There is a problem with National’s response to child poverty and meals in schools…
First, to re-cap, there was no announcement made in the Budget on 16 May regarding meals in schools,
Acknowledgment: Fairfax Media – Key tight-lipped on food in schools
Finance Minister Bill English was adamant that any announcement would be weeks away,
Acknowledgment: NewstalkZB – Budget 2013: No food in schools programme
Interestingly, whilst National is luke-warm on the idea of feeding hungry children in our schools, they have little hesitation in throwing our tax-dollars at private, profit-making businesses such as Charter Schools. What next – state subsidies for farmers to produce fatty sheep meat and a butter mountain?
National – the self-professed champion of the free market – throwing taxpayer’s money at private enterprises?
Regarding food in schools, Bill English had this to say about the subject on Maori TV’s Native Affairs last night (20 May),
Mihingarangi Forbes prefaced the interview by reminding viewers of a statement made by John Key with he was leader of the Opposition in 2007,
MIHINGARANGI FORBES: ” [John Key]… from the Opposition benches, promised, a Food In Schools programme. Back then he said he wouldn’t wait because “kiwi kids deserved better (see: National launches its Food in Schools programme). So earlier today I asked Bill English why, after six years, thousands of kids still wait.”
BILL ENGLISH: “[...] but I think we should keep it in perspective. In the budget there was a wide ranges of measures that are going to have a positive impact on the complicated problem of children and families who suffer from persistant disadvantage.”
MIHINGARANGI FORBES: “Can I ask, do you personally support, believe that central government should be providing food for children?”
BILL ENGLISH: “I think we have to deal with the reality that children turn up to school unable to eat, we believe that it’s parent’s respons-, unable to learn.We believe it’s parent’s responsibility to feed their children. And I think we would find that where children are turning up hungry, there’s probably any number of other issues in the life of that family that are difficult and need resolving. But we need these kids to learn, we can’t punish them for the circumstances that they’re born into or living in and so that’s why we support feeding them so they can learn.”
When asked when National would implement a plan, Mihingarangi reminded English that Key had stated that it was just a “couple of sleeps away”, he responded,
BILL ENGLISH: “Well, look, I think you should just wait for the announcements in a couple of weeks.”
Acknowledgment: Maori TV – Native Affairs (20 May 2013)
So what is the problem with National’s response to child poverty and meals in school that I referred to above?
Firstly the Nats appear to having some kind of internal crisis on this issue – leading to Bill English delaying any announcement for two weeks after the Budget was released. (Some have suggested that there is a ‘power struggle’ going on behind the scenes in Cabinet? It has been suggested that an announcement was going to be made on Budget Day – but was pulled at the last minute.)
But the real problem of any food-in-schools programme?
National has not budgetted for it.
The Mana Party “Feed the Kids” Bill is estimated to cost $100 million to implement (see: Mana Party – Fact Sheet). Any plan from National – unless it is half-hearted and watered down – will also require considerable resourcing.
Where is National’s Budget allocation for implementing any meaningful food in schools programme?
There does not appear to be any.
As National continues to dither and delay on this problem (I refuse to call it an “issue”), there is a feeling of growing dread within me that National ministers are going to deliver the biggest cop-out to the country since… whenever.
No food, no money, no solutions.
Message to John Key & Bill English
Prove me wrong.
Radio NZ: Labour criticises ‘funny money assumptions’ on surplus (20 May 2013)
= fs =
The recent financial crisis and near-collapse of Solid Energy – one of the five, state owned enterprises planned for partial-privatisation – should serve as a warning for those investor-vultures circling to buy shares in any of the SOEs.
In fact, recent history regarding Air New Zealand, Kiwiwail, and (non-privatised) BNZ in 1991, are indicators that privatisation of state assets is not a guaranteed roadmap to wealth,
It is noteworthy that one of the cause of Air New Zealand’s collapse was it’s foolhardy buy-out of Australian airline, Ansett,
First, the decision by Air New Zealand to pay dividends and second, the decision to buy the second half of Ansett. Both moves turned out to be considerably more beneficial to the interests of Brierleys than those of Air New Zealand.
Take the Ansett purchase. In early 1999, Cushing announced that Air New Zealand was vetoing Singapore Airline’s bid to buy News Corp’s 50% of Ansett Holdings (Air New Zealand had held the other 50% of Ansett since September 1996). Instead, it decided to pay News Corp $A580 million and get 100% control.
It’s most likely true that Air New Zealand paid too much for the stake and that directors had too little information about Ansett’s financial and engineering state. These are well-aired opinions, but are secondary to the main question that should be asked: Why did Air New Zealand buy the second half of Ansett at all? It’s not just that it was hopelessly out of its depth buying an airline twice its size. It’s just hard to see any benefits – to Air New Zealand, that is.
On top of that were big dividend demands from one of Air Zealand’s major shareholders, Brierley’s,
The at times cash-strapped investment company held between 30% and 47% of shares over the period so, based on the total dividend of $765 million, Brierley reaped an estimated $250 million to $380 million from the airline. And Air New Zealand’s decision to buy the second half of Ansett, cutting Singapore Airlines out of the deal, contributed to Brierleys being able to do its own deal with Singapore.
In April last year, two months after Air New Zealand bought Ansett, Brierleys sold Singapore Airlines all its Air New Zealand “B” shares for $285 million, or $3 a share. It was arguably the last exit option for Brierleys from these shares, and, apart from a spike at the end of last year, Air New Zealand shares have largely tracked downwards ever since – they were trading around 30 cents as Unlimited went to press.
In other words, Air New Zealand had over-extended in unwise investments (as has Solid Energy), and was bled dry by rapacious demands for dividends (as did Faye Richwhite in NZ Rail in the early 1990s).
How does this relate to the upcoming partial-sale of Mighty River Power?
Recent revelations that Mighty River Power has shaky investments on Chile, should cause potential investors to pause for thought,
According to the TV3 story above, “Mighty River Power has spent $250 million at the geothermal plant in southern Chile, but has just written off $89 million as the investments struggle“.
To which Key responded casually,
“There is always risk.”
Dear Leader seems somewhat blase about investors’ risks? Of course he is. It’s not his money.
The Crown Ownership Monitoring Unit (COMU) reported,
During the period, the Company recognised $91.4 million of impairments principally reflecting its investment in the GeoGlobal Partners I Fund (GGE Fund), and its greenfield explorations for potential developments in Chile and Germany.
This impairment followed higher than expected costs at the Tolhuaca project in Chile due to the worst winter in 40 years adversely affecting drilling performance and only one of the two wells having proven production capacity. The value of GGE’s investment at Weiheim in Germany, has been impacted by increased costs due to required changes in the drilling location following the 3D seismic surveys and delays from environmental court challenges which have been resolved post balance date.
The GGE Fund had not raised capital from other investors by the end of the 2012 and Mighty River Power made the decision not to invest further capital into the existing structure. Overall, the impairment charge of $88.9 million for the German and Tolhuaca assets and the management company of GGE LLC leaves a residual book value of $91.8 million.
On top of Mighty River Power’s dodgy investment in Chile, New Zealand is now experiencing what is being called the worst drought in seven decades (see: North Island’s worst drought in 70 years). As Climate scientist Jim Salinger said about New Zealand’s current weather patterns continuing, and becoming similar to the Mediterranean,
“What it means is that if it just doesn’t rain for at least four months of the year, it means you have to bring in your water from elsewhere.”
As all investors should bear in mind; most of our power generation is generated from hydro stations. Mighty River Power, especially, derives most of its electricity from eight hydro-electric stations on the Waikato River.
