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National whines about Cullen’s appointment – they should know about cronyism
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When it comes to a repulsive cocktail of double standards, self-interest, and hypocrisy, National is the party that just keeps on giving…
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from: Frank Macskasy <fmacskasy@gmail.com>
to: Listener <letters@listener.co.nz>
date: 25 November 2017
subject: Letters to the editor.
The editor
The Listener.
On 23 November, the Coalition government fulfilled another of it’s election pledges. Finance Minister Grant Robertson and Revenue Minister Stuart Nash announced that Michael Cullen would head the planned Taxation Working Group to look into issues surrounding a fairer taxation system.
National’s political strategist and former minister, Steven Joyce responded with a predictable jerk-of-the-knee;
“Sir Michael is many things but a politically independent voice on taxation policy he is not. Let’s face it, he was Labour’s last Finance Minister and one of the key coalition negotiators for the Labour Party.”
Joyce’s reprehensible swipe at Cullen’s appointment was hypocritical for two reasons.
Firstly, it was National that appointed Cullen as deputy chairman of NZ Post in April 2009. By November 2010, then SOE Minister, Simon Power, had promoted Cullen to Chair of NZ Post, saying;
“I look forward to working with Dr Cullen to develop NZ Post’s strategy to accommodate declining mail volumes and a challenging financial environment.”
Secondly, when it comes to cronyism, National is hard to beat. Just some of their political appointees include Jackie Blue, Wyatt Creech, Mervyn English, Sir Wira Gardiner, Catherine Isaac, Judy Kirk, Richard Long, Wayne Mapp, Stephen McElrea, Jim McLay, Belinda Milnes, Ravi Musuku, Brian Neeson, Kerry Prendergast, , Katherine Rich, Jenny Shipley, Ken Shirley, Roger Sowry, and Penny Webster.
One of National’s worst instances of cronyism was the hugely wasteful, so-called “Rules Reduction Taskforce“, which produced it’s “loopy rules report”. Half the “Taskforce”, appointed by Paula Bennett in 2014, consisted of former National MPs such as Tau Henare, John Carter, and former party candidates Mark Thomas and Ian Tulloch. They were each paid $500 a day.
Eventually the “Taskforce” reported that many of the contentious bureaucratic regulations did not exist in reality. They were urban myths.
Thank you Steven Joyce for reminding us how National excels at cronyism.
-Frank Macskasy
[address and phone number supplied]
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Further on the issue of the so-called “Rules Reduction Taskforce”, Green Party MP, Julie-Anne Genter, said at the time;
“We’re getting to that point where the National government is losing all perspective or sense of touch with reality – when they think it’s okay to pay their former MPs or candidates and donors to undertake what’s ostensibly some sort of taskforce work, it’s really just an exercise in PR and spin.”
That little exercise cost taxpayers a cool $750,000.
Around the same time, the Wanganui Chronicle reported that community NGOs were suffering badly, with several such as Relationships Aotearoa and the YWCA, closing entirely;
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Fellow blogger, Curwen Rolinson, was also less than impressed at Joyce’s naked hypocrisy, pointing out on Facebook;
But hold on just a moment. I’ve literally lost count of the number of consultative bodies and even straight-up *Inquiries* that the National Party *quite pointedly* staffed the chairing of with their own people, flunkies, and other such questionable appointments.
I mean, as an example of this – their placing of John Shewan at the head of the group convened to look into slash “dispel” the perception of New Zealand as a tax-haven, for instance, was quite directly a case of placing a fox in charge of a hen-house [Shewan’s private sector activities including quite a spate of tax-“consultancy” and linkages to a series of potentially dodgy international firms in this regard].
Or, worse, the series of appointments of [now Dame – guess why she got the gong, eh?] Paula Rebstock to head Inquiries into everything from Peter Dunne’s ‘alleged’ leaking of materials around the GCSB’s illegal conduct through to the ‘Leask’ affair concerning MFAT information being anonymously passed to the Labour Party.
Curwen continued to strip away National’s faux outrage;
Further, if I recall correctly, the previous National Government’s “2025 Taskforce” on pensions and the like was convened to be *chaired by* none other than arch-neoliberal [and former National Party Leader] Don Brash. I don’t seem to recall the National Party raising any issue with “politically tied” appointments to policy working-group style arrangements THEN…?
What’s different about Cullen on the Tax Working Group, I wonder…?
But when it came to cronyism mixed with commercial self interest, Judith Collins’ involvement in the Oravida milk company scandal was hard to top, as political commentator, Bryce Edwards put bluntly;
Justice Minister Judith Collins has revealed she had a dinner with the head of Oravida and a senior Chinese government official while in China last year and admits she was wrong not to disclose the dinner last week. Mrs Collins has been under pressure to explain her dealings with the milk company Oravida, where her husband is a director;
Perceptions of corruption, cronyism and conflicts of interest can be incredibly damaging to any government, and National will be very wary of a narrative developing that this administration is infected with political sleaze.
Nothing makes a government look more tired, out-of-touch, and arrogant than scandals that suggest governing politicians are ethically compromised and governing in the interests of the powerful rather than the public.
Judith Collins’ milk endorsement scandal is beginning to have a serious impact on the Government’s reputation. But unfortunately for National, there are a number of similar stories dogging it at the moment, and they all come on the back of previous allegations of cronyism related to the scandals over John Banks as well as the SkyCity convention centre procurement process.
The scandal over Judith Collins and her allegedly favourable treatment of the milk company that her husband helps run has allowed National’s opponents to make some strong attacks on the character of, not only the Minister of Justice, but the whole National administration
By August 2014, the allegations of sleaze, corruption, conflicts of interest became over-whelmingly and Collins was forced to step down from her ministerial roles.
There were many other instances of cronyism revealed during National’s nine years in office. Several resulted in ministerial resignations.
If the appointment of a former Finance Minister to a working group focused on Finance issues (ie, taxation) is the worst that National can throw at the new Coalition government – then it is lobbing damp squibs.
Considering National’s own recent murky history, the issue of cronyism is one where it might be wiser to keep a very, very, very low profile.
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Appendix
A roll call of some of National’s cronies – ex-members of Parliament appointed to various government bodies, organisations, NGOs, working groups, etc;
This list is not complete.
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References
Fairfax media: Sir Michael Cullen to head tax working group, GST changes possible
NZ Herald: Cullen leaves politics for NZ Post role
NZ Herald: Cullen to replace Bolger at NZ Post
Fairfax media: Cullen appointed NZ Post chairman
Radio NZ: National accused of cronyism over ‘loopy rules’ report
Wanganui Chronicle: Concern over lack of funding for NGOs
Facebook: Curwen Ares Rolinson – 24 November 2017
NZ Herald: Bryce Edwards – The National Government is looking sleazy
Radio NZ: Collins resigns after ‘smear campaign’
Frankly Speaking: Cronywatch
Additional
Radio NZ: National accused of cronyism over ‘loopy rules’ report
NZ Herald: Bryce Edwards – The National Government is looking sleazy
Other Blogs
AmeriNZ Blog: Is John Key’s government corrupt?
The Standard: Cabinet Club
Previous related blogposts
The Fletcher Affair – a warning for Labour
Doing ‘the business’ with John Key – Here’s How (Part # Rua)
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This blogpost was first published on The Daily Blog on 26 November 2017.
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The Mendacities of Mr Key # 17: The sale of Kiwibank eight years in the planning?
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National Makes Good on 2008 Threat to Sell Kiwibank
NZ Post’s, announcement on 6 April that it intends to sell-down 45% of it’s subsidiary, Kiwibank, appears to make good on Bill English’s inadvertent threat in August 2008 that Kiwibank would “eventually be sold”.
English was secretly recorded by an un-named person during a 2008 National Party Conference, and encouraged to talk freely on the prospect of selling Kiwibank;
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English subsequently complained; “I did not choose my words well“.
However, it now appears that English expressed his words honestly, disclosing a secret agenda to sell Kiwibank to someone he believed was a loyal National Party apparatchik.
Another secret recording, this time from National MP Lockwood Smith, also hinted at a secret agenda held by National;
“There’s some bloody dead fish you have to swallow, to get into government to do the kinds of things you want to do. Once we have gained the confidence of the people, we’ve got more chance of doing more things.
We may be able to do some things we believe we need to do, perhaps go through a discussion document process. You wouldn’t be able to do them straight off.”
Both English and Key issued public statements resiling from any intention to sell Kiwibank;
“It’s not my view. It’s not my private view. I simply used loose language – I made a statement I shouldn’t have.” – Bill English
“We would never make a change to that decision without a mandate.” – John Key
Again in 2008, Key resiled from any sale of Kiwibank;
“I’m ruling out selling Kiwibank at any point in the future.”
