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Posts Tagged ‘Treasury’

Did National knowingly commit economic sabotage post-2008?

24 January 2013 16 comments

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cheesecolour tax cuts

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By now, it has become fairly well known that National’s tax cuts in 2009 and 2010 were unaffordable and impacted disastrously on government revenue (and subsequent spending) in following years.

In 2008, National tempted voters with promises of “self funding” tax-cuts. (Though “self funding” was never very clearly explained.)

National’s rebalancing of the tax system is self-funding and requires no cuts to public services or additional borrowing.

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This makes it absolutely clear that to fund National’s tax package there is no requirement for additional borrowing and there is no requirement to cut public services.

Source: Economy – Tax Policy 2008

The pledge of  “no requirement to cut public services  ” was also one that was made (and subsequently broken in dramatic fashion).

In May 2008, Key was making bold statements  of  “meaningful”  tax cuts,  “north of $50“,

John Key…  said National would be looking at economic figures and what other promises Dr Cullen made in the budget on Thursday… But he was very confident” National could deliver an ongoing programme of tax cuts, like that promised in 2005”.

See: National’s 2005 tax cut plans still credible – Key

Despite the growing black clouds of  a global downturn, Key was still optimistic. When questioned by Sue Eden of the NZ Herald whether National’s tax cuts programme of 2005 were still credible given uncertain economic circumstances, Dear Leader replied,

Well, I think it is.”

See: IBID

By early August 2008, as United States mortgage-institutions Fannie Mae and Freddie Mac  were  sinking into a credit crisis, Key remained defiant in the face of looming recessionary forces,

National will fast track a second round of tax cuts and is likely to increase borrowing to pay for some of its spending promises, the party’s leader John Key says.

But Mr Key said the borrowing would be for new infrastructure projects rather than National’s quicker and larger tax cuts which would be “hermetically sealed” from the debt programme.

The admission on borrowing comes as National faces growing calls to explain how it will pay for its promises, which include the larger faster tax cuts, a $1.5 billion broadband plan and a new prison in its first term.

It has also promised to keep many of Labour’s big spending policies including Working for Families and interest free student loans.

Mr Key today said there would be “modest changes” to KiwiSaver.

See: Nats to borrow for other spending – but not tax cuts

How does one ” “hermetically seal” tax cuts  from the debt programme ” ?!

The ‘crunch’ came on 6 October 2008, when Treasury released a document known as the “PREFU” (Pre-Election Economic and Fiscal Update). This Treasury report analyses and discloses the fiscal and economic state of the nation, with short and medium-term outlooks, based on international and local trends.

The 2008 PREFU started with this dire warning,

The economic and fiscal outlook has deteriorated since the Budget Update

In the five months since the Budget Update was finalised, we have witnessed a number of significant domestic and international developments: in particular, the deepening of the international financial crisis, the slowing housing market, and growing pressure on households and businesses. These developments are key factors in our updated view of the economy and the government’s finances set out in this Pre-election Update.

We are now expecting weaker economic growth over the next few years, resulting in slower growth in tax revenue and higher government expenditure. Combined with increases in the costs of some existing policies, these factors lead to sustained operating balance deficits and higher debt-to-GDP ratios.

The economic outlook is weaker …

Imbalances have built up during nearly a decade of sustained growth, including inflation pressures, an overvalued housing market, high household debt and a large current account deficit, with implications for interest rates and the exchange rate. With the economy slowing, these imbalances are starting to unwind – as are imbalances in the global economy – but there is a long way to go.

See: PREFU 2008 – Executive Summary

The opening statement went on to state with unequivocal frankness,

The international financial crisis has deepened and is having an adverse impact on global economic growth. New Zealand is expected to feel the effects of the financial crisis principally through the tighter availability and increased costs of credit, but also through a fall in business and consumer confidence, falling asset values and lower demand and prices for our exports.

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The weaker economic growth that we are forecasting is reflected in reductions in our tax revenue forecasts. Compared with the Budget Update, we expect tax revenue to be on average around $900 million lower for each of the next three years.

  • The weak outlook for the household sector will have a direct impact through GST, which is forecast to grow by around 4% per annum over the next five years, compared with 7.5% over the six years to 2007.
  • With firms’ margins under pressure and profitability low, underlying corporate income tax is forecast to decline by 3% in the 2009 June year, and growth is expected to be negligible in 2010 as accumulated tax losses offset profits.
  • A relatively robust forecast for wages over the next few years helps to keep underlying growth in PAYE up at around 5% per annum.

The largest single change in government spending in the Pre-election Update is an increase in the expected costs of benefits. Compared with the Budget Update, benefit expenses are around $500 million per annum higher, reflecting both an increase in numbers of beneficiaries as a result of the slowing economy, and the impact of higher inflation on the costs of indexing benefits.

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As a result of the various factors set out above, the government’s debt outlook deteriorates. This leads to higher debt servicing costs, which are forecast to be around $500 million per annum higher

See: IBID

Treasury continued – in considerable detail – to outline the gloomy prospects  for New Zealand’s fiscal and economic short-term and medium-term outlooks (see:  Fiscal Outlook),

In Risks and Scenarios, Treasury wrote,

Since the Budget Update, global developments have been more in line with the alternative scenario than the Budget forecast and global financial and economic conditions have worsened significantly. On the domestic front, finance companies have continued to face reduced debenture funding and more finance companies went into receivership or moratorium in the past three months. The speed and magnitude of the slowing in domestic demand has been more abrupt and greater than forecast in the Budget Update.

Reflecting these recent international and domestic developments, we have made significant downward revisions to our growth forecasts in this Update. However, the financial turmoil has intensified since the finalisation of our economic forecasts. As a result, we have seen the downside risks to our growth forecasts increase markedly, particularly in the years to March 2010 and 2011.