Mighty River Power CEO, Doug Heffernan has given a clear warning,
“Following the lower than average inflows into the Waikato catchment during the last quarter [to December 31], Mighty River ended the half year at just 69 per cent of historical average [hydro storage].”
And Equity analyst Phillip Anderson of Devon Funds stated,
“The same period last year they got really strong inflows, and this is the exact opposite . . .
In the second half of this reporting year they’re going to have to buy a lot more electricity to feed their customers, either on the spot market at a lot higher cost or use their [Southdown] gas plant.
We expect the second half of this year is going to be a lot tougher for them, they should get their margins squeezed if that all plays out.”
The equation is blindingly simple,
Less rain = less water = less electricity generation
The question that begs to be asked is; where does the risk of investing in SOEs fall – private investors, or the State?
The answer I submit to the reader is, that like Air New Zealand, it will be private investors who bear the brunt of all risk. The State will simply pick up the pieces, buying up shares at bargain basement prices, should anything go wrong.
Electricity generators like Mighty River Power will simply never be allowed to fail. Had the Labour government in 2001 allowed Air New Zealand to collapse, the fall-out to the rest of the reconomy would have been too horrendous to contemplate, and flow-on effects to other businesses (eg; exporters and tourism) and the economy would have been worse than any bail-out.
But any bailout will involve a massive loss for investors, as their share-value plummets. Again, Air New Zealand was an example to us all.
As the impact of climate change creates more uncertainly for our state power companies, investors need to think carefully before committing one single dollar toward buying shares,
“Do I really want to bear all the risk?”
Those who lost out on their investments in Air New Zealand in the 1990s will probably answer,
The Air New Zealand crash (1 November 2001)
A history of bailouts (7 April 2011)
Foreigners important for SOE sell-downs: Treasury (30 June 2011)
No law stopping foreign investors (16 Dec 2011)
Parched Waikato could hit Mighty River Power (22 Feb 2013)
Mighty River Power shares float mid-May (4 March 2013)
Taking the plunge in Mighty River (9 March 2013)
Key struggles to push Chilean investments (9 March 2013)
North Island’s worst drought in 70 years (10 March 2013)
Seemorerocks: An Appeal for a New Zealand Risk Assessment
= fs =
“Steven Joyce revealed that Education Minister Hekia Parata, Finance Minister Bill English and former education minister Craig Foss approved the use of Novopay despite being told that it had bugs.”
In colloquial terms, that is what is known as ‘dropping someone in it’ – “it” being brown, smelly, and heading for waste-treament ponds.
Is there a civil war going on within National, comprising two factions with one led by technocrat Steven Joyce and the other by neo-liberal Bill English?
Or is there something even more disquieting going on within National’s ranks.
“There was definitely knowledge there were bugs at the outset of going live. But the advice of all involved was that the thing should proceed. I doubt they’d give the same advice today.”
Noticeably, when queried by media, all three Ministers had similar responses – obviously coached by the same tax-payer funded Party spin-doctors and media-minders,
“I think hindsight’s a wonderful thing....”
And the tongue-tied Craig Foss,
“Well in hindsight… is a benefit of hindsight...”
You can always tell when a politician has been coached; they use the same words and phrases over and over again. Spin doctors/media-minders develop a mantra, and their clients are expected to learn and parrot it, by rote. It takes a skilful journalist/interviewer to peel away the carefully-crafted coaching and get to the truth.
This indicates that Parata, English, and Foss had been pre-warned of Joyce’s press conference and admission of the three Minister’s actions.
So is this some sort of carefully managed internecine warfare?
Or a very subtle, clever strategy to neutralise possible Opposition disclosures in Parliament?
Joyce’s statements that there will be on-going problems with Novopay could be seen as an attempt to minimise future media reports on Novopay errors.After all, if National admits that there will be ongoing problems – does that make it news when it happens?
Whichever is the case, this is Steven Joyce at his most cunning, and the Opposition will need to be on their toes. As will the media, if they are not to be out-manouvered by National’s “Mr Fix It”.
“Mr Fix It” does not apply to sorting out computerised pay systems. “Mr Fix It” fixes political messes.
This certainly qualifies as the Mother of all Messes.
As is common with National, Joyce attempted to shift blame onto advisors/bureacrats/Uncle Tom Cobbly, when he stated,
“There was definitely knowledge there were bugs at the outset of going live. But the advice of all involved was that the thing should proceed…”
My bet is that we will never, ever see this “advice”.
= fs =
In an extraordinary development, TV3 launched a full scale criticism of National’s failure to meet it’s Budget Day promise, last year, to create 170,000 new jobs.
Bill English at first tried to dismiss the horrendous rise in unemployment (7.3%, from the previous 6.8%) as,
“You could call it a blip. There are slow patches but we are on track for 2 to 3% growth.”
But he was eventually pressured to admit,
“In the past two years, [there are] 26,000 people in new jobs, but in the last quarter no new jobs – which is why we want to crack on. We are behind the 170,000 track.”
Which is as close as we will ever get to a National politician conceding that they and their neo-liberal, free market, hands-off, approach has failed.
Every other country on this planet is actively engaged in proactive management of their economies and social policies. Only New Zealand – ‘governed’ (and I use that term loosely) by a Party that is slavishly pursuing a thirty year old dogma – is standing back as our economy goes down the proverbial toilet and will end up flushed out somewhere in the Cook Straight.
The economic realities;
- Unemployment: up from 6.8% six months ago, to 7.3%
- Export sector: in crisis as our over-valued dollar makes selling our products overseas barely worthwhile, losing profits and ending up with staff redundancies
- A critical housing shortage
- A growing poverty-wealth gap
- and thousands more New Zealanders heading overseas
This is in stark contrast to John Key’s vision of the ‘Bright New Future’ that he promised us last year, and the many fine-sounding speeches he made before that in 2008 and since. Unfortunately the rhetoric doesn’t match National’s deeds or results – not by a long shot.
Faced with trenchant criticisms from all direction, English lamely replied,
“We think we have the balance about right.”
God help us.
TV3′s handling of the story left the viewer in no doubt that National was being hauled over the coals. And with a critical analysis not seen for a long time during Dear Leader’s reign.
The steep rise in unemployment was the final signal that National has had an Epic Fail, and from now on it is “gloves off ” by the mainstream media.
As BERL’s economist, Ganesh Nana said bluntly,
“You have a seven in front of unemployment, you have a five in front of dairy forecast payout, a zero in front of inflation and export growth – how many warning signs do you need on the dashboard until you do something different?
Without changes to our policy settings, the short term picture is not pretty, with our models projecting even further rises in jobless numbers.”
Only a year ago, centre-left bloggers had come to this same conclusion when, after the last election, it quickly became apparent to the likes of Tumeke!, The Jackal, The Standard, Bowalley Road, Waitakere News , The Dim Post, et al, that National was reliant on a failed neo-liberal agenda to ‘govern’.
National was not going to govern with pragmatic common sense – it was going to govern from an ideological stance, and nothing was going to change it’s direction.
Since last year’s election, New Zealand has been at undeclared war with it’s own “government”, as unpopular policy after unpopular policy was dumped on us. Coupled to Key’s unhealthy, blind support for the corrupt Member for Epsom; the lies that followed from both men; and this was a “government” we were losing faith in.
TV3′s Duncan Garner simply repeated what bloggers and other commentators have been saying for the past year,
“ Key says now is not the time to change course. But economists are all largely saying the economy has gone into a fragile state.
[...]A change of course is urgently required if New Zealand is to avoid yet another damaging recession.