And again in 2010,
“National would not sell Kiwibank at any stage, ever. We have ruled it out.”
Making a Promise
On 25 February 2014, our esteemed Dear Leader, John Key, announced to the nation that National’s asset sales programme was over;
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![“Just as we did before the last election we’re making our position on share sales clear to New Zealanders before we go to the polls later this year. We’ve achieved what we wanted with the share offers in energy companies and Air NZ. We’re now returning to a business-as-usual approach when it comes to [state-owned enterprises]. The truth is there aren’t a lot of other assets that would fit in the category where they would be either appealing to take to the market or of a size that would warrant a further programme, or they sit in the category that they are very large like Transpower but are monopoly assets so aren’t suited.”](https://fmacskasy.wordpress.com/wp-content/uploads/2016/04/john-pinocchio-key-1.jpg?w=595&h=398)
“Just as we did before the last election we’re making our position on share sales clear to New Zealanders before we go to the polls later this year. We’ve achieved what we wanted with the share offers in energy companies and Air NZ. We’re now returning to a business-as-usual approach when it comes to [state-owned enterprises]. The truth is there aren’t a lot of other assets that would fit in the category where they would be either appealing to take to the market or of a size that would warrant a further programme, or they sit in the category that they are very large like Transpower but are monopoly assets so aren’t suited.”
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Two years and nearly two months later, and Key’s promise- like so many other committments he has made – appears to have been watered-down to permit a de-facto partial-sale.
The intended purchasers would be two other SOEs, NZ Superannuation Funds (25%) and ACC Funds (20%);
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Breaking the Promise
Even as NZ Post’s Directors were announcing the partial sale of their subsidiary, Kiwibank, Finance Minister Bill English was engaged in some well-rehearsed damage-control.
No doubt with considerable prompting by Party strategists and media-minders, English reassured the public that National would not allow the people’s bank to end up in private ownership, as the former Postbank did February 1989 when it was sold to the ANZ Bank.
English promised;
“Kiwibank will remain 100 per cent government-owned – that is a bottom-line. To ensure this occurs, the proposal includes a right of first refusal for the Government over any future sale of shares – which we would exercise.”
To be blunt, National cannot be trusted to keep it’s word.
Key knew in advance!
Despite Key’s committment to end asset sales on 25 February 2014, it appears from Michael Cullen’s own statements that our esteemed Dear Leader was already aware at around the same time, that a partial asset-sale was being planned by NZ Post.
During a video-taped press-briefing by Fairfax media, Cullen admitted that he and Key had discussed the partial-sale of Kiwibank that year (2013/14).
@ -14.56
“So Brian [Roche] and I after discussion, and [I] think I remember correctly, I had a brief discussion with the Post Board, went to see the Prime Minister, to see whether there would be a kind of visceral reaction from the government, as our ultimate share holder, to that happening. That was not the case. Mr Key indicated he was very comfortable with that prospect and on that basis therefore we began to proceed...”
So when Key made his public promise on 25 February, 2014, that National’s asset sales programme was over – he was making that committment whilst knowing full well that the partial sale of Kiwibank was already underway.
Broken promises and secret agendas – this story has it all.
Who Pays? Loyal Kiwibank customers do!
There is a hidden cost to the partial-sale of Kiwibank.
As David Hargreaves from Interest.co.nz reported;
The move could see Kiwibank’s credit rating slip by one notch from the current A+ to A as NZ Post will likely not guarantee Kiwibank’s future obligations once the deal proceeds.
When a financial institution’s credit rating is reduced, it means (generally) that they become a greater risk of lending money to them. According to Investpedia;
“…While a borrower will strive to have the highest possible credit rating since it has a major impact on interest rates charged by lenders, the rating agencies must take a balanced and objective view of the borrower’s financial situation and capacity to service/repay the debt.
A credit rating not only determines whether or not a borrower will be approved for a loan, but also the interest rate at which the loan will need to be repaid.
… and a high interest rate is much more difficult to pay back.”
It is entirely likely that when a credit down-grade occurs (as happened to New Zealand under National in September 2011), the cost of borrowing funds will increase for the bank.
Which is precisely what Hargreaves reported;
Standard & Poor’s has indicated that following the announcement of the proposed transaction, Kiwibank’s long term issuer credit rating (A+) will be placed on credit watch negative pending the proposed termination of the standing guarantee provided by NZ Post. Should the guarantee be terminated, Standard & Poor’s has indicated it will result in a one notch downgrade to Kiwibank’s long term issuer credit rating (from A+ to A).
That cost will either have to be absorbed, reducing their profit margins and making it easier for Key and English to justify full privatisation – or will be passed on to the banks customers.
English will most likely not permit Kiwibank’s profit to fall as that would mean lower dividends paid into government coffers.
Which leaves Kiwibank’s Mum & Dad customers to foot the bill for the partial-sale.
The Agenda #1
The sale to ACC and NZ Super Fund is a clever ploy. On the face of it, Kiwibank remains in wholly State ownership, albeit shifting it’s shareholders around, from one SOE (NZ Post) to three (NZ Post, ACC, NZ Super Fund).A kind of multi-million dollar Musical Chairs.
At the same time, this would allow a healthy dividend payment (an amount yet to be disclosed) to be paid to the government. As Cullen said on 6 April;
“The proceeds would allow New Zealand Post to invest in its core parcels, packages and letters business and pay down debt. It is anticipated that a special dividend would also be paid to the Crown…”
This was confirmed a day later by Bill English speaking with Guyon Espiner, on Radio NZ’s Morning Report;
@ 2.10
Guyon Espiner: “Ok, let’s look at what happens to the $495 million that NZ Post gets from this sale. I understand it doesn’t go to generate any extra capital for Kiwibank, it goes to NZpost to pay down debt and invest in it’s parcel and mail business, right?”
Bill English: “That’s right, and then if there’s, subject to negotiations there may be special dividend passed back to this [inaudible] government.”
English said any dividend payable to the government would “likely be several hundred million“. This would prove a godsend to English who otherwise would be struggling to create another Budget surplus in his May budget.
The Agenda #2
National has not only increased it’s revenue, thereby alleviating a major headache for Bill English, but they have pulled the rug out from under the Greens who, three days earlier, had been calling for increased $100 million investment in Kiwibank. As Greens co-leader James Shaw stated in a recent policy announcement;
“Our plan will help Kiwibank lead a change in New Zealand banking, by giving it a clear public purpose that requires it to drive competition to generate better interest rates for New Zealanders.
We’ll help Kiwibank to grow faster by injecting $100 million of capital into the bank and let it retain more of its profits.
Strengthening Kiwibank so it can create competition in the banking sector is the smartest way to ensure all banks pass on the best interest rates to Kiwis.”
A deeply cynical person might suspect that after the defeat of John Key’s pet vanity-project (the recent flag referendum debacle) that National has decided to exact revenge against the many Labour and Green voters who voted to retain the current flag, by partial privatisation of a favourite state owned enterprise.
Does such cynicism border on paranoia? In an era of Dirty Politics; tax-havens with trillions hidden away; and increasingly corruption of state leaders, officials, organisations, and institutions – the demarcation between healthy scepticism and paranoid fantasies blur, merge, and are tomorrow’s headlines waiting to be made public.
Labour’s Response?
Labour and the Green Party both responded to Cullen’s announcement. As Stacy Kirk wrote for Fairfax Media on 6 April;
The response of opposition parties has been mixed, with the Greens calling it a step down the path of privatisation.
Labour leader Andrew Little said it was important Kiwibank stayed in public ownership.
“And this does that, there are some good conditions around it,” he said.
“This provides a way to get extra capital from these sovereign wealth funds, and hopefully for NZ Post to use the funds that they raise from the sale, to put more capital into Kiwibank.
Meanwhile, Labour Party state-owned enterprise spokesman David Parker said Cullen should be congratulated on the idea.
“Michael Cullen should be congratulated for securing a route to expand KiwiBank and keep it in public ownership, given the refusal of National to provide more capital for NZ Post or KiwiBank.
“Michael Cullen’s solution only works to ensure the bank will remain in public ownership if National promises that if ACC or the Super Fund sells its shares, then the government of the day would exercise its first right of refusal and buy them back.”
Labour’s response has not only been weak and naive – but it also appears that David Parker is not “up to speed” with the terms of the sale. It is extraordinary that both Labour’s SOE Spokesperson, David Parker, and Labour’s Leader, Andrew Little, believe that;
“This provides a way to get extra capital from these sovereign wealth funds… to put more capital into Kiwibank” and that “Michael Cullen should be congratulated for securing a route to expand KiwiBank”.