See: 2008 PREFU – Risks and Scenarios

Unlike his “lack of knowledge” over the GCSB monitoring of Kim Dotcom, or the Police report on John Banks, John Key cannot feign ignorance over the 2008 PREFU report,

John Key has defended his party’s planned program of tax cuts, after Treasury numbers released today showed the economic outlook has deteriorated badly since the May budget. The numbers have seen Treasury reducing its revenue forecasts and increasing its predictions of costs such as benefits. Cash deficits – the bottom line after all infrastructure funding and payments to the New Zealand Superannuation Fund are made – is predicted to blow out from around $3 billion a year to around $6 billion a year.”

See: Key – $30b deficit won’t stop Nats tax cuts

Especially when Bill English admitted his knowledge of the PREFU,

The figures outlined in the Prefu are a bit worse than we expected, and we are currently digesting them. However, National is not content to run a decade of deficits.”

See: IBID

In an example of black-humoured irony, English went on to say,

New Zealand can no longer afford Michael Cullen and Labour’s big-spending low-growth policies.”

See: IBID

But evidently New Zealand could afford National’s  “ big-tax-cutting low-growth policies“?

On 6 October 2008, Key reacted to the PREFU (proving he had full knowledge of it’s contents, and made this astounding comment when questioned about National’s planned tax cuts, at 0:40,

“REPORTER: What is your growth programme, does it include tax cuts?.”

“JOHN KEY: It certainly does include tax cuts. We have a programme of tax cuts.”

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Key reacts to 2008 PREFU figures

See: Key reacts to [2008] PREFU figures

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Key’s comments following 0:40 seem equally bizarre, and at 2:28 admits that “… we can’t deliver anything other than, ‘yknow,   a legacy of deficits for New Zealand…” – and still continues to warble on about cutting taxes, including trying to justify “debt for future growth“.

The consequences were a $2 billion hole in government tax revenue (see:  Outlook slashes tax-take by $8b;   Govt’s 2010 tax cuts ‘costing $2 billion and counting’); budget deficits (see:  Budget deficit $1.3b worse);   increased borrowings (see:  Govt borrowing $380m a week); cuts to the State sector in terms of services and jobs (see:  Early childhood education subsidies cut; 10 August: Unhealthy Health Cuts, 2500 jobs cut, but only $20m saved); and surreptitious increases in government charges and taxation elsewhere (see:  Petrol price rises to balance books; Student loan repayments hiked, allowances restrictedPrescription charges on the rise); and asset sales  (see: Govt says asset sales will cut debt).

The point of this blogpost is simple.

It’s not to look back, at the past…

… it is to look forward to the future.

When National makes Big Promises, be wary of the nature of said promises, and the underlying , invisible “hooks” contained within them.

Quite simply when the Nats offer you a “tax cut”, the first question that should pop into your head is not, “Oh goody, I wonder how much I’ll get!”

The first thought should instead be, “Uh oh, I wonder how much that’s going to cost me!”.

Because as sure as evolution made little green apples and the sun will rise tomorrow, the Nats care very little about your pay packet.

They care only about “rewarding hard work” [translation: more income for the rich] and “making the veconomy more competitive”  [translation:  implementing their neo-liberal agenda for their ideological crusade to turn this country into a Market-driven economy, away from an egalitarian society].

In the process, if they have to turn our country into a slow-rolling, economic train-wreck, then so be it.

They can always blame someone else,

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Key blames Labour for his Govt's wage gap failings

See video: Key blames Labour for his Govt’s wage gap failings

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Key even blames Labour for the  global recession !? (see @ 0:48)

In the meantime, did National recklessly  damage the New Zealand economy with unaffordable tax cuts, despite Key & Co being given ample warning by Treasury – simply to get elected in 2008?

Draw your own conclusions.

The evidence speaks for itself.

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I lied  get over it!

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Additional reading

The Atlantic: Tax Cuts Don’t Lead to Economic Growth, a New 65-Year Study Finds (16 Sept 2012)

References

National Party: Economy – Tax Policy 2008

NZ Herald: National’s 2005 tax cut plans still credible – Key (20 May 2008)

NZ Herald: Nats to borrow for other spending – but not tax cuts (2 Aug 2008)

The Treasury:  Pre-election Economic and Fiscal Update 2008 (6 Oct 2008)

NZ Herald: $30b deficit won’t stop Nats tax cuts (6 Oct 2008)

BBC News: Bank shares fall despite bail-out (13 Oct 2008)

Bay of Plenty Times: John Key: We cannot afford KiwiSaver (11 May 2011)

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John Key’s track record on raising wages – 5. The Minimum Wage

11 November 2012 4 comments

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Continued from: John Key’s track record on raising wages – 4. Rest Home Workers

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5. The Minimum Wage

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From 2004 to 2008, the minimum wage rose from $9 to $12 – an increase of $3 in four years.

From 2009 to 2012, the minimum wage rose from $12 to $13.50 – an increase of $1.50 over three years.

See: Dept of Labour – Previous minimum wage rates

Last year, Labour, the Greens, NZ First, and Mana campaigned to raise the minimum wage to $15 ($16 for Mana).

When a worker at a fast-food outlet asked John Key to raise the minimum wage to $15 an hour, he  rejected the proposal, saying,

It will go up, but it won’t go up straight away.”

See:  Raising minimum wage won’t cost jobs – Treasury

Key’s right. At the glacial speed that National increases the minimum wage, it will take another three years to deliver $15 an hour.

Yet it took only a couple of years to implement two massive taxcuts that gave hundreds, thousands,  of dollars a week, to the top income earners.

Priorities, eh?

The real insult is that  Key and English both admit that the minimum wage is difficult to live on.

Key said,

Look, I think it would be very difficult for anyone to do that.”

See:  Ibid

GUYON:  Okay, can we move backwards in people’s working lives from retirement to work and to wages?  Mr English, is $13 an hour enough to live on?

BILL ENGLISH:  People can live on that for a short time, and that’s why it’s important that they have a sense of opportunity.  It’s like being on a benefit.

GUYON:  What do you mean for a short time?

BILL ENGLISH:  Well, a long time on the minimum wage is pretty damn tough, although our families get Working for Families and guaranteed family income, so families are in a reasonable position.