The Government was shell-shocked by yesterday’s numbers, but it’s praying with its fingers crossed that things come right.
It’s risky. The expensive tax cuts from three years ago have had little impact.
Christchurch needs to be rebuilt fast and Auckland has alarmingly softened, although its house prices haven’t.
That’s seriously concerning, especially when your second largest city is in rubble.
Forget gay red shirts, comments about ‘batsh*t’ and what Key knew or didn’t know about Dotcom.
This blows all that away in terms of importance. This is fundamental. This is the serious stuff.
It’s people’s lives, their jobs, their mortgages, their families, their hopes, their dreams and their security.
It’s the economy, stupid. It wins and loses elections.
The Prime Minister’s sole focus needs to be the economy.
If he can’t turn this around or halt the slide – National will likely lose the Treasury benches in 2014.”
“Is our economy collapsing” askes Duncan Garner? The answer, Duncan, is yes; it is. You just needed to pay closer attention to what the rest of us were saying all along.
As for John Key – I suspect he’ll be avoiding other media from now on, and not just Radio New Zealand.
Dear Leader’s bunker awaits, as critics close in on him and his harried Party.
= fs =
As the Dotcom-GCSB Affair drifts further into ‘The Twilight Zone‘ (or Wonderland), we learn the latest anouncement that Secretary of Cabinet, Rebecca Kitteridge, will be seconded to the GCSB to oversee a review of the Bureau.
The NZ Herald reports,
The Herald lists Ms Kitteridge’s responsibilities to include:
- Review the systems, processes and capabilities underpinning the GCSB’s collection and reporting,
- Build capability and provide assurance to the GCSB director that the compliance framework has been reviewed, improved and is fit for purpose.
- She will establish new, specific approval processes for activity in support of police and other law enforcement agencies.
Meanwhile, NZ First Leader, Winston Peters, managed to extract this gem from Dear Leader during Question Time in Parliament,
Government Communications Security Bureau—Briefings Since November 2008
3. Rt Hon WINSTON PETERS (Leader—NZ First) to the Prime Minister: How many times has he been formally briefed by the Government Communications Security Bureau, by year, since November 2008?
Rt Hon JOHN KEY (Prime Minister) : My diary indicates that I have been formally briefed by the Government Communications Security Bureau the following number of times, by year, since 2008: twice in 2008, 15 times in 2009, 11 times in 2010, 10 times in 2011, and 15 times in 2012.
Key’s response is extraordinary for two reasons,
- He gave a serious answer and not the flippant, juvenile wise-cracks he normally indulges in (which, we, the taxpayer, have to pay for as he wastes Parliamentary time)
- The answer he gave revealed that Key had met with the Government Communications Security Bureau (GCSB) fifteen times this year alone – and the subject of GCSB surveillance on Kim Dotcom – possibly one of the most colourful, controversial, and contentious people in the country – was never raised once?!?!
John Key. Met. With. The. GCSB. Fifteen. times.
It is worthy to note that Ms Kitteridge’s three areas of responsibilities,
- Review the systems, processes and capabilities underpinning the GCSB’s collection and reporting,
- Build capability and provide assurance to the GCSB director that the compliance framework has been reviewed, improved and is fit for purpose.
- She will establish new, specific approval processes for activity in support of police and other law enforcement agencies.
… and nowhere is it written that she should ask the question on all our minds: how can the Prime Minister – the one man who has oversight over the SIS and GCSB – not have discussed Kim Dotcom with either of the Security Agencies?
There can be only two possibilities;
Key lied – and the matter of Dotcom was discussed.
The GCSB deliberately witheld this matter from the Minister in charge of the GCSB.
Why are there no resignations/sackings?
Why is Ms Kitteridge not charged with finding out the truth of this issue?
Why is John Key refusing a full inquiry on this issue?
Why did Bill English sign off on a warrant to suppress the GCSB’s wrongdoing?
Parliamentary Hansards, 25 September 2012 (25 Sept 2012)
Inspector-General’s report released by PM (27 Sept 2012)
Dotcom case: GCSB review ordered (1 Oct 2012)
Cabinet Secretary to head review of spy agency (1 Oct 2012)
= fs =
Continued from: What’s up with the Nats and ACT? (Part toru)
The Tories are slipping.
Firstly, if you’re a politician representing an actual electorate, and you promised to do something for your constituents (remember them – the folk who were nice enough to elect you into Parliament?) – then you damn well do it…
Secondly, if you decide at the last minute to back out – because you realise that representing your constituents conflicts with your ultra-cosy relationship with you corporate backers – then make sure that everyone is telling the same lie.
Because it ain’t a good look, Mr English, when one of your
cronies fellow MP’s explanation for your absence conflicts with that given by your office;
Eric Roy: “Apparently the acting Prime Minister has just been caught up with something that’s captured his time and he’s asked me to accept it on his behalf – which I’m very happy to do. We kind of work together a bit in the South.”
- vs -
Mr English’s office: “He pulled out at the last minute because the Government must be seen to be objective, and he would meet petition organisers later in the day“.
And politicians wonder why we don’t trust them?!
Well, wonder no more, Member for Clutha-Southland.
Just as well that Clutha-Southland is a National safe-seat. Voters there would probably vote for a piece of furniture if it had the blue “N” logo stamped on it.
So not much hope there that voters would take umbrage at being lied to, Mr English.
Just don’t do it again.
(Or at least, hide it better.)
= fs =
Politicians take utmost care when the media are anywhere within cooee. They understand that a slip of the tongue or the wrong facial expression can be recorded, and reported, for the rest of the population to witness firsthand.
The “tea party” between John Banks and John Key was a conversation they believed to be private; was recorded; and subsequently made public. With thirty-plus media within a metre of the two politicians, what were the chances of holding a ‘private conversation‘ separated by a few millimetres of glass? Slightly better than wining 1st division Lotto Powerball, one would have thought.
So politicians choose their words carefully and present their best possible image to the voters.
Every so often, though, their guard drops and we glimpse their real personas. Once their public mask slips, we discover what they really think – especially of us, the voting public…
4 May – The Prime Minister’s blokey facade is momentarily displaced by his obvious disdain for New Zealanders who oppose him, and oppose his planned state asset sales. With mocking dismissiveness, he said,
“How many people did they have? Where was it? Nope wasn’t aware of it.
Well over a million New Zealanders voted for National in the full knowledge we were going to undertake the mixed ownership model. So look, a few thousand people walking down the streets of Wellington isn’t going to change my mind.” – Source
The words were bad enough, but look at the expression on his face and vocal tone, @ 2:14,
His arrogance was laid bare for all to see. He was laughing at us.
25 May – Following the release of Budget 2012, University students showed their displeasure and protested on the streets of Auckland. The protestors blockaded streets; over-turned rubbish skip-bins; and vented their frustrations at guests who attended a post-Budget-related function where Dear Leader was giving a speech.
English responded with breathtaking, derisory, arrogance,
“ Yes, there’s a protest movement out there but who’s really listening to them? They get on TV and they can make a bit of a racket … dragging a few rubbish bins around, they need some Greeks to show them how to do it.
It gets reported, mainly because it blocked the traffic, [but] who’s listening? Most people actually think the students got a pretty fair go and they should count themselves lucky that they’ve still got interest free loans and get on with it because, you know, get your training finished and get a job and start contributing. ” – Source
Aside from the fact that politicians like Bill English and John Key took advantaged of free tertiary education (prior to fees being introduced in 1992), and others like Paula Bennett had their tertiary fees paid by WINZ – it is staggering that English could respond with a comment inciting protestors to riot !?