Nothing of the sort will happen.
Both Cullen and Bill English have been crystal-clear and surprisingly honest in stating that;
- “The proceeds would allow New Zealand Post to invest in its core parcels, packages and letters business and pay down debt.” “
- “It is anticipated that a special dividend would also be paid to the Crown.”
- Kiwibank will get nothing.
So where Parker and Little get their cozy ideas about “putting more capital into Kiwibank” is unclear.
Instead, Green Party co-leader, James Shaw, seemed more cognisant to National’s real agenda;
“The fact is the Government forced Kiwibank’s hand and today’s announcement will make it easier than it was before to move Kiwibank into private ownership.”
Labour needs to get it’s act together on this issue.
The future of the people’s bank depends on it.
As for the mainstream media, it is high time they became aware of the many promises made by both Key and English – and their subsequent breaking. Otherwise, they too are failing the public.
National, in the meantime, has carried out the perfect bank “heist”.
It only took eight years to accomplish.
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References
Fairfax Media: NZ Post to sell 45 per cent of Kiwibank for $495m cash injection
NZ Herald: English – I didn’t choose my words well
TV3 News: National hit by more secret recordings
Fairfax Media: Facebook Video – NZ Post to sell 45 per cent of Kiwibank for $495m cash injection
NZ Herald: PM pledges not to sell Kiwibank after all
Faifax Media: Key – Why I should be the PM
Otago Daily Times: Key not ruling out Kiwibank sale in future
NZ Herald: PM – no more SOEs to sell after Genesis
Fairfax Media: Key ‘no GST rise’ video emerges
NZ Treasury: Income from State Asset Sales as at May 2014
Interest.co.nz: NZ Super Fund and ACC proposed as new minority shareholders in Kiwibank
Investopedia: Credit Rating
NZ Herald: S&P cuts NZ credit rating
Radio NZ: Bill English – Kiwibank will stay 100 percent New Zealand-owned
Green Party: Greens will repurpose Kiwibank and save Kiwis hundreds of millions
Additional
Fairfax media: Kiwibank tape catches English
Scoop Media: Bill English Talks On KiwiBank Being Sold (audio)
Other bloggers
No Right Turn: Plunder
The Daily Blog: KiwiBank another privatisation by stealth – Robbing Fred to bribe Dagg to pay John
The Dim Post: A fascinating precedent
The Standard: Kiwibank sale to NZ Super, ACC privatisation by stealth
Previous related blogposts
Westpac, Peter Dunne, & Edward Snowden
The Mendacities of Mr Key # 12: No More Asset Sales (Kind of)
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This blogpost was first published on The Daily Blog on 11 April 2016.
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Dear Michael Cullen: the GCSB is not International Rescue!
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When a spokesperson for the government tries to employ scare-tactics to persuade the public that increasing surveillance powers for various arms of the State – in this case the Government Communications Security Bureau (GCSB) – is warranted, then suspicions arise.
In the week following the release of the first review of intelligence organisations in New Zealand, Michael Cullen offered no less than three scare-tactics, that on the face of it, should send children and the naive running into the arms of spymasters at the SIS and GCSB.
On 10 March, Kathryn Ryan interviewed Michael Cullen on Radio NZ’s ‘Nine to Noon‘ show. Cullen was one of the reviewers of our spy agencies. In reply to questioning why the GCSB needed increased powers, he said;
@ 10.04
“…Suppose, let’s take an example, you know that a Chinese agent is arriving on a plane at an airport, for whatever reason you also know that they’re only going to be here for a short time but you’ve no idea what it is they’re going to be up to, and you can’t find a judicial commissioner, you know you’re only half an hour out from a landing kind of thing…”
@ 10.34
“…In extreme circumstances where you can’t find the Attorney General, or the the Minister deputed [sic] by the Prime Minister [to] act on the Attorney General’s behalf, or the judicial commissioner, then the Director can issue a warrant, but that’s in the case of immediate threat to life or the fact that if it doesn’t happen quickly then the opportunity to gather that intelligence will have passed…”
Aside from a “Yellow Peril” hint to Cullen’s reference to “a Chinese agent”, one has to ask why he is suggesting that the imminent arrival of such a person would strike fear into the heart of our government and it’s agencies.
Did the announcement that we are at war with China miss the 6PM news bulletin on both TV1 and TV3?
If such a mythical “Chinese agent” is a “threat” to our security and well-being, then a simple phone call to New Zealand Customs should be sufficient to detain the person and return him/her home on the next available flight. NZ Customs already has this power, as Mario Quintela learned to his misfortune last February;
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Not only was Mr Quintela detained after disembarking his flight; he was held for ten hours, and promptly deported thereafter. (As the story reports, Customs then had to pay for Mr Quintela‘s flight back to New Zealand.)
So why the “imminent arrival” of a foreign agent should send the GCSB or other state agency into a tizzy is unclear. Our Customs department already ‘has our backs’ on such matters.
Cullen then painted a frightening picture where “in extreme circumstances where you can’t find the Attorney General, or the the Minister deputed by the Prime Minister [to] act on the Attorney General’s behalf or the judicial commissioner”.
Really? In the 21st century, with mobile phones, smartphones, email, faxes, landlines – Cullen is deeply concerned “where you can’t find the Attorney General, or the the Minister deputed [sic] by the Prime Minister [to] act on the Attorney General’s behalf, or the judicial commissioner“?!
If such an unlikely scenario ever eventuated, my concern would not be for the GCSB unable to have a warrant-to-surveil signed – but where the hell our Attorney General, or the the Minister deputed [sic] by the Prime Minister [to] act on the Attorney General’s behalf, or the judicial commissioner” were, that they could not be easily located.
Perhaps the most disingenuous, anxiety-laden scenario from Cullen was his implausible Lost At Sea fantasy. On Radio NZ’s Focus on Politics, Cullen maintained that expanding the GCSB’s surveillance powers was a “safety” issue;
@ 2.30
“Let us suppose a New Zealander is in imminent danger, in terms of their life overseas. Maybe lost at sea or some other example. Under this legislation as the GCSB feels it has to interpret it, the GCSB’s capacity to trace an individual’s cellphone and to say exactly where it is, cannot be used.
We have no way of finding out where that person is, using that capacity, in order to take immediate and urgent action, in whatever way, to try to protect the safety of that New Zealander.”
I call total bollocks on Cullen’s example.
Aside from the fact that most yachties and other vessels now use modern emergency locator beacons, if a New Zealander is in “imminent danger”, a bunch of spooks sitting in Pipitea House, Thorndon, listening in on conversations and reading emails and txt-messages are hardly likely to be in a position to facilitate rescue operations to assist a person “ lost at sea “.
Checking Google, using the search parameters “spy agency locates lost person at sea” did not yield a single example of a spy agency finding anyone in such dire straits.
The GCSB is a spy agency. International Rescue, it is not.
If by some bizarre chance the GCSB did pick up an SOS call, or locator beacon, no person in their right mind would object if the information was passed on to rescue services. By definition, SOS calls cannot be considered “private communications” since they are broadcast far and wide to anyone capable of picking up the transmissions.
Cullen is fear-mongering.
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In the report, Intelligence and Security in a Free Society Report of the First Independent Review of Intelligence and Security in New Zealand, under a section headed “Key Issues Identified“, the authors write;
7. It quickly became apparent to us that there were a number of deficiencies in the Agencies’ current legislative frameworks. The legislation establishing the Agencies is not comprehensive, is inconsistent between the two agencies, can be difficult to interpret and has not kept pace with the changing technological environment. This has led to some significant problems.
8. First, lack of clarity in the legislation means the Agencies and their oversight bodies are at times uncertain about what the law does and does not permit, which makes it difficult to ensure compliance. Critical reviews in the past have led the Agencies, particularly the GCSB, to take a very conservative approach to interpreting their legislation. While we understand the reason for this, and it is certainly preferable to a disregard for the law, this overly cautious approach does mean that the GCSB is not as effective or as efficient as it could be. The legislation needs to set out clearly what the Agencies can do, in what circumstances and subject to what protections for individuals.
It appears that Cullen and his co-author, Dame Patsy Reddy, are repeating the very same justifications that Key and other National ministers spouted in 2013, when they implemented an expansion of GCSB’s powers to legalise Bureau surveillance of New Zealanders.
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Michael Cullen and Report co-author Patsy Reddy (Radio NZ)
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On 9 April 2013, our esteemed Dear Leader claimed that the GCSB – as it stood at the time – was not “fit for purpose”;
“In addition, the Act governing the GCSB is not fit for purpose and probably never has been. It was not until this review was undertaken that the extent of this inadequacy was known…
[…]
The advice we have recently received from the Solicitor-General is that there are difficulties interpreting the legislation and there is a risk some longstanding practices of providing assistance to other agencies would not be found to be lawful.