See: TVNZ’s Q+A: Transcript of Bill English, David Cunliffe interview

The Department of Labour claimed  a rise in the minimum wage  would cost 6,000 jobs.

But Treasury disagreed, saying,

This has not been true in the past. The balance of probabilities is that a higher minimum wage does not cost jobs.”

Raising the minimum wage would certainly benefit SMEs (Small-Medium Enterprises), as low-income earners spend their entire wages on goods and services. Any rise in paying wages should be offset by increasing till-takings with customers spending more.

So it appears blatantly obvious that no good reason exists not to raise the minimum wage.

After all, in 2009 and 2010, National gave away far more in tax cuts for the rich.

And precisely how does this raise wages, as per Dear Leader’s promises?

Next chapter: 6. Youth Rates

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EXCLUSIVE STORY: Anti-asset sale Flash Occupation at Clemenger BBDO offices!

28 August 2012 23 comments

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Background: The Company

Clemenger Group Limited is the holding company of a group of companies involved in advertising and marketing communications services throughout Australia and New Zealand. It is the largest communications group in Australia and New Zealand. Clemenger Group Limited has about 1500 employees and is headquartered in Melbourne, Australia. 26% of the shares are held by Clemenger Communications staff and 74% by BBDO Worldwide. BBDO Worldwide is in turn part of the Omnicom Group, which the largest communications group in the world.”

Source:  Wikipedia Clemenger Group

Source: Clemenger Group/About CGL

Background: Asset Sales

Last year, National opened a tender for companies which might be interested in a multi-million dollar contract to handle an advertising/publicity campaign for up-coming asset sales,

Advertising agencies are working through the Christmas holiday period to meet a Treasury request for proposals to provide the advertising and communications campaigns that will accompany the Government’s partial privatisation agenda over the next three years.

While no budget is given for the contract, it is likely to be one of the largest new pieces of Government-funded advertising work agencies have seen for some time, but they have been given just 28 days to respond over the traditional shutdown period of Christmas and New Year.

See: TVNZ News: Ad agencies scramble for asset sales contract

On at least two fronts, the tender process was seen as dubious by various groups.

Firstly,

A formal Request for Proposals was issued on Decermber 15, with a deadline of January 9 for responses, leading industry veterans to suggest the Treasury has already made a choice of agency, but needs to follow Government rules requiring a tender process.

Advertising consultant and agency developer Mike Hutcheson says it is likely the Treasury already knows who they will give the job to, and this kind of fast-tracking is typical of such Government contracts.

“It’s a bit of a charade that Government departments and local authorities always go through because their choice is quite limited. There will be relatively few who can actually handle it,” said Hutcheson.

“Government departments have to go through a process and in fact it’s meant to be quite a transparent process, but usually it’s pre-determined.

“There will be someone in Government who would favour someone for sure. They’ll want someone to win, and whoever it is generally knows in advance”. “

See: Ibid

Secondly, the Green Party pointed out that seeking tenders for contracts over the December/Christmas and Easter period contravened Department of Prime Minister and Cabinet (DPMC) Guidelines for best-practice. The Guidelines states,

Unless it is unavoidable, government entities should be sensitive to the needs of busy people and not initiate tendering processes in the three weeks before Christmas, the week after Christmas and around Easter.”

See: Asset sale contract ‘broke rules’

So, not only was the timing of the tender process seen as disturbingly hasty by some – but it was held over a period which the Department of Prime Minister and Cabinet guidelines itself stated quite clearly, should be avoided.

A spokeswoman for Treasury, Chris Major, said whilst Treasury was ‘mindful’ of DPMC’s guidelines, that,

Those guidelines note that RFPs should be avoided at Christmas if possible; in the case of the Mixed Ownership Model programme it was deemed necessary and unavoidable to proceed with procuring advertising and communications services in December/January.”

See: Ibid

It’s hard to understand why Treasury wanted “to proceed with procuring advertising and communications services in December/January”  – no advertising or publicity has taken place either last year or this year.  Only a website has been put up, and there is no apparent reason for urgency in that regard.

Someone, it appears, was in a hurry to award this particular contract.

The tender process closed on 9 January 2011, and the lucrative contract was awarded to Australian-based company,  Clemenger BBDO, thereafter,

State-Owned Enterprises Minister Tony Ryall said Treasury made decisions about contracts.”

In which case, why have a Minister of the Crown?  Why not have Treasury run the country (gods forbid)?

Is this  the sort of  “personal responsibility” that National continually demands from the public – but not from themselves?  The “Buck Does Not Stop Here”, obviously.

Clemenger BBDO will be paid a multi-million dollar sum for the contract, but National has refused to disclose the figure, citing “commercial sensitivity”,

Finance Minister Bill English yesterday told Parliament the cost of the contracts were commercially sensitive but the Government would release figures ”in due course”.”

In effect, politicians are handing over unknown  millions of dollars of our money, to corporates,  to sell our own state assets, to corporates.

Al Capone was in the wrong job.

Tuesday, 28 August: Aotearoa is Not For Sale organised another ‘Flash Occupation’ – this time targetting Clemenger BBDO in Kent Tce, Wellington.

At around 2pm, the small group of a dozen activists – some in corporate attire – met at Te Aro (Pigeon) Park, in Manners St. The group discussed tactics; reaffirmed a committment to non-violence; and practiced singing several anti-sale songs. The songs were popular titles such as “Down by the Riverside“, which had been adapted for the current situation, and re-titled, “We’re gonna stop the asset sales“,

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Placards and banners were prepared, including this new one, “No Asset Sales – No Higher Prices – No Corporate Welfare“,

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All in readiness, the group set off to Kent Tce, a ten minute walk from the Park,

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The group was in good spirits, and continued practicing singing the songs we would soon be sharing at the offices of Clemengers,

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Target dead ahead; the corporate offices of Australian-based, Clemengers BBDO. Interesting to note that being an overseas-owned company, any fees paid to this company will be remitted offshore, to foreign shareholders.