When English said that “ they need some Greeks to show them how to do it “, what else could it be called, except incitement? See video @ 1:19,
It seems fairly clear as to the contempt that National politicians have for the rest of us. But that’s ok. Many of us feel precisely the same contempt for John Key, Bill English, Paula Bennett, et al.
= fs =
National’s latest budget promise,
“Ms Tolley says that’ll go towards the aim of a 25 percent reduction in re-offending by 2017.”
By 2017? Five years away?!
Who will remember National’s promise in five years’ time?
Just as, how many people remember this budgetary promise, made only last year,
One year ago, National’s promises included,
- 170,000 new jobs
- wages growing 4% each year, for the next three years
- 4% growth by 2013
Let’s put National’s 2011 Budget to the test,
1. 170,000 new jobs
In June 2011, employment and unemployment stats showed the following,
Unemployment rate: 6.5%
By March 2012, employment and unemployment stats showed the following,
- Increase in employment: 16,000
- Rise in unemployed: 6,000
- Rise in unemployment rate: 0.2%
- Verdict: fail
Instead of 170,000 new jobs, there have been only 16,000 – and unemployment has risen at the same time.
2. Wage Growth
Promised: Budget 2011;
Actual: In the year-to-March 2012 Quarter;
Salary and wage rates (including overtime) increased by 2%
Overtime wage rates increased 2.5%
Private sector salary and ordinary time wage wages increased 2.1%
Growth in wages has been half of that predicted by National.
3. Annual Growth
Promised: Budget 2011;
4% by 2013
Actual: in the year-to-March 2011 Quarter;
Gross domestic product (GDP) increased 1.5%
Actual: In the year-to-December 2011* Quarter;
For the year ended December 2011, gross domestic product (GDP) increased 1.4%
Economic activity increased 0.3% in the December 2011 Quarter
(* March 2012 Quarter figures not available until 21 June 2012.)
Verdict: At 1.4% to December last year, GDP growth is unlike to have reached 4% by March this year. Probable fail.
Moral of the story; take National’s Budget predictions with several very large grains of salt. They are likely to be more propaganda than precision.
After all, will Anne Tolley even be around in five years to be held accountable for her wish list?
We’re still waiting for the 170,000 new jobs.
= fs =
I’ve been involved in politics, in one form or another, for much of my life. I think I have a fairly good ‘handle’ regarding politicians; their ideologies; and their Parties.
I’ve seen Muldoon come and go; Bolger and Richardson; Shipley and English; and now Key and English, try their hand at managing our economy and spending our tax dollars.
Without exception, folks, every single National Government, from Robery Muldoon onwards, has been an apallingly bad fiscal manager.
National’s modus operandi,
- Cuts short term spending, worsening long-term social problems, which will become more expensive eventually, as social ills remain unaddressed,
- Cuts state sector employees and services, then realises that essential issues still remain,
- Cuts taxes when we can least afford it,
- Implements fiscal, political, and social policies that impact negatively on economic and social indicators,
- Borrows from overseas lenders when it was never necessary in the first place (or reduced borrowing, had tax cuts not been implemented)
- And generally makes bad choices that, long term, will cost the taxpayer more.
So – how on Earth has National ever built up a reputation of being a “sound fiscal manager” of our economy?!?!
Because every time National has been in office, it has left the country in an absolute economic shambles.
From Ruth Richardson’s “Mother of All Budgets”, to Jenny Shipley’s and Bill English’s “slash and burn” of the health sector, state housing, Police force, and other essential state services in the late 1990s – National has proven time and again it’s ineptness.
This Party is utterly clueless when it comes to simple matters of cause-and-effect.
One thing, though, has escaped me utterly.
How have they sucked in the public to effect a (undeserved) reputation of sound fiscal management?
Whilst National runs deficits, Labour, in the 2000s, ran surpluses. (A fact National attempts to hide by clumsily persisting in re-writing history.)
See previous blogpost: Labour: the Economic Record 2000 – 2008
Case in point; Dear Leader and his minions has made a great deal about slashing the state sector. National has made deep cuts into state sector services and sacked over 2,500 much-needed employees,
As 2,500 people were sacked from their jobs – all for a grand saving of $20 million, National belatedly realised that their slash-and-burn was little more than a false economy.
It soon became apparent that many of the sacked workers were much-needed experts in their field, and essential personnel to make the State function smoothly.
National took “appropriate action”,
Two thousand, five hundred of our fellow kiwis lost their jobs for “savings” of $20 million.
The Economic Development Ministry alone increased spending on consultants, contractors, etc, from $6.7 million in 2008-09 to $19.2 million in 2010-11. Other ministries most likely spent several million on their consultants, contractors, advisors, and Uncle Tom Cobbly.
So much for “savings” of $20 million.
One can only try to imagine what those 2,500 people who were sacked by National, must be feeling right now.
So the question remains; how has National managed to paint itself as a “responsible steward” of the country’s economy? Especially when a cursory study of their real performance reveals otherwise?
Tracey Watkins, writing in today’s (19 May) ‘Dominion Post‘, may have offered a clue,
” But while these sorts of measures might be an annoyance, they do not cause widespread pain.
And in a perverse way, Europe helps Bill English’s cause. It maintains a sense of crisis while the sight of workers marching in the streets only underscores the gentle and low-fuss nature of our own austerity drive.
This is why Labour has struggled so far to run a coherent argument against National’s management of the books – the danger has always been that protesting any cuts to date look not only shrill, but profligate. To voters, less is more at the moment. “
“ A sense of crisis “. It may well be that the Middle Classes have been panicked by overseas events. There may be an under-lying fear that – like households in tough times – the country needs to cut back on spending, to avert a Greece-like melt-down in our own economy.
There may be an underlying belief within the collective consciousness of New Zealanders that, in “tough times”, National is better at cutting than Labour. In “tough economic times”, cutting expenditure may appear to the public as more of a priority than, say, job creation.
Such feelings are not necessarily based on any reality or logical analysis of the country’s true economic situation; nor of the side-effects of cutting back on State expenditure. These may be deep-seated feelings based on how people may view the economy.
Generally speaking, people have very little experience with macro-economics; Keynesian-vs-Friedmanite economic systems; nor any real understand of how government economic policies work.
For most folk, their only experience is running the finances of their own households. Doing a household budget; paying bills; and balancing the chequebook is the extent to most peoples’ exposure to finances.
And yet, government finances is not like household finances at all. The former is more complex, with control over fiscal and taxation policy; revenue streams; and policies that can work to generate income for the state. The State has access to borrowings (if necessary) not open to ordinary households. By widening the tax-base, the State can increase its revenue – no easy task for ordinary households.
In short, the State has options not readily available to households.
But through a dumbed-down media which focuses mostly on superficial political issues; mindless entertainment; and on the Here-And-Now, the public have become low-information voters.
By not being aware of the true extent of the State’s abilities, the public are trapped in a narrow paradigm of the State being akin to “household budgets”.
So when National cuts expenditure, services, and jobs – it appears to the public to be a “common sense” plan to follow.
The public are not so aware that austerity measures can have negatives impacts on our economy and society, even in the short-term. Cutting back on government economic activity means a drop in all-round economic activity.
It is no coincidence that following Ruth Richardson’s “Mother of all Budgets“, that unemployment, company liquidations, economic growth, and other indicators worsened.
This is a Party that I would barely trust to run a sausage sizzle. They’d get rid of the volunteers; sell the barbeque; pay themselves a hefty fee; and claim success,
The ‘mother of all budgets’
In the above graph, note the two ‘spikes’ in unemployment. The first in the early 1990s, after cuts (through the “Mother of all Budgets”) created a rise in unemployment. The second rise occurred in the late 1990s, when the Shipley/English government again cut government services.