[…]
It is absolutely critical the GCSB has a clear legal framework to operate within.”
Now it appears that Cullen and Reddy are parroting the same rationale for advancing the “need” to expand the Bureau’s surveillance powers.
This appears to be the stock-standard meme that will be trotted out every time the government pushes for further extensions to State surveillance powers.
Council for Civil Liberties, chairperson, Thomas Beagle, was correct when he pointed out the obvious “mission creep” of stealthily increasing State surveillance in this country;
“I think it’s part of a shift towards an overall surveillance society and I think it’s part of a wider shift towards a government which is not of the people but a government which is actually working on the people.”
Cullen and Reddy have played their part in this latest chapter of an on-going process.
What next in two, five, or ten years’ time?
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References
Radio NZ: Nine To Noon – Spy law shake-up, heightened protection or erosion of privacy? (alt. link)
TVNZ News: Portuguese tourist gifted free flight to NZ after immigration debacle
Radio NZ: Focus on Politics – 11 March 2016 (alt. link)
Beehive: PM releases report into GCSB compliance
Radio NZ: Spy review aims to clarify powers
Additional
Radio NZ: Canada stops sharing Five Eyes data
The Guardian: Canada spy agency stops sharing intelligence with international partners
Other Blogs
Dim Post: Security and intelligence legislation: then and now
No Right Turn: As predicted
No Right Turn: The problem with the intelligence review
The Standard: New report on GCSB spying powers
Previous related blogposts
Audrey Young, Two Bains, old cars, and… cocoa?!?!
National Party president complains of covert filming – oh the rich irony!
An Open Message to the GCSB, SIS, NSA, and Uncle Tom Cobbly
Dear Leader, GCSB, and Kiwis in Wonderland
One Dunedinite’s response to the passing of the GCSB Bill
The GCSB Act – Tracy Watkins gets it right
The GCSB – when plain english simply won’t do
The GCSB law – vague or crystal clear?
The Mendacities of Mr Key #1: The GCSB Bill
Campbell Live on the GCSB – latest revelations – TV3 – 20 May 2014
The real reason for the GCSB Bill
Letter to the Editor: John Campbell expose on Key and GCSB
A letter to the Dominion Post on the GCSB
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This blogpost was first published on The Daily Blog on 13 March 2016.
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Questionable assumptions ‘bad for small democracies’
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This item in Fairfax’s Dominion Post caught my eye a few days ago;
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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.
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“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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Note the credit downgrades (red underlined) in the chart above and detailed belowed;
- Standard & Poors: From AA+ in April 1983, to AA in December 1986 (Rogernomics Labour)
- Standard & Poors: From AA in December 1986, to AA- in January 1991 (National)
- Moodys: From Aa1 Stable Outlook, February 1996, to Aa1 Negative Outlook on 30 January 1998 (National)
- Standard & Poors: From AA+ Stable Outlook in January 1996, to AA+ Negative Outlook on 10 September 1998 (National)
- Moodys: From Aa1 On Review for Possible Downgrade on 5 June 1998, to Aa2 Stable Outlook on 24 September 1998 (National)
- Fitch: From AA+ Stable Outlook on 28 November 2008, to Aa+ Negative Outlook Reaffirmed on 16 July 2009 (National)
- Fitch: From Aa+ Negative Outlook Reaffirmed on 16 July 2009 to AA Stable Outlook on 24 September 2011 (National)
- 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;
- Standard & Poors: From AA+ Negative Outlook on 27 March 2000, improved to AA+ Stable Outlook on 7 March 2001
- Fitch: From AA on 27 March 2002, improved to AA+ on 16 August 2003
- Moodys: From AA2 Stable Outlook on 24 September 1998, improved to Aaa on 21 October 2002
- 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,
- Net sovereign debt was paid down to near zero;
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- Finance Minister, Michael Cullen posted nine consecutive surpluses
- Unemployment was at a record low 3.4%;
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- The minimum wage was increased nine times under Labour, from $7.00 to $12.00 – whilst National has raised it six times from $12.00 to $14.25,
- Building permits rose steadily until 2008;
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- The NZ stock market showed a steady rise, until the 2007/08 Global Financial Crisis;
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- GDP rose steadily, averaging 3.5% per annum, until 2008;
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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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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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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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= fs =
That was Then, This is Now #19 – A “Decade of Deficits”
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This blogpost was first published on The Daily Blog on 20 December 2013.
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Previous related blogpost
That was Then, This is Now #18
References
Fairfax media: Nats blame Labour for ‘decade of deficits’
TVNZ: Breakfast Show
National: Government Share Offer
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= fs =
Nats, Lies, and Videotape
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National MP, Mark Mitchell, was a guest on Prime TV’s “Backbenches” on 1 May, along with Damien O’Connor (Labour Party); Jan Logie (Green Party), and Peter Dunne (Peter Dunne Party).
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Mark Mitchell
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Usual political rah-rah, blah blah, from the Tory politician, until he came up with this throwaway remark,
“We inherited ten years of deficits from the previous Labour Government...”
Now, quite simply, anyone with a passing knowledge of Labour’s fiscal record during their term in office from 2000 to 2008 will know that is a blatantly untrue comment.
In fact, it’s bullshit.
Under Labour, Government Debt to GDP dropped from 31.4% of GDP to 17.4%.
Government debt did indeed rise – under National, as the graph below amply demonstrates;
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Acknowledge: Trading Economics/NZ Treasury
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National’s government debt is now twice as high as when Labour left office in 2008.
Some will even recall that Labour Finance Minister, Michael Cullen, posted several surpluses during his tenure as Finance Minister – reaching $7.9 billion by 2007;
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$2,300,000,000: Dr Cullen’s finest hour (29 May 2002)
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Cullen prepares to trumpet high surplus (21 Feb 2003)
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Cullen Unwilling To Share Fiscal Surplus Through Tax Cuts (18 Oct 2004)
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Hide attacks Cullen for hiding huge surplus (16 March 2005)
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Record surplus, but Cullen ‘won’t know about tax cuts until December’ (11 Oct 2006)
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Cullen confirms huge surplus (10 Oct 2007)
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Cullen quick to emphasise volatility after surplus hit (19 Feb 2008)
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Just as well that Cullen resisted strident calls for massive tax cuts. Instead, perhaps being the wisest man in the decade, realised that common sense demanded that we pay down our sovereign debt, rather than splurge out on an almighty cash-lolly scramble.
Mitchell should know all this. He probably does. In which case we can only wonder if he was perpetuating a right wing lie about Labour’s track record.
If Mitchell isn’t aware of the reality of Labour record whilst in government, then he is woefully ignorant.
And, as pointed out above, is Mitchell aware the govenment debt under National watch has doubled from 17.4% in 2008 (left by Labour) to 37% (generated by National)? Having to borrow billions to pay for two unaffordable tax cuts in 2009 and 2010 certainly did not help (see: Govt borrowing $380m a week ).
Let’s ask Mr Mitchell, shall we?
Date: Fri 3 May 2013, at 12.09pm
From: Frank Macskasy <fmacskasy@yahoo.com>
Subject: Budget surpluses and deficits
To: Mark Mitchel <mark.mitchell@parliament.govt.nz>
Cc: Dominion Post <editor@dompost.co.nz>, NZ Herald <editor@herald.co.nz>,
Otago Daily Times <odt.editor@alliedpress.co.nz>,
Morning Report <morningreport@radionz.co.nz>,
Nine To Noon RNZ <ninetonoon@radionz.co.nz>,
Kim Hill <saturday@radionz.co.nz>,
Chris Laidlaw RNZ <sunday@radionz.co.nz>.
Kia ora Mr Mitchell,
Recently, on 1 May, you made a statement on Prime TV’s “Backbenches” to the effect,
“We inherited ten years of deficits from the previous Labour Government…”
I was surprised that you would make such a comment.
Are you aware that under Labour, Government Debt to GDP dropped from 31.4% of GDP to 17.4%?
https://fmacskasy.wordpress.com/wp-content/uploads/2013/05/new-zealand-government-debt-to-gdp.png
Government debt rose thereafter, from 17.4% in 2008 to 37% – generated by your government.
Labour’s surpluses were well publicised in media reports, reaching $7.9 billion by 2007,
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$2,300,000,000: Dr Cullen’s finest hour (29 May 2002)
.Cullen prepares to trumpet high surplus (21 Feb 2003)
.Cullen Unwilling To Share Fiscal Surplus Through Tax Cuts (18 Oct 2004)
.Hide attacks Cullen for hiding huge surplus (16 March 2005)
.Record surplus, but Cullen ‘won’t know about tax cuts until December’ (11 Oct 2006)
.Cullen confirms huge surplus (10 Oct 2007)
.Cullen quick to emphasise volatility after surplus hit (19 Feb 2008)
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Can you explain how you’ve managed to turn a near-decade of surpluses, and paying down sovereign debt, into “ten years of deficits from the previous Labour Government”?