The sale of our state assets was already resulting in the outflow of profits to overseas investors,

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A brief demonstration took place outside the company’s doors. Considering the honking of car horns, it was evident that the public supported our presence, and more importantly, the message we were conveying,

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The group then headed into the building,

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The target of our ‘Flash Occupation’, emblazoned on the wall of the ground floor foyer,

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And into the Reception Area, where a startled receptionist was the first to see the messages we had brought to Clemengers,

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The Flash Occupation broke into song, as we moved through the offices,

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At all times, the event was recorded. Not just to spread the event through on-line video, but to protect against mischievous allegations of violence or damage,

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As the protestr moved through the offices, leaflets were distributed outlining why we were there and explaining why Clemenger’s participation in asset sales was unacceptable,

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We sang our protest songs with gusto, and this blogger noticed more than a few office workers smiling to themselves. (Ok, we won’t be appearing any time soon on the next  “New Zealand’s Top Idol“…)

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But we gave the Clemenger’s staff seated behind the activists entertainment, and a clear message: Aotearoa is not for sale!

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At this point, Clemenger’s Wellington Managing Director, Andrew Holt (center, white shirt), appeared and advised us that the police had been called and that we should leave.

We stood firm. We had more songs to sing, and a final message to read out,

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The singing continued. We would not move on until our message had been delivered, in full, and understood by everyone at Clemengers,

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Andrew Holt  (standing behind banner) stood with some of his staff (unseen, behind banner), as the singing came to an end,

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Shane read out a message, as Andrew Holt looked on, and  listened,

“The power companies Mighty River Power, Genesis Energy, and Meridian Energy belong to those who built them from scratch, benefitted from them in the past and benefit  from them today;

all New Zealanders.

The proposed sale of these State Owned Assets means the transfer from public into private ownership of these essential national services. We know that this will result in higher power prices for thepublic and loss of control of our electricity-generating capacity.

We think your role in this process is outrageous and we, as members of the public, object to paying fees to you to help sell what we already own.

No sale of state assets!”

In the background, another Clemengers staffer can be seen on the phone – talking with police?

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Having delivered the message, the ANFS activists departed from the building peacefully, and with no damage or mess  left behind.

Another Flash Occupation peacefully and successfully completed, the group separated and departed.

Clemengers was now the second corporation, connected to asset sales, that had been visted by a Flash Occupation.

See: Anti-Sale protestors invade Bell Gully offices

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Copyright (c)  Notice

All images are freely available to be used, with following provisos,

  •     Use must be for non-commercial purposes.
  •     Where purpose of  use is  commercial, a donation to Child Poverty Action Group is requested.
  •     For non-commercial use, images may be used only in context, and not to denigrate individuals.
  •     Acknowledgement of source is requested.

Additional

NZ Parliament:  Questions for Oral Answer: State-owned Energy Companies and Air New Zealand, Sales—Contracts for Related Services

Scoop.co.nz: Govt ignores ad guidelines for SOE contract

Fairfax: Asset sale contract ‘broke rules’

Contact

Aotearoa Is Not For Sale – Facebook

Aotearoa Is Not For Sale – Website

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ACC – A Complete Cock-up

22 June 2012 1 comment

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Revelations unearthed and made public by the Green Party, that ACC paid bonuses to their staff to ‘bump’ long-term clients from their books comes as no surprise. Only the most naive would still believe that everything was hunky-dory at ACC.

See:  ACC bonus pay for claimant cull

Faced with the revelations, ACC Minister, Judith “Hugs’n’Crushes” Collins belatedly admitted that ACC staff are paid bonuses, and tried to justify the payments as  “a good thing” because ‘it gets the clients back to work’.

Yeah, right.

Nice spin, Minister.

Then ACC’s departing chief executive Ralph Stewart chipped in, rejecting accusations that bonuses were made to bump clients of ACC’s books,

No one can leave ACC until they are rehabilitated. There are two clear steps. The rehabilitation step’s first, leaving the scheme second – it’s not the other way around.”

See:  ACC claimants removal motive denied

Let me put this as delicately as I can: bullshit.

This blogger is aware of at least one person in the late 1990s,  who was bumped from ACC’s books and onto a WINZ invalids benefit, after a work-related back-injury.  ACC actually paid for the client to be flown from Dunedin to Auckland, to be  “assessed” by one of ACC’s “independent” consultants.

Result; she was taken off ACC’s books and made a WINZ “client”.

If anyone wonders why the numbers of invalids and sickness beneficiaries have risen in past decade – whilst ACC’s long-term clients have reduced – wonder no more. This is where invalids/sickness beneficiaries have come from.

This is backed up by a  2007 report on ACC clients  removed from ACC’s books,  showing 46% were out of work, with nearly 25% on the unemployment benefit.

See:  Long-term ACC client list pruned

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WINZ Beneficiaries

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Actual MSD figures

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ACC long-term clients

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Source

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The woman in question received no rehabilitation and her back injury persists to this day.  “No one can leave ACC until they are rehabilitated” – therefore rings hollow in this blogger’s mind.

It is a bit rich for Ralph Stewart to be rejecting that bonuses were made to reduce long-term ACC clients – whilst at the same time   admitting,

Mr Stewart said long-term claimants have dropped by about 1200 since November, to about 10,400-10,500, but denied he was put in the job to move on claimants.

He said only 20 percent of staff incentives relate to rehabilitation.”

This is the same man who,

  • oversaw  ACC’s  accusations of extortion levelled against Ms Pullar and laid a complaint with the Police;
  • during the police investigation had listened to Bronwyn Pullar’s taped conversation of a meeting held between ACC staff; Michelle Boag; and herself;
  • and yet stayed silent at a subsequent media conference that the taped conversation actually proved Pullars innocence!

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ACC Chief Executive Ralph Stewart and Chairperson John Judge

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Aside from the very real possibility that ACC’s executives may be guilty of the crime of wasting Police time (see:  The Jackal: ACC’s false police complaint against Bronwyn Pullar), why on Earth should we believe anything that escapes Ralph Stewart’s mouth?

Ralph Stewart is not averse to mis-representing facts when his suits his agenda. He has already demonstrated that his word cannot be taken at face-value.