However, unemployment fell after the election of a Labour-led government in late 1999.
The implications of austerity policies should be crystal clear to everyone: reducing government expenditure and activity in the economy dampens overall economic activity. Everyone is affected – no one escapes the inevitable downturn.
Hence why the new French President, Francois Hollande, has rejected austerity policies for his country. President Hollande understands full well that cutting government expenditure will result in reduced state services; more unemployment; and a drop in economic activity and growth.
As long as the public are aware of these facts, then they can make decisions accordingly.
Ignorance of these facts will be painful, as anyone with memories of the 1990s will attest to.
In this case, ignorance is not most definitely not ‘bliss’. And no one will be exempt.
Dominion Post: Public service cuts get deeper
= fs =
Is it me… or… am I hearing an echo?!
We seem to be getting more repeats from John Key – than summertime viewing on television.
Perhaps his comments would not be so bad, except for the industrial disputes around the country from workers from industries as diverse as resthome workers; meatworkers, and port workers.
In the case of rest-home workers, their pitiful wages are as low as $13.61 an hour – whilst being charged with the responsibility of caring for our aged and infirm. Poor recompense for such responsibility, one would think?
In the case of meatworkers and Auckland portworkers, hundreds have been locked out by two ruthless employers that are focused solely on de-unionising their respective workplaces and casualising the workforce. Talleys AFFCO and Ports of Auckland Ltd (POAL) have one agenda; to drive down wages and increase their own profitability.
It was not long ago that Finance Minister Bill English let slip on TVNZ’s Q+A that our 30% lower wages gave New Zealand a competitive advantage over Australia,
““Well, it’s a way of competing, isn’t it? I mean, if we want to grow this economy, we need the capital – more capital per worker – and we’re competing for people as well…
“… we need to get on with competing with Australia. So if you take an area like tourism, we are competing with Australia. We’re trying to get Australians here instead of spending their tourist dollar in Australia.” – Bill English, 10 April 2011
And in October last year, the Seafood Industry Council (SeaFIC) told a ministerial inquiry into Foreign Charter Vessels that their industry needed more cheap foreign labour,
“SeaFIC says FCVs hiring Asian crews was no different to companies going to low wage countries.
“Many New Zealand businesses have exported jobs previously done in New Zealand to other countries with wage rates considerably less than minimum wage rates in New Zealand.” ” – Source
Australian businesses duly obliged, and several corporations moved some of their operations here to New Zealand,
Some folk reading this may be scratching their heads in bewilderment, wondering what’s wrong if our Aussie cuzzies decide to relocate some aspects of their operations here to New Zealand. After all, that’s good isn’t it? It’s more jobs, isn’t it?
After all, isn’t that what Hollywood did – sent their biggest film productions down under for Peter Jackson to produce?
No, not quite.
Peter Jackson offered a production services of a highly-skilled, talented workforce.
The Australians are exploiting our cheaper wages – just as Bill English anticipated back in April last year.
If foreign companies come to New Zealand in pursuit of a low-waged , “flexible’, workforce – then expect pressure to be brought to bear on National to maintain these low wages, and to suppress any union activity that would try to raise wages. National has already demonstrated it’s unreserved willingness to bow to pressure from local and foreign businesses.
Just as it’s happening now.
- National changed the law to satisfy Warner Bros, so that Peter Jackson’s workforce would become “contractors”, rather than employees. This had the immediate effect of de-unionising every film crew member, with the result that wages would be negotiated as IEAs (Individual Employment Agreements) rather than collective contracts.
- National is willing to change the law to allow Sky City to install 350 to 500 more pokies and gaming tables, in return for a $350 million convention centre.
- National has resisted raising the minimum wage from $13 to $15 an hour, citing employer “unnaffordability”. This ignores the reality that even Bill English agreed that living on $13 an hour was not possible “in the long term”,
“GUYON: Okay, can we move backwards in people’s working lives from retirement to work and to wages? Mr English, is $13 an hour enough to live on?
BILL: People can live on that for a short time, and that’s why it’s important that they have a sense of opportunity. It’s like being on a benefit.
GUYON: What do you mean for a short time?
BILL: Well, a long time on the minimum wage is pretty damn tough, although our families get Working for Families and guaranteed family income, so families are in a reasonable position.” Source
There is nothing desirable about attracting businesses from overseas that are keen and eager to employ people at low wages. Aside from the fact that none of us (except for some rightwing extremists) would like out children to face such a prospect – it will not grow the economy, nor help raise wages.
It will, though, maximise profitability for those companies.
This, folks, is what happens in Third World countries where,
- Wages are low
- Legislation is weak, or is easily changed
- Unions are powerless or non-existent
Welcome to New Zealand, 2012AD.
Is this what we have to look forward to? Becoming the “Mexico” of the South Pacific?
No wonder that 53,000 New Zealanders leaving for Australia in the last year. These are our fellow kiwis, voting with their feet for better wages, working conditions, Union protection, longer paid parental leave, and probably more valued as citizens than in their own country of birth,
People like Shane and Kelly cannot wait for John Key’s pie-in-the-sky promise of higher wages. For all we know, Dear Leader will make the same empty promises next year, and the year after, and…
Because John Key and his fellow National ministers have no plans for job creation and higher wages. They are reliant solely on an economic ideology called neo-liberalism that says quite plainly that only the private sector can create jobs and only the free market can raise wages.
One problem though. That ideology doesn’t work.
Or rather, it works only for a small sector of society – those who control wealth and the means of production. Neo-liberalism is not geared to do anything except facilitate “market responses”. Neo-liberalism is certainly not an ideology that concerns itself with society, communities, nor the needs of families.
One would think that after 27 years of neo-liberalism here in New Zealand and it’s many failures, that our elected leaders would conclude that it is a failed ideology. (But then again, it took our Russian cuzzies 70 years to learn that their opposite ideology, marxist-leninism, was also a failure. Do we really need another 43 years of neo-liberal dogma controlling our lives?!)
While my fellow New Zealanders make up their minds, I’m going to start on writing John Key’s speech for next year. It goes something like this,
“We, my government and I, will be striving to dedicate ourselves to raising wages and standards of living for all New Zealanders. We will endeavour to stem the flow of our children to Australia by creating a wealthy society that will draw them back to our shores, to share in our prosperity and bright new future… “
It amazing how easy it is that write that kind of crap. And more amazing how many people believe it.
= fs =
= That Was Then =
= This Was Before=
Of course, the “cap” soon turned into cuts. Two thousand five hundred cuts.
It’s not very fashionable to say it these days – but these were 2,500 hard working, dedicated, state sector workers who made sure that the wheels of government moved efficiently. They made sure police got their cars, radios, and tasers. They made sure doctors got their hi-tech machines-that-went-*ping* and medicines. They made sure schools were resourced (as much as penny-pinching politicians might permit).
And all the other jobs that are quietly done, out of sight, and which make our society function. John Key said pretty much the same thing in a speech, in March 2008.
Key was also adamant that National would not cut front-line staff, and instead would re-direct resources to where it was needed,
Both Key and English repeated the mantra; “no cuts to frontline staff, no cuts to frontline staff, no cuts to frontline staff, no cuts to frontline staff...”
The public came to believe Dear Leader and Little Leader.
Until the day of reckoning, and the lie was exposed…
= This Was Before=
The first lie was that there would be a cap on the state sector.