It is obvious that your statement on Labour’s fiscal track record was somewhat in error.
Will you be issuing a media correction on this issue? If not, why not?
Please note that any statement you provide may be published in a blog.
Regards,
-Frank Macskasy
This blogpost will be updated upon Mr Mitchell’s response.
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= fs =
Bill English – do you remember Colin Morrison?
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A message to the Hon. Bill English;
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From the NZ Herald on 27 January, uttered by Bill English,
“…On top of that, Labour still hasn’t apologised for their wasteful policies the last time they got their hands on the economy.”
See: IBID
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Firstly, let’s review recent history in decidely more accurate terms,
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The IMF (International Monetary Fund) chart above shows that from 2000 to 2008, the Labour government paid down debt, from 33.4% in 2000 to 17.4% in 2008 (a near-halving of our sovereign debt) to when National took the reigns of government.
Some will even recall that Labour Finance Minister, Michael Cullen, posted several surpluses during his tenure as Finance Minister,
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$2,300,000,000: Dr Cullen’s finest hour (29 May 2002)
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Cullen prepares to trumpet high surplus (21 Feb 2003)
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Cullen Unwilling To Share Fiscal Surplus Through Tax Cuts (18 Oct 2004)
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Hide attacks Cullen for hiding huge surplus (16 March 2005)
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Record surplus, but Cullen ‘won’t know about tax cuts until December’ (11 Oct 2006)
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Cullen confirms huge surplus (10 Oct 2007)
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Cullen quick to emphasise volatility after surplus hit (19 Feb 2008)
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Just as well that Cullen resisted strident calls for massive tax cuts. Instead, perhaps being the wisest man in the decade, realised that common sense demanded that we pay down our sovereign debt, rather than splurge out on an almighty cash-lolly scramble.
Had Cullen yielded to calls for tax cuts instead of addressing our debt, our current sovereign debt would probably be approaching Greece’s.
But Bill English and other National/ACT sycophants don’t want us to know this. It makes Labour look good. And that’s the last thing they want.
After 2008, as National gave away tax revenue on the form of two unaffordable tax cuts in 2009 and 2010, debt skyrocketed from 17.4% to 37% of GDP.
Now, if one was to use the same mis-information as Bill English, John Key, et al, I could shout from the roof-tops that the rise in debt was due wholly to National’s mis-management of the government books.
The reality, of course, is that the 2007/08 Global Finance Crisis – as well as National’s incompetance in giving away tax cuts we could ill afford – both had a part to play in our increased borrowing.
Secondy, let’s deal with English’s claim,
“…On top of that, Labour still hasn’t apologised for their wasteful policies the last time they got their hands on the economy.”
Budget expenditures from the early 1990s to 2012 reveal an interesting story,
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The early 1990s (characterised by Finance Minister, Ruth Richardson) was one of massive cuts to health, welfare, sale of State houses, and other social services. The same can be said of the late 1990s, where de-regulation; so-called “reforms“; cuts to state services; and increasing User Pays led to growing poverty and the widening income gap.
Eventually, those cuts to state services had dire consequences. For example, the health sector was particularly badly hit,
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Claim many burned out by health sector reforms – (21 Dec 1996)
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More health changes tipped – (8 March 1997)
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Must pay for ‘wants’ – (19 July 1997)
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Cuts to hospital services expected – (8 Aug 1997)
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‘Serious flaws’ in Govt’s health funding formula – (31 Jan 1998)
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GP hits out at health reforms – (3 Feb 1998)
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Funding for Dunedin Eye Clinic Slashed – (26 Feb 1998)
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Shipley, Bolger sorry for deaths of patients – (3 April 1998)
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Health cuts spell doom for services – (30 April 1998)
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Hospitals now owe $1.3 billion – (4 June 1998)
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Staff shortages could hit patient care, say nurses – (4 May 1999)
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Public hospital ills blamed on funding – (20 Aug 1999)
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Health spending rates poorly – (24 Aug 1999)
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The Health “reforms”, along with chronic under-funding, had their inevitable consequences,
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Death The Northland Way (15 Oct 1997)
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Died waiting for by-pass (6 April 1998)
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Rau Williams and Colin Morrison – both with entirely different lives; living at opposite ends of the country; one Maori, the other Pakeha – both suffered the same fate. They died because government cutbacks on spending (see red square in above chart) had reduced the Health budget, and as media reports above show – were impacting harshly on our society.
These two men – and perhaps others who died quietly, shunning the glare of publicity – died on Bill English’s watch. As Minister responsible for Crown Health Enterprises and later Minister of Health, English could not shift responsibility to anyone else.
At one point, English was forced to concede that the Health system and funding mechanism was “flawed”,
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English may review waiting list funding (11 April 1998)
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English agrees system flawed (19 May 1998)
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Tragically, Mr English’s “Road to Damascus” experience was too late for Mr Williams and Mr Morrison and their families.
Is it me, or does it seem that everything National touches turns into one, big, steaming cow-patty?
Finally, by 1999 the country had had enough. On 27 November, the country went to the polls and National and their coalition ally, NZ First, were roundly defeated.
The incoming Labour-Alliance government was faced with a crippled health sector (amongst other state services that had been cut back) that had been impoverished and was struggling to perform it’s most basic core services,
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Cancer patients face string over staff shortage – (9 June 2001)
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Maternity crisis set to get worse – (6 July 2001)
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Despair at lack of young doctors – (11 Nov 2001)
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Local cancer patients die waiting for radiotherapy – (17 Nov 2001)
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A crisis that could only be remedied by a hands-on government prepared to make appropriate funding decisions,
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Waiting lists for elective surgery cut – (24 April 2000)
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Health Minister will end user-pays wards – (9 July 2000)
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More money promised to fund GPs, health clinics – (17 Nov 2001)
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$1.5b injection for health – (9 Dec 2001)
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Upshot of this, Mr English?
Any increase in funding of state services was necessary. After savage cuts, National created a situation where our healthcare system was unequivocally unsafe.
In fact, it had become lethal. People were dying for lack of appropriate medical intervention.
That was the legacy of the National Government, 1989 – 1999.
So before Mr English or any of his cronies complain that Labour spent more than National did – damn right they did. And the increased health funding under Labour probably saved an unknown number of lives.
Tell us, Mr English, do you remember Colin Morrison and Rau Williams?
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Addendum 1
By the way, Mr English, with reference to your criticism of the Green Party regarding job creation,
“And to make it worse, at the same time their coalition partners the Greens are up in Auckland busy working out how to stop everything they don’t like – which includes everything to do with growth and jobs.”
There’s no need to point the finger at the Greens and blame them for lack of growth and jobs. The inept National Party are quite efficient at stifling the economy and creating rising unemployment,
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See: Unemployment rate lifts to 6.7pc
See: 8000 more jobless as rate hits 6.8pc
See: Unemployment up to 7.3pc – a 13 year high
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See: Economy may be going backwards
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No need to invoke the Green Party (who aren’t even part of the National-led coalition) – it seems National is quite adept at grinding the economy into the ground.
Credit where it’s due, Mr English, credit where it’s due.
Addendum 2
The Bolger-led National cut taxation-revenue by implementing two tax cuts, in 1996 and 1997. (see: Reserve Bank – New Zealand’s remarkable reforms)
Why does this sound more and more familiar?!
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*
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References
Reserve Bank: Reserve Bank – New Zealand’s remarkable reforms (4 June 1996)
OECD: Economic Surveys: New Zealand 1996
Treasury: Briefing to Incoming Government 1996 (12 Oct 1996)
NZ Herald: McCully: Jobs backtrack no surprise
Dominion Post: Key hands-on in MFat restructuring
NZ Herald: Defence Force plan to cut costs a failure – Auditor-General
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= fs =
Johnny’s Report Card – National Standards Assessment – Growth
To Whom It May Concern; the following Report Card detail’s Johnny’s achievements over the last four years.
The following contrasts compare four years, ranging from the end of 2008 to the end of this year, 2012.
Whilst it is acknowledged that the Global Financial Crisis impacted harshly on our society and economy, it is also fair to say that National has had the benefits of starting out with a sound economy (surpluses, low unemployment, etc) in 2008 and four years in office to make good on it’s election promises.