The evidence is compelling: ACC is mis-using Corporation funds to pay it’s staff bonuses to push long-term clients off its books.

Next question: what is Judith Collins going to do about it?

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Additional

ACC minister put pressure on bosses to make complaint – Labour

TV3 Sixty Minutes:  The Eye of the Storm

Gordon Campbell on the incentive payments at ACC

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Fifty cents an hour? I’m under-whelmed by Dear Leader’s Generosity…

8 February 2012 5 comments

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Labour Minister Kate Wilkinson today announced a 50 cents per hour  increase in the minimum wage, from $13 an hour, to $13.50 an hour.

Our Dear Leader says,

Between making sure that people can feed their children and look after their families and themselves and also ensure that they keep their job…

“…We’re on our way to the magical $15 people talk about, but we can’t get there in one step.” – John Key, 8 Feb

Dear Leader is now saying that families  “can feed their children and look after their families” on minimum wage?!

That’s not what Bill English said last year.  When questioned by Q+A’s Guyon Espiner on this issue, English responded,

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GUYON:  Okay, can we move backwards in people’s working lives from retirement to work and to wages?  Mr English, is $13 an hour enough to live on? 

BILL:  People can live on that for a short time, and that’s why it’s important that they have a sense of opportunity.  It’s like being on a benefit.

GUYON:  What do you mean for a short time?

BILL:  Well, a long time on the minimum wage is pretty damn tough, although our families get Working for Families and guaranteed family income, so families are in a reasonable position.Source

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In today’s “Dominion Post“,  Kate Wilkinson says that, “Government was advised raising the minimum wage would result in up to 6000 job losses“.

Noticeably,  she does not disclose what advice, or from whom, she is referring to. It can’t be Treasury advice, because as TV3′s Patrick Gower reported on his blog last year,

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“…research from the United Kingdom suggests minimum wages may have no effect on employment, or that minimum wage effects may still exist, but they may be too difficult to detect and/or very small.” – Source

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NZ  Treasury stated that “…the claim a minimum wage rise may cost jobs has not been true in the past“. – Ibid

In other words, Wilkinson and Key are making it up as they go along. And finding it increasingly difficult to keep their ‘stories’ straight, it would seem.

On the other hand, there is little ambiguity in this story from a couple of years ago,

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It beggars belief that New Zealanders – a national once proud of their  egalitarian society – can view this situation with anything but angry disdain.

When did it become socially acceptable that the richest 1% increased their wealth by a massive 20%, as well as gaining the greatest benefit  from the 2009 and 2010 taxcuts, whilst those on the minimum wage increase their income by a measely 50 cents an hour?

50 cents an hour. Or $20 a week.

By contrast, our elected representatives did very well last year from their pay increases.

Do you want to know what MPs, Ministers, and the P.M. are now paid?

Click here

John Key’s words continue to  echo throughout New Zealand,

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We will be unrelenting in our quest to lift our economic growth rate and raise wage rates.” – John Key, 29 January 2008

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Here’s a thought, Dear Leader; if the top 1% could increase their wealth by 20% – why not increase the Minimum Wage by precisely the same amount?

That would raise the minimum wage to $15.60 an hour.

Still not as high as our Aussie cuzzies enjoy – but getting there.

So what about it, Dear Leader, are you keen to share the wealth around a bit?

Show us how “unrelenting” you really are.

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Previous Blog post

Bill English: Minimum Wage Not Sufficient to live on!

Treasury’s verdict on raising the Minimum Wage? – Part II

Additional

Minimum wage rising by 50c

Other Blogs

NZ Govt celebrate Charles Dickens’ 200th birthday with 50 cent increase in minimum wage

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Government sprung on SOE sale plan!!

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Full Story

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As well as trying to “quietly” drop all references to Treaty obligations, under Section 9 of the SOE Act 1986 – something guaranteed to buy a fight with their coalition partner, the Maori Party -  there are other  revelatory aspects  of the draft Treasury document that should  also be a matter of considerable concern.

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[1]

The Government’s mixed ownership model

Intitial public offerings (IPOs)

An initial public offering, or share float as they are often called, is a way of selling some or all of a  company to a large number of investors. Shares in the company are offered for sale to retail investors (individuals, sometimes referred to as “mums and dads”) through an advertising campaign to the public and through shareholders.Source

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Intitial public offerings (IPOs)

Once a minority shareholding in each company is sold, the government proposes that the company will be governed in the same way as other listed companies and that they will be subject to the Companies Act 1993 and other relevant legislation, the NZX listing rules and the companies’ constitutions.  The crown will not reserve any special rights  to itself, except that it is still to decide whether it will a have any special power to approve the chairman of the Board, as it has for Air New Zealand.” Source

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With regards to Paragraph 1, above, it is interesting that the Treasury report refers to “retail investors (individuals, sometimes referred to as “mums and dads”)“. In effect, it is a ‘slip’ on Treasury’s part, acknowledging the reality that “mum and dad investors” is simply propaganda “code” (newspeak) for common, garden-variety, investors.

There is nothing “mum and dad-ish” about corporate share-brokers working on behalf of investment companies.

Government uses the term “mum and dad investors” to hide the reality that shares in part-privatised SOEs will be purchased by individuals in dapper suits and silk ties, operating  out of very nice offices, on behalf of Very Big Corporate Clients.

Government myth: busted.

Paragraph 2, above, is even more insidious and refers to, “Once a minority shareholding in each company is sold, the government proposes that the company will be governed in the same way as other listed companies and that they will be subject to the Companies Act 1993 and other relevant legislation…” and furthermoremore, “The crown will not reserve any special rights  to itself…”.

In effect, once partially-privatised, the Government intends that none of  the entire State Owned Enterprise will  be governed by the State Owned Enterprises Act 1986. (Not just the privatised 49% part.)