The second lie was that there would be not cuts.
The third lie was that cuts would be made on the “backroom bureacracy” (whatever that is), and not on the front line.
Does anyone know if, or when John Key, Bill English, aren’t telling lies?
This blogger has been politically involved since his late teens. I have lived through the Muldoon regime; the Lange/Douglas “reforms”; the cock-ups of the Bolger/Richardson/Birch/Shipley circus; and the safer, more steady stewardship of Clark and Cullen.
I can tell the reader one thing: of all the governments we have had since the 1970s, the two most mendacious; dishonest; deceptive and manipulative ones have been;
May we have the envelope please.
And the winners are…
#1. Key & English
#2. Lange & Douglas
No need to clap.
Even Bolger – to his credit – kept to his word on most of his policies and pledges.
To my fellow New Zealanders – even to you folk who naively voted for National last November – I offer you this prediction; by the time the next election rolls around, you will be climbing over each other to cast your ballots, and to vote to throw out this shabby, dishonest, visionless ratbag regime.
You will have had a gutsful of Key’s empty promises and National’s shady dealings with casinos and other corporate interests.
You will have had enough of the relentless bad news; the growing inequality; the lack of jobs and spreading poverty; and losing more of your friends and family to Australia.
You may not even be here in New Zealand by the next election.
But I hope you still vote. We will need it.
= fs =
In the last couple of years, this blogger has been pounding away, wearing out one keyboard after another; shooing cats of piles of documents; drinking enough coffee to deny me sleep for the rest of the decade…
To make a point.
By early 2008, recession was looming following a banking crisis that started in the US,
John Key’s history in international finance would have alerted him immediatly of the looming crisis. It was irresponsible of him to campaign on tax cuts when he must have known they were unachievable, as New Zealand’s economy began to slump.
To point out the blindingly obvious: New Zealanders in 2008 voted tax cuts for themselves that we could ill-afford as a nation. We were warned, even as far back as 2008,
No one who voted for National in 2008 can genuinely claim ignorance – we were warned. News of the building crisis and recession filled the media. New Zealanders’ greed for money simply outstripped their common sense,
We should have taken note when John Key “assured” us,
“Our tax policy is therefore one of responsible reform… We have ensured that our package is appropriate for the current economic and fiscal conditions… This makes it absolutely clear that to fund National’s tax package there is no requirement for additional borrowing and there is no requirement to cut public services… National’s rebalancing of the tax system is self-funding and requires no cuts to public services or additional borrowing.’ “ – National Party: Tax Policy
Despite all the media reports; despite all the warnings; despite all the criticisms that National’s programme of tax cuts was unaffordable, on 8 November 2008, 1,053,398 New Zealanders voted for National.
As a result of cutting taxes in April 2009 and October 2010, government revenue dropped. The supposedly “fiscally neutral “tax-switch” wasn’t so much a “switch” as a parlour-trick. It wasn’t our money that John Key was giving back to us – it was money borrowed from overseas.
The first tax cuts kicked in on 1 April 2009. That was followed by this media report,
The second round of tax cuts took effect on 1 October 2010. Predictably, that was followed by this media report, eight months later,
Yesterday, the NZ Herald published this piece penned by Bernard Hickey. It wasn’t just highly critical of the National – it accused the John Key’s government of;
- being fiscally irresponsible
- enacting policies designed to please its wealthy backers
- borrowing money overseas, to fund taxcuts
- economic treason
- and generational selfishness
Bernard Hickey did not mince his words,
Hickey went on to state,
“The charts reveal the results of the cut in the income tax rate from 39 to 33 cents, which was in theory partly paid for by an increase in the GST rate from 12.5 to 15 per cent. They also reveal a massive reversal in a decade-long trend of improvement in New Zealand’s public debt position.
Our tax-to-GDP ratio has crashed from almost 34 per cent in late 2008 to 29 per cent last year, which means yet more borrowing on the horizon.
At the same time, the tax from individual incomes has fallen from around 32 per cent to around 24 per cent.
This is a direct result of the cut in the top personal tax rate and consumers’ shift to spending less and saving more. This means the higher GST rate is not collecting the revenue expected.
Meanwhile, interest-free student loans and Working For Families are deepening budget deficits. That is being paid for with increased Government borrowing to the tune of 15 per cent of GDP.
A collapse in the corporate tax take is only partly responsible and is largely due to the recession rather than any change in policy. It is now rebounding but the tax-to-GDP ratio is worsening.
This is unsustainable without an immediate and extended surge in economic growth, which few expect.
Voters will have to repay this debt in decades to come. Why are they not revolting at this national act of selfishness?” – Ibid
To illustrate his point, Hickey charted New Zealand’s economic progress (or lack, thereof),
Hickey condemns the borrowing-funded tax cuts by calling it for what it is: inter-generational theft. It is a massive debt that will have to be repaid by loading that debt onto future generations of taxpayers.
Like hell !!
Many of the next generation won’t have a bar of paying of their parents’ debt. They’ve already decided to take the only logical step,
Bernard Hickey, and many other political, economic, and social commentators have highlighted the bad decisions that voters continually make. Unsurprisingly, we all like tax cuts – who wouldn’t want more money to spend on nice, new, shiny things.
Voting for wealth is not enough to make us wealthy. Especially if, at the same time, we expect all the nice things that a modern social democracy has to offer; free education; free healthcare; good roads and public transport; a pension at retirement; and lots of other state services funded by – taxation.
Well and truly, we have shot ourselves in the foot. We voted for more wealth, through taxcuts, and comprehensive social services – and we’ve ended up with neither.
And we have no one to blame but ourselves. We did this; 1,053,398 New Zealanders voted for it.
Here’s an idea: every single person who voted for National in 2008 and 2011 should be sent an invoice for their share of our country’s debt. Wouldn’t that be a lovely prospect?
Meanwhile, the final word goes to National’s Finance Minister, Bill English,
* * *
A few previous blogposts on tax cuts
= fs =
Five days ago, Finance Minister Bill English released a statement on the part-privatisation of several State Owned Enterprises. It is worthwhile re-printing his statement in full, and responding to it, point-by-point,
Running up $5-$7b more debt not the answer
by Hon Bill English, Finance
23 February 2012
Opponents of the Government’s mixed ownership programme need to explain to New Zealanders why it would be better to borrow an extra $5 billion to $7 billion from overseas lenders, Finance Minister Bill English says.
Speaking to an Auckland Chamber of Commerce and Massey University business lunch today, he said the challenge was how the Government pays for forecast growth in taxpayers’ assets over the next few years.
“Taxpayers own $245 billion of assets, and this is forecast to grow to $267 billion over the next four years. So we are not reducing our assets. Our challenge is how we pay for their growth, while getting on top of our debt.”
The rationale for offering New Zealanders minority stakes in four energy companies and Air New Zealand is quite simple, Mr English says.
“First, the Government gets to free up $5 billion to $7 billion – less than 3 per cent of its total assets – to invest in other public assets like modern schools and hospitals, without having to borrow in volatile overseas markets.
“Our political opponents need to honestly explain to New Zealanders why it would be better to borrow this $5 billion to $7 billion from overseas lenders at a time when the world is awash with debt and consequent risks.
“We would rather pay dividends to New Zealanders on shares they own in the energy companies than pay interest to overseas lenders on more borrowing.
“The fact is, the Government is spending and borrowing more than it can afford into the future. So it makes sense to reorganise the Government’s assets and redeploy capital to priority areas without having to borrow more.
“Most nights on television, we see the consequences of countries in Europe and elsewhere borrowing too much. We don’t want that for New Zealand.”