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Growth
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Recent history:
In the past, whenever National (or the right wing “Labour-ACT” government of the 1980s) came to power, the result was never very good,
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Source: Dunedin Star
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Source: Otago Daily Times
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Source: Otago Daily Times
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Source: Otago Daily Times
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The rhetoric:
“The National Party has an economic plan that will build the foundations for a better future.
* We will focus on lifting medium-term economic performance and managing taxpayers’ money effectively.
* We will be unrelenting in our quest to lift our economic growth rate and raise wage rates.
* We will cut taxes, not just in election year, but in a regular programme of ongoing tax cuts.
* We will invest in the infrastructure this country needs for productivity growth.
* We will be more careful with how we spend the cash in the public purse, monitoring not just the quantity but also the quality of government spending.
* We will concentrate on equipping young New Zealanders with the education they need for a 21st century global economy.
* We will reduce the burden of compliance and bureaucracy, and we will say goodbye to the blind ideology that locks the private sector out of too many parts of our economy.
And we will do all of this while improving the public services that Kiwis have a right to expect. ” – John Key, 29 July 2008
See: 2008: A Fresh Start for New Zealand
” Growing the economy is the Government’s number one priority, and science and innovation have a key part to play in that growth.
Indeed, this Government has made science and innovation one of the six cornerstones of its economic growth agenda. We’ve done this because New Zealand needs an economic jolt. Our productivity and economic growth have been sluggish for decades and as a result we have slipped down the OECD’s ranking of national wealth per capita.
Our performance compared to other smaller advanced economies has been uninspiring at best. For example, in 1976 our per capita income was slightly ahead of Australia. It was nearly 20 percent greater than the OECD average.
We are now 20 percent behind the OECD average. Australia, by contrast, is still about 20 percent ahead.
Finland is another example of our relative decline. In 1979 our per capita income lines crossed – New Zealand going down and Finland going up. The Finns are now about 20 percent ahead of us.
So, how do we turn the situation around? ” – John Key, 1 July 2011
See: National Economic Development Forum
Present reality:
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Two things would be fair to say,
- National inherited an economy with low unemployment and net government debt at an all time low of 5.6% of New Zealand’s GDP, net. (Far from being fiscally profligate as National claims, Labour actually behaved more responsibly than National has done, as the information below clearly illustrates.)
- The Global Financial Crisis was not an event of National’s making. (Though the ideology of corporate greed, profiteering, and minimal government oversight which contributed to the Crisis is most certainly one that National shares.)
As Treasury data shows, New Zealand’s net government debt situation worsened from 2008 to June of 2012,
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Source: Treasury – Financial Statemement of the Government of New Zealand
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Source: IBID
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Table 16 above opened with a net government debt of 5.6% – left by the outgoing Labour government.
It closed with 25% net government debt – a fourfold increase – courtesy of National’s “prudent fiscal management”.
As the Treasury document explained,
Net debt increases as a result of cash deficits and
declines as a result of cash surpluses. It also
fluctuates in line with valuation movements in the
underlying financial assets and liabilities of the Crown
and movements in the amounts of currency issued to
New Zealand banks.Net debt increased this year, continuing the steady
increase since the global financial crisis (figure 11).
Net debt increased from last year primarily due to
additional borrowings over the year to meet the
residual cash deficit (refer table 17).
Source: IBID
In other words, National took in lower revenue – taxes – which inevitably resulted in increased borrowings; slashing of State services and funding; increasing user pays for other state services; mass redundancies of state sector workers, and impending partial state asset sales.
The Treasury document goes on to show how much revenue was lost between 2008 and 2012,
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Source: IBID
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A recent NZ Herald report has updated Treasury’s expections. The tax-take, GDP growth, and unemployment outlooks are not good,
A weaker economic outlook over the next four years has taken a bite of nearly $8 billion out of the Government’s forecast tax revenues for that period.
Nevertheless the Treasury is still forecasting a return to surplus, though only just, on schedule by 2015.
The forecasts in yesterday’s half-year economic and fiscal update are in line with the latest consensus forecasts, which means they are significantly weaker than in the Budget.
The growth track is lower by around 0.5 percentage points a year.
It reflects downwards revisions to expected growth among New Zealand’s trading partners, and a kiwi dollar expected to remain around present levels until the first half of 2014, so that net exports subtract from growth for the next couple of years.
Unemployment has been revised higher; it is 7.3 per cent now and still expected to be 5.6 per cent by March 2016.
See: Outlook slashes tax-take by $8b
The forecast rate of tepid growth is on top of low to negative growth in the last four years,
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Source: tradingeconomics.com
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So what caused the drop in government tax revenue? And why did the lower tax revenue impact on higher unemployment and lower domestic growth?
The answer, in part, is not hard to uncover, and the following reports tell the story of how National undermined (sabotaged?) our nation’s government accounts.
First, we were offered The Bribe,
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Then we got the warning signs,
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We were not exempt from the looming storm that was the coming Global Financial Crisis ,
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National’s response?
The prudent step to take would have been to cancel the tax cuts as simply unaffordable. (Labour’s Phil Goff generously promised to support National had it taken such a prudent measure. See: Labour would support deferral of tax cuts)
As a nation, we would then maintain social services (education, housing, healthcare, justice system, early childhood education, superannuation, etc) – or cut taxes. We could not have both. Not without even further massive borrowings from overseas.
National’s decision to persevere with their taxcuts beggered belief for those who understood the seriousness of the GFC and the recession we had fallen into,
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The consequences of National’s irresponsible cutting of taxation revenue was utterly predictable,
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Writing for the NZ Herald, Brian Fallow put the cost of taxcuts at $8 billion. (See: Outlook slashes tax-take by $8b)
Only a fool (or devoted National supporter – the two are not mutually exclusive) could believe that we could give away billions in tax cuts without resorting to massive borrowings to cover the shortfall.
The result was a government deficit rising fourfold from 2008 to 2012, as the above Treasury stats clearly show.
National then desperately needed to balance the books. It scrimped and scrapped by cutting the state sector; raising taxes (gst, fuel tax, ACC levies, government charges, etc) elsewhere; closing tax exemptions for property investors; and cutting back on services (see: Student allowances a thing of the past for post-graduate students ).
Even paper delivery kids were not exempt from the grasp of this Scrooge-like ‘government’. See: Budget 2012: ‘Paper boy tax’ on small earnings stuns Labour)
It also desperately needed to proceed with it’s state asset sales.
A cynic with a conspiratorial ‘bent’ might suspect that National deliberately manufactured it’s own debt crisis so that it could justify the partial privatisation of Meridian, Genesis, Might River Power, Solid Energy, and Air New Zealand, to it’s corporate/investor/aspirationist constituent-base.
In doing so, not only was the door left open for their privatisation agenda – but the side-effects of tax cuts left National with few options and manouvering room for job creation policies.
With net government debt quadrupling in four years from $10.2 billion (2008) to $50.6 billion (2012), and taxation revenue falling from $56.7 billion (2008) to $55 billion (2012), their hands were seemingly “tied”.
Compounding matters, National cut back state services and fired thousands of state sector workers, resulting in a further drop in expenditure, all of which impacted harshly on the economy.
Whether Free Marketeers like it or not, the state is the #1 business generator in our economy and society. When it cuts spending, the flow-on effects on other, down-stream businesses, is inescapable.
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With higher income earners either saving their tax cuts or paying down debt, tax cuts failed to “fire” the economy as Little Leader said in 2009 and Dear Leader adamantly predicted in 2010,
“By taking firm, early and decisive action, the Government is managing the downturn to cushion the immediate impact on New Zealanders and to enhance future growth.” – Bill English, 28 May 2009
See: Budget 2009 – House goes into urgency
“We’ve cut all personal income tax rates, GST has increased to 15%, and we’ve boosted NZ Super, Working For Families, and benefit payments by 2.02% to compensate for the rise in GST.
Today’s changes are just one part of our comprehensive plan to grow the economy, create jobs, boost incomes, and raise living standards for all New Zealanders. The tax package improves incentives to work, and tilts the economy towards savings, investment, and exports.” – John Key, 1 Oct 2010
See: Tax cuts today
In May 2010, Key had even used the migration issue as justification to cut taxes for higher income earners, professionals, and others in top brackets,
“We can be envious about these things but without those people in our economy all the rest of us will either have less people paying tax or fundamentally less services that they provide.
They include doctors, entrepreneurs often, scientists, engineers, lawyers, accountants, school principals and nurses.
On Thursday you will see a deliberate attempt to make sure those people stay and put their skills to work here in our economy.” – John Key, 18 May 2010
See: Key again defends tax cuts
BS. All of it is, BS.