Specifically, Section 4 of the Act,

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 Principal objective to be successful business
  • (1) The principal objective of every State enterprise shall be to operate as a successful business and, to this end, to be—

    • (a) as profitable and efficient as comparable businesses that are not owned by the Crown; and

    • (b) a good employer; and

    • (c) an organisation that exhibits a sense of social responsibility by having regard to the interests of the community in which it operates and by endeavouring to accommodate or encourage these when able to do so.

    (2) For the purposes of this section, a good employer is an employer who operates a personnel policy containing provisions generally accepted as necessary for the fair and proper treatment of employees in all aspects of their employment, including provisions requiring—

    • (a) good and safe working conditions; and

    • (b) an equal opportunities employment programme; and

    • (c) the impartial selection of suitably qualified persons for appointment; and

    • (d) opportunities for the enhancement of the abilities of individual employees.

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And most specifically, this part of  it’s Principal Objectives,

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“…an organisation that exhibits a sense of social responsibility by having regard to the interests of the community in which it operates and by endeavouring to accommodate or encourage these when able to do so.”

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Any committment to promoting clean, sustainable energy; considering the needs of the community in it’s activities; and other social responsibilities will all vanish if  the SOEs concerned are “ governed in the same way as other listed companies and that they will be subject to the Companies Act 1993 and other relevant legislation… [and] …the crown will not reserve any special rights  to itself…”

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In the case of Genesis Energy, Mighty River Power, and Meridian Energy – their sole objective will be to make greater profits for government and private share-holders.

Those profits will be generated by raising power prices.

Guess who pays those higher power prices? (Clue: look in the mirror.)

Right about now, any person reading this who voted for National last year must be entertaining serious regrets at ticking “National” for the Party Vote. Those folk who voted for National – and conversely, those who failed to go out and vote for an alternative Party opposed to asset sales – must be wondering if they will end up paying for their voting choices.

Of course they will  pay for voting National.

Every month. When their power bill comes in.

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Additional

NZ Herald: Asset sale draft plan internet blunder

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If size doesn’t matter…

5 February 2012 6 comments

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Source

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Well, it seems that we’re about to witness yet another broken promise from this shabby government. It seems that after three years, John Key, Bill English, and their mates were hoping we had forgotten their pledge “that National will not cut spending to education“.

Because now we have this,

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Source

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It occurs to me that…

“I can tell you categorically that National will not cut spending to education,” the party’s education spokeswoman Anne Tolley said in a statement today.” – Anne Tolley, 5 August 2008

conflicts with…

Finance Minister Bill English is not ruling out an increase in class sizes, saying all Government departments are tasked with finding ways to save money, and staff costs are one of them.” – Bill English, 3 February 2012

Bill English’s comments that “there is clear evidence that class size does not significantly affect the quality of students’ education” is all rubbish, of course. Common sense will tell us that a teacher can give more attention to each child in a class of 20 – than s/he can in a class of 40. Especially if there are children with disabilities; special needs; or just plain disruptive kids in the room.

Professional studies confirm this common sense approach.

But even if it were true that  “class size does not significantly affect the quality of students’ education” – can that  rule-of-thumb be applied elsewhere?

What about… the government Cabinet?

New Zealand reportedly has one of the biggest Cabinets (ministers, and suchlike) for a country the size of ours,

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New Zealand Cabinet:  28

Population: 4.4 million

Ratio: 1/157,142

British Cabinet: 23 (currently)

Population: 62.2 million

Ratio: 1/2.7 million

Australian Cabinet (Federal only – excluding State Cabinets): 21

Population: 22.8 million

Ratio: 1/1.08 million

Irish Cabinet: 20

Population: 6.2 million

Ration: 1/310,000

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We have more Cabinet minister per head of population than Britain, Australia (Federal Parliament), and Ireland.

And it’s costing us truckloads of cash. Ministers of the Crown don’t come cheap these days,

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How They’re Paid

Prime Minister -  New salary (backdated to July 1): $411,510. Was: $400,500.

Deputy Prime Minister -  New salary: $291,800. Was: $282,500.

Cabinet Minister -  New salary: $257,800. Was: $249,100.

Minister Outside Cabinet -  New salary: $217,200. Was: $209,100.

Speaker and Opposition Leader – New salary: $257,800. Was: $249,100.

Backbenchers – New salary: $141,800. Was: $134,800.

Source

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So, excluding the Prime Minister, 27 cabinet ministers is costing the tax-payer;

Deputy PM: 1 X $291,800 (p/a) = $291,800

Cabinet Ministers: 18 X $257,800  (p/a)  = $4,640,400

Ministers Outside Cabinet: 8 X $217,200 = 1,737,600

Total cost of Cabinet, per annum (ex Prime Minister) = 6,669,800

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Six point six million dollars each year. Throw in one smile & wave Prime Minister at $411,510 p/a, and the wages bill for that talkfest comes to over $7 million a year.

And that figure does not include allowances such as housing, superannuation, etc.

If we followed the Irish ratio, we would have fourteen ministers (including the PM), or, one Minister per 314,285 people (approximately). That would roughly halve the cost of Cabinet minister salaries.

And if a Minister needed assistance, there are another 106 or 108 (depending on over-hangs) MPs in Parliament who could assist with Ministerial duties (but still be paid a Back-bencher’s salary).

So what about it, Mr English?

If “class size does not significantly affect the quality of students’ education” then obviously, we should be able to apply precisely the same rule to Cabinet,

Cabinet size does not significantly affect the quality of  Ministers’ performance.

And we could plow the $3.5 million (approximately)  saved, plus ministerial perks, into training and hiring more teachers to educate our children.

Brilliant!

We can start on Monday.

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Tax cuts & school children

2 February 2012 3 comments

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Source

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Despite recession hitting our economy in 2008, and despite a looming $30 billion deficit, John Key’s government proceeded with tax cuts in April 2009 and October 2010.

To make up for the billions lost in taxation revenue, government borrowed millions every week,  from overseas banks, and began a programme of harsh cost-cutting,

Finance Minister Bill English is is not ruling out an increase to the ratio of students to teachers, saying all Government departments are tasked with finding ways to save money, and staff costs are one of them.

