Issues down but still easily the most important problems facing New Zealand (42%) and facing the World (36%) according to New Zealanders

NBR: Govt sees wider deficit in 2014 on ACC levy cut, lower SOE profits

Fairfax media: Public debt climbs by $27m a day

NZ Herald: Govt debt – it’s the trend that’s the worry

NZ Treasury: Tax Outturn Data

NZ Herald: Govt deficit bigger than expected as tax trickles in

Previous related blogposts

TV3 Polling and some crystal-ball gazing

National, The Economy, and coming Speed Wobbles

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http://fmacskasy.files.wordpress.com/2014/02/the-cost-of-living1.jpg?w=722&h=510

Above image acknowledgment: Francis Owen

This blogpost was first published on The Daily Blog on 16 March 2014.

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A Tale of Two Track Records: Labour vs National #1: New Zealand GDP

12 March 2014 3 comments

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party-logos - which

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As the election campaign for 2014 heats up, citizens can expect a deluge of dis-information, distortions, and  lies from the enemies of the progressive Left. Their constant repetition will be that Labour left the economy is a shocking state in 2008, with the most pernicious  outright lie that the Clark-Cullen government left New Zealand with a “decade of deficits”.

None of it is true. It is part of a meme-construction by the Right, with zealous followers who are willing and able to spread their mis-information on the internet.

Spreading lies is easy.

Discovering the truth is that much harder – you need to know where to look.

This series of reports will hopefully make things easier for those who want a clearer picture of events over the last two or three decades.

Those who cannot remember the past are condemned to repeat it.” – George Santayana

  • Introduction

Most graphed information is taken from Trading Economics, a US-based, on-line, economics-information website.

Trading Economics provides its users with accurate information for 196 countries including historical data for more than 300.000 economic indicators, exchange rates, stock market indexes, government bond yields and commodity prices. Our data is based on official sources, not third party data providers, and our facts are regularly checked for inconsistencies. TradingEconomics.com has received more than 100 million page views from more than 200 countries.

In turn, the site uses information from Statistics New Zealand, the World Bank, NZ Treasury, etc.

The reader can set dates for specific time-parameters  (indicated with red arrows) to search the site’s data-banks by years. It is extremely user-friendly and informative.

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field parameter searches

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Other sources for data will be clearly referenced.

National governance is marked with a blue line.

Labour governance is marked with a red line.

  • New Zealand GDP

“The gross domestic product (GDP) measures of national income and output for a given country’s economy. The gross domestic product (GDP) is equal to the total expenditures for all final goods and services produced within the country in a stipulated period of time.”

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New Zealand GDP

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In the 1990s, under National and Ruth Richardson’s (1990-1993) economic stewardship, GDP dropped from $43.9 to $40.3 billion and unemployment skyrocketed to 11.2%. For much of the 1990s, GDP see-sawed up and down, peaking at $67.9 billion in 1997 before falling away again.

Note: National implemented two tax cuts, in 1 July 1996 and 1 July 1998. Neither seemed to help grow GDP, and many public services were cut back in the late 1990s.

For Labour, except for a dip in 2001, GDP rose every year from 2002 to 2008. The rise in percentage terms is outlined below.

From 2009 to 2013, despite the GFC, GDP increased from $117.8 to $169.6 billion, though the rise in percentage terms, outlined below, was not so encouraging. GDP growth, per capita, was also lack-lustre, as demonstrated below.

  • New Zealand GDP per capita

“The GDP per capita is obtained by dividing the country’s gross domestic product, adjusted by inflation, by the total population.”

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New Zealand GDP per capita

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Except for two recessionary periods (early 1990s and 2007/08 Global Financial Crisis and recession), New Zealand’s GDP, per head of capita, has grown every year, until the GFC/recession, when it dropped from$28,168.1 per capita in 2008 to $27,383.8 in 2009.

Curiously,  the 2009 and 2010 tax cuts did not seem to contribute greatly to per capita GDP.

  • New Zealand Real GDP

Real Gross Domestic Product (real GDP) is a macroeconomic measure of the value of economic output adjusted for price changes (i.e., inflation or deflation). This adjustment transforms the money-value measure, nominal GDP, into an index for quantity of total output. GDP is the sum of consumer Spending, Investment made by industry, Excess of Exports over Imports and Government Spending. Due to inflation GDP increases and does not actually reflects the true growth in economy. That is why inflation rate must be subtracted from the GDP to get the real growth percentage called the real GDP.

The raw data for the Reserve Bank  graph (see below) is available in an XLS spreadsheet containing all key figures.

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reserve bank of nz real gross domestic product 1990_2013

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  • Main Stats
  1. Average GDP, 1990 to 1999:     2.4%
  2. Average GDP, 2000 to 2008:   3.5%
  3. Average GDP, 2009 to 2013*:  1.2%

* 2013 figure averaged over three Quarters only.

(Calculations based on RBNZ raw data spread sheet)

  • Impactors on GDP growth
  1. Recession, 1987/91
  2. Ruth Richardson’s “Mother of all Budgets” in 1991, which deepened the recession,
  3. Recession, 1997/98
  4. GFC/recession, from 2007/08 onward.
  • Conclusion
  1. Whilst GDP figures “bounce” around, Labour’s stewardship of the economy between 2000 and late 2008 has been more consistant in GDP growth and with less extremes shown in the 1990s and post-2008.
  2. GDP dipped into negative growth in the early 1990s and post-2008
  3. GDP remained in positive growth between 2000 to 2008
  4. Allegations that the economy did not perform well under Labour are clearly wrong, and the evidence does not sustain those claims.
This blogpost was first published on The Daily Blog on 5 March 2014.

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References

Trading Economics:  About Us

Trading Economics: New Zealand GDP

Trading Economics: New Zealand GDP per capita

Wikipedia: Real Gross Domestic Product (definition)

Reserve Bank of NZ: Real GDP

Reserve Bank of NZ: Real GDP Raw Data spreadsheet

NZ Treasury: New Zealand Economic Growth: An analysis of performance and policy

NZ Treasury: Recent Economic Performance and Outlook

Te Ara: The ‘mother of all budgets’

Ministry of Business, Innovation, & Employment/Dept of Labour:  How bad is the Current Recession? Labour Market Downturns since the 1960s

Colin James: Ruth amid the alien corn

Previous related blogposts

Labour: the Economic Record 2000 – 2008

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The trouble with capitalism is that you run out of money

There, fixed it.

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