None of it worked, of course. The economy not only failed to grow – it stagnated or contracted (see: Economic recovery stagnates – NZIER). And despite two tax cuts, migration to Australia skyrocketed – ten thousand higher than under the previous Labour government’s last four years. (see related blogpost: Johnny’s Report Card – National Standards Assessment y/e 2012: migration)
Up until 2011, two of our most important industries – manufacturing and construction – contracted, at a time when the Christchurch re-build should have been growing their turn-over and profitability. The downturn in manufacturing and construction had a flow-on effect on the Wholesale Trade sector,
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Source: New Zealand in Profile: 2012 – Economy
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Other measures of the economy show no sign of improvement,
Bank profits back over $3 billion while economy stagnates (24 April 2012)
then “good news”,
Pickup in economic growth predicted (29 Aug 2012)
followed two months later by bad news,
Businesses gloomy about economic growth (9 Oct 2012)
Current Account Deficit Widens (19 Sept 2012)
Trade deficit widens as dairy values fall (27 Nov 2012)
Terms of trade continue to drop (4 Dec 2012)
Govt deficit up as tax take dips (5 Dec 2012)
Deficit $169m wider than predictions (6 Dec 2012)
Growth forecast cut, debt seen higher (18 Dec 2012)
Current account gap narrows as trade balance shrinks (19 Dec 2012)
Outlook slashes tax-take by $8b (19 Dec2012)
Whichever way one looks at it, it’s a mess.
And it’s simply a bad joke for Key to reassure us,
“While I think we have to acknowledge that the last three years have been pretty tough with the Global Financial Crisis, on a relative basisNew Zealand’s been doing a better than a lot of other countries.” – John Key, 17 Nov 2011
See: Key and Goff Q&A: Creating jobs
Trying to suggest that we are nowhere as bad off as other nations such as the US, Spain, Greece, etc – so our current stagnating economy is somehow acceptable – is sheer rubbish.
One might as well justify National’s poor performance and reckless decision-making by stating we are better off than Zimbabwe, Haiti, or Bangladesh,
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We should not be “worse off” than those nations – we headed into the Global Financial Crisis with relatively good economic indicators!
There is Always An Alternative!
A responsible government would have abandoned any prospect of taxcuts and prepared policies to keep people in work; off the unemployment queues; paying taxes; and contributing to the economy.
Policies such as,
- Government procurement favouring local providers over imports from other nations. This would have kept companies such as Kiwirail from closing their Dunedin Hillside workshops, with the loss of over 150 jobs (see: Dunedin workshop sale will see job losses – Kiwirail)
- Government intervention in the value of the New Zealand dollar. The high dollar has destroyed some 40,000 manufacturing/exporting jobs in this country – swelling the ranks of the unemployed to 175,000 (see: Unemployment up to 7.3pc – a 13 year high, Job losses blamed on high NZ dollar: more forecast, Rakon a victim of high dollar – union, etc). Other OECD nations have thrown away the mopnetarist rule book and engaged in quantitative easing to preserve their manufacturing base. The choice is either that – or losing more jobs and increasing expenditure on unproductive social welfare.
- Government implementating a mass construction programme of 10,000 new state houses. (see previous blogpost: Can we do it? Bloody oath we can!)
With Option #3, National appears to have missed the obvious.
Injecting several billion into a crash-programme to build ten thousand homes for New Zealanders, who are currently struggling to buy their own houses, makes sense.
The Christchurch re-build has proven this to be the case, as the NZ Herald reported on 20 December 2012,
The economy grew at an annual pace of 2.5 per cent, and was 2 per cent higher than the same quarter a year earlier. Revisions to previous quarters showed New Zealand dipped back into recession in the second half of 2010, with two 0.3 per cent contractions in each quarter.
The New Zealand dollar dropped to 83.33 US cents after the figures were released, from 83.60 cents immediately before.Construction kept the economy ticking over with a 4.5 per cent expansion, contributing 0.2 of percentage point to overall GDP. Electricity, gas, water and waste services grew 4.4 per cent in the quarter, contributing 0.1 of a percentage point in growth to GDP, underpinned by an increase in hydroelectric generation.
“Residential and non-residential building activities were both up strongly this quarter, and both were boosted by Canterbury,” Statistics NZ said in its report. “The upper North Island also contributed to the growth in residential building activity.”
The Canterbury rebuild, which is expected to top $30 billion, is widely seen as the saving grace for an economy that has struggled to recover from its deepest recession in two decades, and has been getting some help from a resurgent property market in Auckland in recent months.
See: Economy grows 0.2pc – saved by construction
Statistics NZ national accounts manager Rachael Milicich didn’t split hairs. She bluntly stated,
“The growth in the latest quarter was driven by construction.”
See: Economic activity up 0.2 percent
As for the tax cuts stimulating the economy with extra spending – you can forget that pipedream. According to Statistics NZ,
Household consumption expenditure, which measures the volume of spending by New Zealand households, was flat this quarter (0.0 percent).
See: IBID
National not only bought the 2008 election with promises of unsustainable, unaffordable tax cuts – Key, English, Joyce, et al, squandered an opportunity to keep 70,000 New Zealanders in paid employment (see: Employment graph, 2008-2012).
It was all so unnecessary.
Addendum
In March 2008, the then Finance Minister, Michael Cullen said,
“Even before these challenges hit home John Key wants to increase our debt to at least 25 per cent of GDP. But he does not pretend he wants to borrow more to pay for more services and he does not really believe he needs to borrow more to pay for roads. He only wants to outspend Labour on tax cuts.”
See: [Labour]Government will not borrow for tax cuts
According to Treasury, the current net government debt as at 30 June 2012 stands at… 24.8% of GDP – just shy of 25%,
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Source: Treasury – Financial Statemement of the Government of New Zealand
Cullen called it 100%.
It’s a shame that 1,053,398 voters couldn’t look past their own selfishness, and the lure of cash dangled before them, by a Party that was hell-bent on it’s own agenda to win power at any cost.
For New Zealand, that cost measured $50 billion and 175,000 unemployed.
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History Lesson – Toru – Jobs
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Another look back into our recent history. Just to remind ourselves, that what is past, is prologue…
Firstly, too many of our simple-minded fellow New Zealanders still cling to the bigotted fantasy that those on welfare benefits are there “by choice”. Currently, our unemployment stands at 150,000 – or 6.3% of the workforce.
But was it always so…?
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6 June 2002
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14 September 2002
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New Zealand’s growth rate in the early to mid 2000s was between 4% and 6%, and the skilled labour shortage reflected an economy that was doing well,
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Tony Alexander, the BNZ’s chief economist, was reported to have said that “businesses are also going to have to consider helping with basic education. They are going to have to take on less skilled people and train them up in reading, writing, and arithmetic“,
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24 October 2002
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Unemployment dropped to a record low of 3.8% by December 2007. Interestingly, as the recession impacted on our economy, unemployment soared. It is no secret that unemployment and recessionary periods are closely intertwined,
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28 October 2002
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Our GDP (per capita, adjusted by purchasing power parity) rose steadily in the 2000s, levelling of post-2008, as the global banking crisis hit New Zealand, creating into a full-blown recession,
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The result of leaving everything up to the free market – a skills shortage. It became readily apparent that businesses demanded well-educated, trained, experienced workers – but were not prepared to pay for that upskilling. That was the role of the State. So much for the State staying out of the Market – when the Market could not/would not, invest in skills training as required,
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20 November 2002
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As the economy boomed, the government post surplus after surplus. (So much for the mischief-making from certain National/ACT agitprops who scurrilously spread the lie that the previous Labour Government mis-managed the economy.) The actual data is on record for all to see,
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Which, in turn, allowed Labour’s finance minister, Michael Cullen to pay down our sovereign debt,
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As always, the building industry was affected. Which is in marked contrast to builders who, in the last couple of years were finding work hard to come by. But in 2002, it was a completely different world,
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25 November 2002
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Even though the economy was growing and unemployment was dropping, it was evident that people’s skills (or lack of) did not match the demands of employers for their businesses. This failure of the Market to upskill workers, to meet the needs of business, is yet more clear evidence that without State assistance and intervention, economic growth is stifled.
If the self-regulating “Invisible Hand” of the Marketplace acted as per theory, then unskilled unemployed should be upskilled by businesses as required. This did not happen,
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2 December 2002
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The point of this history lesson is that a poorly performing economy will not maximise the use of available human labour. Or to put it more plainly, if the economy is in recession – expect high unemployment.
That is fairly simple to understand.
Those politicians, and their groupies, who talk about a “welfare lifestyle” or “welfare dependancy” are being deliberately disingenuous. These politicians are well-educated, sophisticated men and women who have a clear understanding of economic forces and their consequences.