Mr English says there is clear evidence that class size does not affect the quality of students’ education.” – Source

What did the tax cuts cost us?

The PSA published the following report,

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Tax cuts widen the gap between rich and poor

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  •  Government chose to make tax cuts in worst recession in 70 years
  •  Total tax cuts worth $5.5 billion
  •  Top 10% income earners got tax cuts worth $2.5 billion
  •  GST increased to 15% – hurts low and middle income most
  •  Tax cuts + GST left $1.4 billion hole in budget

Since 2008, National has introduced tax cuts that cost New Zealand around $5.5 billion a year in lost revenue. Most of the benefit has gone to the wealthiest.

National’s first set of tax cuts – the personal tax cuts and ‘Independent earner rebate’ taking effect in April 2009 – cost approximately $1 billion a year.

The second set of cuts – cutting the top income tax rate from 38% to 33%, and the company rate to 28% – will cost $4.5 billion a year, according to figures from the 2010 Budget. That gives a total of $5.5 billion.

National claimed that because it was also increasing GST, the tax changes would be “revenue neutral” – that is, the increase in GST would cancel out the income tax cuts. In fact, the losses from the income tax cut will outweigh the gains from GST by $1.4 billion. In other words, the so-called “tax switch” has blown a $1.4 billion hole in the budget.

The tax cuts have also made New Zealand a less fair place. According to Labour, the wealthiest 10% of New Zealanders will get 43% of the tax savings. And the gap in take-home pay between someone on $30,000 and someone on $150,000 a year grew by $135 a week as a result of the tax cuts.

New Zealand’s income tax rates are among the lowest in the OECD, as the Tax Working Group acknowledged.
In Australia , for example, income over $80,000 is taxed at 37%, and income over $180,000 is taxed at 45%.

Figures from the OECD itself show that, before National’s tax cuts, New Zealand’s “all in” top income tax rate – a measure that includes all taxes on income, including local and regional ones – was 38%. In contrast, the all in top income tax rate in Australia was 47%, and in most countries it was higher still.

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Bill English says,

…all Government departments are tasked with finding ways to save money, and staff costs are one of them.”

No doubt as part of government’s desperate attempt to cover the “$1.4 billion hole in the budget“, courtesy of their  ’09 and ’10 tax cuts.

The tax cuts have benefitted the top 10% of our economy, with the top 1% increasing their wealth by a staggering 20%,

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Full Story

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Even John Key did rather well out of the tax cuts,

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Source

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For John  Key,  to suggest that the latest research showed the income gap in New Zealand was actually narrowing, is breath-takingly disingenuous. The reality of every day life for New Zealanders is different from that of a millionaire who has long since lost touch with Mr and Mrs Everyperson,

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Full Story

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It’s abundantly clear: Government is cutting the very social services that we need, to remain a First World nation.

National gave us tax cuts and put a few extra dollars into our pockets – and a whole lot more into the deep pockets of the country’s richest people.

New Zealanders obviously haven’t got their heads around one simple, inarguable fact; we don’t get something for nothing. If we want social services, then we need to pay for them.

Now, the chooks have come home to roost. We are having to pay for those tax cuts – or rather, our children are paying. Children who never voted for this shabby government.

I wonder what the 1,058,638 people who voted for this government are feeling right now? Are you folks feeling warm fuzzies?

Because all I’m feeling is the chill of a society that values tax cuts more than our children and their future.

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Blood from a stone?

27 January 2012 4 comments

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Full Story

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Why do I get the impression that this story just screams desperation, from this government?

Aside from the fact that many sceptics voiced doubts last year about National’s optimism to “balance the books”, and considered it nothing more than election propaganda for gullible voters, Dunne’s comments on this issue beggar belief,

“‘We just had public consultation on the use of mixed assets such as holiday homes and launches, and we’ve been doing other work looking at the tax treatment of various forms of activity.”

”That programme needs to be ongoing… what we should be doing is making sure we are collecting all the existing taxes which are due and if there anomalies and loopholes we need to be closing those to make sure the system is fair to everyone.’

It was estimated the Government was missing out on hundreds of millions of dollars of revenue a year.” – Ibid

Whut?!?!

We just had public consultation on the use of mixed assets such as holiday homes and launches

“…what we should be doing is making sure we are collecting all the existing taxes which are due and if there anomalies and loopholes…”

Isn’t this precisely what Labour was suggesting last year with it’s Capital Gains Tax?

The Green Party certainly made that connection,

“Bill English has failed to close the single largest remaining loophole in our income tax system. A comprehensive tax on capital gains (excluding the family home) is hugely progressive and would help close the growing gap between rich and poor,” said Green Party Co-leader Dr Russel Norman.

“Treasury advice to Bill English in 2009 made it clear to him that capital assets are owned disproportionately by higher income families. The advice said not taxing this income is regressive. That’s Treasury’s way of saying that a capital gains tax is incredibly fair.

“Both John Key and Bill English have consistently defended the tax loophole, however, preferring to ignore growing inequality in our society…”

…“The largest proportion of capital gains is earned by those at the upper end of the income spectrum. This income currently remains untaxed,” said Dr Norman.

“This tax loop-hole for those that can afford to own multiple properties needs to be closed.” ” – Source

So much for John Key stating last year,

Scrapping the top income tax bracket reduced the value of highly leveraged investment properties as a tax shelter, while tougher rules on depreciation and LAQCs also reduced their relative attractiveness as investments.

Labour, Prime Minister John Key declared on Monday, is “fighting a problem they had when they were in office, not a problem we have today”. ” – Source

Yeah right, Prime Minister. Unfortunately, simply saying that didn’t make the problem go away, did it?

Gareth Morgan pointed all this out to us, last November,

It’s difficult to detect any sort of principle – liberal or otherwise – in the economic policies we could reasonably expect to address the widening income gap. Gaping loopholes in our tax system permit those with wealth to earn tax-free gains – putting them further ahead than ever.

While the Government sees fit to give a handout to working families earning $100,000 per year (nearly twice the average wage), those who can’t meet bureaucratic hoops miss out on support altogether and we have abandoned targeting in toto for the politically powerful (the elderly).