Secondly, under the mixed ownership programme New Zealanders will get an opportunity to invest in big Kiwi companies so they can diversify their growing savings away from property and finance companies.
“Counting the Government’s controlling shareholding, we’re confident 85-90 per cent of these companies will be owned by New Zealanders, who will be at the front of the queue for shares.”
Thirdly, mixed ownership will be good for the companies themselves, Mr English says.
“Greater transparency and oversight from being listed on the stock exchange will improve their performance and the companies won’t have to depend entirely on a cash-strapped government for new capital to grow.
“We already have a living, breathing and successful example of mixed ownership in Air New Zealand, which is 75 per cent owned by the Government and 25 per cent by private shareholders.”
In his speech, Mr English reiterated the Government’s economic programme this term would focus on rebuilding and strengthening the economy.
It’s main priorities are:
- Responsibly managing the Government’s finances.
- Building a more productive and competitive economy.
- Delivering better public services within tight financial constraints.
- Rebuilding Christchurch.
“So there will be no big surprises from this Government,” Mr English says. “We have laid out our economic plan and Budget 2012 will focus on implementing that plan.”
Firstly, let’s call a spade, a spade here. Whilst National ministers use the euphemistic term, “mixed ownership model”, the issue here is partial-privatisation of state owned enterprises. National’s spin-doctors may have advised all ministers and John Key to always use the phrase “mixed ownership model” – but the public are not fooled.
To begin, I take great exception to English’s opening statement,
“Opponents of the Government’s mixed ownership programme need to explain to New Zealanders why it would be better to borrow an extra $5 billion to $7 billion from overseas lenders…”
Opponants of National’s part-privatisation do not “need to explain” anything. It is up to National to explain why it feels the need to part-privatise tax-payer owned corporations that are efficient and give a good return to the State.
Demanding that the “opponents of the Government’s mixed ownership programme need to explain” their opposition is the height of arrogance. Governments in western-style democracies are accountable to the public – not the other way around.
English then goes on to say,
“Taxpayers own $245 billion of assets, and this is forecast to grow to $267 billion over the next four years. So we are not reducing our assets. Our challenge is how we pay for their growth, while getting on top of our debt.”
“…we are not reducing our assets” ?!?!
Selling 49% of Genesis, Meridian, Solid Energy, Might River Power, Air New Zealand (from 75% to 51%) down to a 51% holding is “not reducing our assets” ?!?!
“To know and not to know, to be conscious of complete truthfulness while telling carefully constructed lies, to hold simultaneously two opinions which cancelled out, knowing them to be contradictory and believing in both of them…”
English laments that “our challenge is how we pay for their growth, while getting on top of our debt”.
This involves two distinct issues;
Paying for the growth of state assets.
Genesis, Meridian, Solid Energy, Might River Power, and Air New Zealand are all profitable enterprises in their own right. In the 2010 financial year, these assets made a combined profit of $581 million dollars. None of these five SOEs are loss-makers.
They can each pay for whatever growth programme they require, using their profits.
Where National interfered in SOE operations, the results were highly distorted,
“Genesis paid out no dividend and had a zero yield on its operating profit of $293 million.
It had a 30.5% shareholder return on total assets.
Meridian had a dividend yield of 10.4%, achieved by paying out 428.8% of its profit. The increase came from the $300 million special dividend it received during the sale of Tekapo A and Tekapo B stations to Genesis, which was forced by the Government to borrow to pay for the purchase.” – Source
The reason that there is a “challenge [in] how we pay for their growth“ is simple: National demands high dividends from these SOEs (often by forcing them to borrow) leaving little for the companies to reinvest in their own growth.
Under-funding is a problem only because National has created the problem.
Getting on top of debt.
Linking New Zealand’s $18-plus billion dollar debt to funding the growth of SOEs is deliberate sophistry (ie; a deliberate deception).
The reason we have out-of-control debt is because,
- the global banking crisis and recession hit New Zealand’s export-driven economy as it did nearly every other country (which is also why we have high unemployment – which makes National’s current beneficiary-bashing all that much more repugnant);
- the two earthquakes which damaged or destroyed much of Christchurch;
- and two tax-cuts in 2009 and 2010 which we could ill-afford; benefitted the top income earners/wealthy; and left a gaping $1.4 billion “hole” in the government’s revenue.
As a society and as an economy, we had no control over the first two crises to hit us.
But we sure had control over our taxation policy, and doling out generous tax cuts to millionaires and wealthy businesspeople was a luxury we could not afford. (Many maintain that National was “rewarding” certain affluent socio-economic groups for electoral support at the ballot box.)
Next. English states,
“First, the Government gets to free up $5 billion to $7 billion – less than 3 per cent of its total assets – to invest in other public assets like modern schools and hospitals, without having to borrow in volatile overseas markets.”
National appears confused (as with most of its ad hoc policies) as to the proceeds it may gain from the partial sales. Only a year ago, Key stated authoritatively,
“If we could do that with those five entities … if we can make some savings in terms of what were looking at in the budget and maybe a little on the upside you’re talking about somewhere in the order of $7 to $10 billion less borrowing that the Government could undertake.” – John Key, 26 January 2011
Then again, as recently as eleven days ago, English let slip that,
“I just want to emphasise that it is not our best guess; it’s just a guess. It’s just to put some numbers in that look like they might be roughly right for forecasting purposes. That’s an honest answer.” – Bill English, 17 February 2012
The best description of Key and English on asset part-sales: clueless.
It is also worrying that National is selling state assets to pay for “other public assets like modern schools and hospitals, without having to borrow in volatile overseas markets“.
Every householder will tell you that if you have to sell of your furniture; whiteware; tv, family car, to pay to maintain your home – then you are in deep financial trouble.
What National is doing is “selling the household furniture to pay for painting the house”. Selling off assets to pay for maintenance is not sustainable – eventually you run out of stuff to sell. It is a really dumb idea.
But more than that, it indicates that National is not “earning” enough, by way of taxation revenue to pay for it’s house-keeping. If we have to borrow or sell assets to do simple things like paint schools or properly resource hospitals – then it is a fairly clear indication that taxation revenue is insufficient for day-to-day operations of public services.
It also indicates that we are paying for the 2009 and 2010 tax cuts by selling state assets.
This is not “fiscal prudence” – this is foolish profligacy.
Bill English again demands, in his speech,
“Our political opponents need to honestly explain to New Zealanders why it would be better to borrow this $5 billion to $7 billion from overseas lenders at a time when the world is awash with debt and consequent risks.”
No, Mr English. Perhaps you should “honestly explain to New Zealanders” why you believe it makes greater commerciall sense to part-sell profitable assets that are returning a higher yield on investment, than what the government pays to borrow?
“The Government is estimating a $6 billion reduction in net debt after the sale of the state-owned enterprises – but concedes the savings on finance costs will be less than what it would have booked from dividends and retained earnings if it kept them.
Treasury forecasts released today in the Government’s budget policy statement outline the forecast fiscal impact of selling up to 49 per cent in each of the four State-owned power companies – Mighty River Power, Meridian, Genesis Energy and Solid Energy – and by reducing the Crown’s current shareholding in Air New Zealand.
They assume a price of $6 billion – the midpoint in previous estimates of a $5 billion to $7 billion sale price – and a corresponding drop in finance costs of about $266 million by 2016.
But the trade-off is the loss of an estimated $200 million in dividends by 2016 and the loss of $360 million in forecast foregone profits in the same year.