Politicians understand that very few people are on welfare as a “lifestyle”. And “dependancy” should actually mean being dependant on state assistance – or the alternative being to starve. Those who are unemployed are as “welfare dependent” as an astronaut in space is “spacesuit dependent”.
In truth, when the likes of John Key, Paula Bennett, et al, talk of “welfare lifestyle” and/or “welfare dependancy” – they are using ‘code’ to paint welfare recipients as being the architects of their misfortune.
Because, dear fellow New Zealanders, as we all know, the unemployed here in New Zealand were sitting in the Boardrooms of Goldman Sachs, AIG, Bank of Scotland, General Motors, Lehmann Bros, etc, etc, etc, and were responsible for the chaos and misery of the 2008 Recession.
When a politician attempts to paint a welfare beneficiary as “welfare lifestyle” and/or “welfare dependancy” – they are shifting responsibility from themselves – the people with power – onto welfare reciepients – the most powerless in society- for the pitiful state of the economy here in New Zealand, and throughout the world.
I wonder if welfare beneficiaries know that they crippled the revered demi-god of Western Capitalism, and brought Wall St and City of London, to it’s knees?
Damn crafty, these benes, eh?
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Labour: the Economic Record 2000 – 2008
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There has been considerable commentary made by Labour’s critics and political opponents that Labour was an incompetant economic manager, during their nine year term in office. The reality, though, is somewhat different. There are many things that Labour did well and some not-so-well.
But the records speaks for itself.
The following is data, in the form of easily understandable graphs, from Trading Economics, an American website. They collect data from the IMF, World Bank, Statistics NZ, the Reserve Bank of NZ, etc, (the usual motley crew of subversive, left wing organisations) to compile their finished presentations.
Each category will be presented via two graphs. Eg,
“New Zealand GDP Growth Rate”
Graph 1: 2000 – 2011
Graph 2: 1990 – 2011
National was in power from 1990 to the end of 1999.
Labour governed from the beginning of 2000 to the end of 2008.
National took office After November 2008.
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New Zealand Population 1960 - 2011
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New Zealand Unemployment Rate
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New Zealand Unemployment Rate 2000 - 2011
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New Zealand Unemployment Rate 1990 - 2011
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Long-term unemployment (% of total unemployment) in New Zealand
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Some politicians use long-term unemployed as an election weapon, to win electoral support. However, despite their mis-use of the facts and figures, long-term unemployment was dropping in the last ten years. Not that certain politicians would admit it, though.
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Long Term Unemployment (% of Total Unemployment) in NZ 2000 - 2008
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Note how long-term unemployment rose in the late 1980s and spiked in the early to mid 1990s. Can we remember what happened to New Zealand in that time? The terms “Rogernomics” and “Ruthanasia” might jog our memories.
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Long Term Unemployment (% of Total Unemployment) in NZ 1990 - 2008
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New Zealand Employment
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New Zealand Employment 2000 - 2010
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New Zealand Employment 1990 - 2010
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New Zealand Government Debt To GDP
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Despite claims that Labour “spent up large” during their nine year term, the truth is completely different. As the IMF data shows with crystal clarity, Labour paid down debt. It was not until National came to office that debt levels took of again.
It could be said, with considerable truth, that Finance Minister Michael Cullen ran the government accounts with a fiscal discipline that would make Scrooge sit up and take notice.
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New Zealand Government Debt To GDP 2000 - 2011
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The IMF data shows fairly well why Labour had such massive debt kevels to pay down. It was an inheritance from the previous Bolger-led National Government of the 1990s. (Though National were addressing that debt, the reduction slowed from 1997 onward.)
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New Zealand Government Debt To GDP 1990 - 2011
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New Zealand GDP
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One of the many “charges” made by neo-liberals against the Labour Party is that centre-left governments are poor stewards of the economy and are anti-business. Yet, the World Bank data below shows quite dramatically how well New Zealand’s economy fared in the 2000s. Our growth was such that a common complaint from business was a lack of skilled, experienced staff.
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New Zealand GDP 2000 - 2010
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The early 1990s were marked by “Ruthanasia” – a continuance of Roger Douglas’s extremist neo-liberal, free market policies. All socio-economic indicators worsened during Ruth Richardson’s tenure as Minister of Finance. The World Bank data below shows how New Zealand’s economy was practically crippled under the tender mercies of the New Right.
It was not till 2003, under Labour’s governance, that the economy began to grow.
As an aside, there were took tax cuts during the 1990s. Result: minimal benefit for the economy.
Labour increased taxes for top income earners in the early 2000s. Except for a short-term ‘dip’, the tax rise doesn’t seem to have impacted on the economy.
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New Zealand GDP 1990 - 2010
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New Zealand GDP per capita
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New Zealand GDP per capita 2000 - 2009
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New Zealand GDP per capita 1990 - 2009
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New Zealand Interest Rates
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New Zealand Interest Rates 2000 - 2011
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New Zealand Interest Rates 1990 - 2011
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New Zealand Inflation Rates
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New Zealand Inflation Rate 2000 - 2011
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New Zealand Inflation Rate 1990 - 2011
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New Zealand Current Account
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This is the bit which shows how much we sell overseas (export), compared to what we buy (import). Exports can be wool, timber, fish, dairy products, company profits, etc. Imports can be fuel, consumer products, vehicles, raw materials, heavy machinary, etc. The shaded gray should be above the ‘O’ line, instead of below it.
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NZ Current Account 2000 - 2011
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NZ Current Account 1990 - 2011
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New Zealand Government Budget
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This graph is an interesting bit. When John Key and Bill English refer to the previous Labour government expanding State expenditure, this is what they are referring to. And they are correct – but only half correct. As per usual, they are telling you only half the truth – and leaving out the next, important bit.
Look at the next graph below, 1990 – 2000.
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New Zealand Government Budget 2000 - 2011
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In the graph below, it is clear that the National government from the early to mid 1990s (commonly referred to as “Ruthanasia”) and in the late 1990s, consistantly cut back on expenditure. Some of you may recall horror stories of those times; ex psych patients living rough, in toilets, with no State-community support; market housing rentals; and hospital waiting lists far longer than anything we have today.
On 3 April 1998, Southland dairy farmer Colin Morrison (42) died on a waiting list, awaiting a triple heart bypass surgery. In death, Mr Morrison symbolised everything that was terribly wrong with the health system in the late 1990s. Public anger mounted as an unpopular government seemed unable to respond to concerns that our public services were being run down in the name of “efficiency”.
Little wonder that there was a 11.55% swing toward Labour in the 1999 General election – the electorate had had a gutsful of neoliberal policies resulting in growing inequality and social problems that seemingly went unheeded. Contrasts
That is the reason why Labour spent so much during it’s term: to make up for the lack of social spending in the 1990s, and to meet growing public clamour for social services to be better resourced.
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New Zealand Government Budget 1990 - 2011
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Cash surplus/deficit (% of GDP) in New Zealand
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Contrary to the fantasies of some history-revisionists, trying to paint the previous Labour Government as “bankrupting the country”, Cullen actually posted some fairly respectable surpluses.
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Cash surplus-deficit (percent of GDP) in New Zealand
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New Zealand Sovereign Credit Ratings
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The following data-sheet shows New Zealand’s credit downgrades from 1977, when Rob Muldoon was Prime Minister, to the present.
Note that three credit downgrades happened duting three National governments; 1991, 1998, and this year. And if you include the Rogernomics period – that makes FOUR neo-liberal governments that were downgraded.
Do credit ratings agencies seem “risk averse” to new right governments? Do they prefer centre-left governments?
First, look at 10 September 1998 (National government) – AA+ (negative outlook)
But when Labour came to power – 7 March 2001 – AA+ (stable outlook)
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New Zealand Prison Population trend since 1980
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The prison sentenced population demonstrates continuous and steady growth since 1986. The seasonal pattern of reduced numbers toward the end of each year is well established, and reflects the influence of the prisoner Christmas release policy 1 , as well as cycles of activity involving Police and the Courts. Notable is the sharp upturn in numbers which commenced in mid-2003, continuing through to June 2007.
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A closer look at the period 1962 to 1996. Note the huge ‘spike’ in the prison population from 1986 onwards. Except for occassional dips, the prison population has continued to rise steadily since the mid-1980s.
It cannot be a coincidence that New Zealand’s entire socio-economic fabric was unravelled and “reformed” in a process commonly referred to as “Rogernomics”. The process of “economic reform” continued into the 1990s, referred to as “Ruthanasia”, up until 1996.
The prison population, though, continued to rise.
The ongoing effects of “Rogernomics/Ruthansia” are ongoing to the present day.
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Total prison population 1962 to 1996
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[This page still under construction – more data to follow. Keep checking back for more info.]
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