Documents supplied today state that the overall fiscal impact of selling a partial stake in the SOEs is a reduction in net debt, but the Government’s operating balance will also be smaller, because foregone profits would reduce the surplus.” – Source
Yet, only a year ago, Bill English was forced to concede that state owned power companies were indeed, highly profitable. In fact, he was complaining bitterly about State-owned generators “earning excessive returns”,
“Generally the SOE model has been quite successful in that respect. But if you look at those returns being generated particularly out of the electricity market, the Government has taken the view that that market is not as competitive as it should be.” – Source
The State will be losing money on the deal; earning less dividends from the SOEs than the cost of borrowing. The sums simply don’t add up.
There also seems to be some confusion (no longer a surprise) as to what National intends to do with sale proceeds.
On the one hand Bill English sez he wants to reduce debt,
“We are firmly focused on keeping the Government’s overall debt as low as possible and that is the most important consideration over the next few years.” – 16 February 2012
And a week later, English is spending it,
“First, the Government gets to free up $5 billion to $7 billion… to invest in other public assets like modern schools and hospitals…” – 23 February 2012
I guess Mr English is hoping that no one is paying attention?
Further in his speech, English makes this rather candid admission,
“The fact is, the Government is spending and borrowing more than it can afford into the future. So it makes sense to reorganise the Government’s assets and redeploy capital to priority areas without having to borrow more.”
And there we have it, folks: the clearest statement yet from our Minister of Finance that the partial-sale of our state assets has little to do with giving “mum and dad” investors a share in our power companies; or making them more efficient; or paying down any of our $18+ billion debt; or putting a new coat of paint on your local school – the government is desperate to raise cash because it “is spending and borrowing more than it can afford “.
The tax cuts of 2009 and 2010 were never “fiscally neutral” as National kept insisting.
The “tax switch” left a $1.4 billion “hole” in the government’s revenue and this is how they are attempting to “plug that hole”.
We have been conned.
The tax cuts will be funded by the sale of state assets that we, as citizens of this country, already own. And because the bulk of tax cuts benefitted the highest income earners/wealthy – who are also in a better position to acquire shares in Genesis, Meridian, Solid Energy, Might River Power, and Air New Zealand – the transfer of wealth from low and middle income earners will be two-fold.
The legacy of John Key’s government will be to make the rich richer, and for the rest of us, we can look forward to,
- more expensive power
- losing half ownership of our taxpayer-created state assets
- and the top 10% to increase their wealth even more
But, to be generous, I will leave the last word to the Hon. Bill English,
Despite John Key’s election-pledges in 2008 to see wages rise in New Zealand, the opposite seems to be happening; wages have either mostly stagnated, or, in some very public instances, are being actively driven down.
The maritime workers in Auckland and meat workers for meat-processing company, AFFCO, are facing an unprecendented attack on workers’ right and conditions which would see many (if not all) of them casualised and suffer a cut in wages.
This is hardly an “unrelenting… quest to lift… economic growth rate and raise wage rates“. It is, in fact, more akin to Bill English’s remarkable admission on TVNZ’s Q+A, on 10 April last year that having wages 30% lower than our Australian cuzzies was a “a good thing if we can attract the capital, and the fact is Australians- Australian companies should be looking at bringing activities to New Zealand because we are so much more competitive than most of the Australian economy.“
Unions representing various groups of workers have had a gutsful, and are asserting their right to strike,
The casualisation and reduction of real wages is not just a threat to the families of working men and women – but a threat to our economy as well.
National and ACT voters might care to reflect that just recently, BERL released a report outlining the value of blue-collar workers to the economy,
We simply cannot afford to lose skilled blue-collar workers heading of to Australia, or elsewhere in the world. Australia already has plenty of our doctors, nurses, engineers, scientists, etc.
As Berl chief economist Ganesh Nana said,
“If you reduce the amount of trained and skilled labour out there, not only are you reducing the quantity available to businesses, you are also increasing the cost of the labour … because it’s in short supply.”
Global finance and accounting firm Robert Half director, Andrew Brushfield, said recently,
”Where there is currently a need for skilled people in Australia, that need is just as prolific in New Zealand.” – Source
So let’s be clear about this;
- Reducing wages or casualisation of the workforce (which is the same thing thing as cutting wages) eventually ends up with this country losing yet more skilled workers to Australia.
- Reducing wages and casualisation increases the already widening wealth/income gap.
- More families will find themselves under financial pressure, as costs-of-living out-strips incomes. (In June 2007, 254,100 households rated themselves income-poor . By December last year, that number risen to 283,300. )
Instead of short-sighted, selfish, employer-driven vendettas against their workers – which achieves nothing except a form of reckless economic self-sabotage – this country should be looking at ways to increase wages, which then leads to increased business turn-over; generating greater economic growth; and ultimately, a more prosperous society.
I do not believe – not for one micro-second – Employers and Manufacturers Association chief executive Kim Campbell, when he said,
“Frankly, I think most employers would like to pay more if they can, I don’t know any employer who genuinely wants to pay less.” – Source
That is 100%, unadulterated crap.
It is crap because many employers can pay more,
They just choose not to.
Once again, from Mr Key,
“I just want to emphasise that it is not our best guess; it’s just a guess. It’s just to put some numbers in that look like they might be roughly right for forecasting purposes.
“That’s an honest answer.” – Bill English, 17 February 2012
That may be an “honest answer” – but it also has to rank as one of the dumbest in New Zealand’s political history.
To explain what Bill English was being “honest” about,
That’s right, folks, our Finance Minister has just let slip that National has no idea how much money they will raise from the part-privatisation of Genesis Energy, Might River Power, Meridian, Solid Energy, and Air New Zealand.
They don’t have a clue.
The $5 -$7 billion they have been quoting pre and post election are figures seemingly plucked out of hot-air from Parliament’s oxygen-depleted atmosphere. (Oxygen depletion tends to have unpleasant side-effects on a brain such as confused, muddled, thinking.)
John Key – realising that Bill English had made National the laughing stock of the country – jumped in, changing the “best guess” to a “best estimate”,
However, Key didn’t help matters much when he added,
“I think they are our best estimates”.
“There are lots of variables in there … what we do know is the Crown will absolutely have a minimum of 51 per cent shareholding but could have more. We don’t know what price the market will pay at the time; we don’t know the exact timing of all these particular floats.”
So let’s see. Key and English don’t know any of the following,
- How much will be raised by the partial-privatisation?
- Whether they will end up with 51% ownership – or more?
- Or even the timing of the “floats” (sale of shares)?
- Or what price the shares will be sold at???
No wonder Greens co-leader Russel Norman said, in utter exasperation,
“That isn’t how we should be running the finances of New Zealand.”
Norman wasn’t playing usual political one-upmanship games – he was voicing the entire country’s disquiet at what is rapidly looking like mickey mouse incompetance.
Yet again this is an example of National simply not being up-with-the-play. Much like unaffordable tax-cuts of ’09 and ’10; the Jobs Summit of 2009 that achieved very little; the credit down-grade they “never saw coming”; the broken promise on raising gst; the $1.4 billion revenue short-fall – National’s economic policies seem to be ad-hoc at the very best.
If this was the Muppet Show, it might look something like this,
Instead, it looks like this,
clowns muppets are in charge of billions of dollars worth of public property?
I am not reassured. In fact, I wouldn’t trust these two to run a charity sausage sizzle.
I can imagine how that would end badly,
- 1 x sausage, @ 50 cents wholesale
- gas, onion, sauces, napkin, est. 50 cents per sausage
- Retail price: ?
40 cents 60 cents75 cents!
Cue: muppet theme & roll credits.
Other Blog stories