Equally worrying, current tax policy incentivises investment for capital gains, causing excessive investment in property at the expense of business – something which has hindered the long-term outlook for incomes and jobs.” – Source

So for United Future leader Peter Dunne to try to excuse their inertia by saying  “that the Prime Minister could not have foreseen a dramatic slide in global economic conditions“, is disingenuous.

No. Not disingenuous. Let’s call it for what it really is: bullshit.

National’s tinkering with the tax system is not going to address the shortfall in government revenue. We will simply see more of the above headlines in future media, as the core-problems in our taxation system go unaddressed.

National simply does not have the intestinal fortitude to address taxation problems in any meaningful way. If they did, they would,

  • Implement Labour’s capital gains tax
  • Stop Trusts from being tax havens
  • Reverse the 2009 and 2010 tax cuts for those earning above $70,000
  • Implement a Financial Transactions Tax
  • Review Working for Families payments for families earning over $100,000

Unfortunately, none of the above will happen. Generally, only reformist Labour governments have the inclination to make radical changes when they become blindingly obvious as necessary.

It also takes a collective frustration from Voterland to “connect the dots” and realise that voting for National will not achieve longterm reforms.

In the meantime, Dunne will tinker; National will continue cutting services; government workers will continue to be sacked; and we’ll see more of the following, as our economy stumbles along like a diabetic with low blood sugar,

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Full Story

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Additional

NZ Herald: The case for a tax revolution

Gareth Morgan: Capital gains tax best way to tackle rot

Gareth Morgan: Reviving the values of an egalitarian society

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Jobs for the bro’s?

20 November 2011 1 comment

10 September 2011

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Is it me – or does this sound plain wrong

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Full Story

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Why was the position not advertised, as is common practice?

Is this an example of nepotism? (Silly question. Of course it is.)

And at a time when this government has thrown thousands of government workers out of their jobs, and onto the unemployment scrap-heap – how much is this “advisor” job costing the tax-payer?

As an indication, this case might give us an idea,

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Full Story

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And once again, the highly-paid “advisor” involves the English family.

Another case,

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Full Story

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So much for this government “cutting expenditure”. They are sacking ordinary workers – and rehiring “advisors” aid exorbitant amounts of tax-payers’ money?

What on Earth is going on here?

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+++ Update +++

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It appears that the ‘heat’ has gone on Tony Ryall in this matter.  He and his colleagures may have been hoping that Mervyn English’s appointment slipped in “under the radar” – but New Zealand is too small a country for that to happen.

Appointments of family and friends to jobs that are not publicly advertised is never a good look, and it is surprising that the government was silly enough to think they could get away with it. It reeks of corrupt practice.

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19 November 2011

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And yet more of the same…

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Full Story

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Katherine Rich has been appointed to the Health Promotion Agency Establishment Board, which replaces the Alcohol Advisory Council.

The move has outraged advocacy group Alcohol Action. Spokesperson Doug Sellman says Ms Rich has been one of the most vociferous defenders of the alcohol industry.

Professor Sellman says supermarkets normalise alcohol as an ordinary commodity and sell it by the tonne at ultra-cheap prices up to 24 hours a day.Ibid

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The Labour Party agrees the appointment of Katherine Rich is too much a conflict of interest.

Health spokesperson Grant Robertson told Radio New Zealand while he holds Ms Rich personally in high regard, he believes her role with the Food and Grocery Council does clash with being part of such an agency.

“I think the linkage with her role supporting and advocating for the supermarkets is unfortunate and doesn’t sit well with the health promotion role that the future agency will have.”

However, in a written statement on Saturday, Health Minister Tony Ryall says Ms Rich, a former National MP, was appointed for her experience, balance and integrity.” Ibid

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(L-R) National MPs Simon Powell, Katherine Rich, former National leader Don Brash, National MPs Nathan Guy and Gerry Brownlee applaud John Key as he delivers his speech as the New Zealand National Party launch their election campaign at Sky City on October 12, 2008 in Auckland, New Zealand.

Source

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Stacking government and quango roles with party hacks (even if they are talented party hacks) seems to be a time-honoured tradition that National is loathe to depart from.

However, the Radio NZ report does raise an important question regarding her appointment to  the Health Promotion Agency Establishment Board, which replaces the Alcohol Advisory Council.

ALAC was an organisation dedicated to raising awareness of New Zealand’s considerable alcohol related (some say fueled) problems.

2009 BERL report estimated that “$4.437 million of diverted resources and lost welfare” could be directly attributed to alcohol abuse. That $4.4 billion  is reflected in  ACC, hospital admissions, crime, family violence, lost productivity, etc, and places a firm dollar cost on the harm that alcohol abuse is causing NZ society. These are costs we all pay for through ACC levies and taxes spent on medical intervention; policing; and the justice system.

Whilst working for the Food and Grocery Council, Ms Rich was a firm advocate of liberal laws surrounding marketting and retailing of alcohol.,

The New Zealand Medical Association (NZMA) and Alcohol Advisory Council (Alac) strongly backed the recommendations.

Alac chief executive Gerard Vaughan said it set out a clear objective of reducing alcohol-related harm which stretched to structure and role changes for the district licensing agencies responsible for managing liquor licensing in their own communities.

Communities up and down the country were sick of the violence and vandalism that came with drinking and that proposed changes to licencing regimes would help address the problem, Mr Vaughan said.

Nearly 3000 submissions were received by the commission, many of which supported the tightening of laws around alcohol sales, purchasing and consumption.

But NZ Food and Grocery Council chief executive Katherine Rich said the report reflected “classic nanny state thinking.”

It failed to target those causing the problems and punished everyone, she said. The industry was already one of the most regulated, and more sensible ways to approach existing problems included better enforcement of current rules and better use of legal powers, along with industry-led initiatives.”   Source

New Zealand has a $4 billion-plus problem with alcohol abuse (BERL report) and Katherine Rich dismissed attempts to address this crisis as “classic nanny state thinking“.

Thank you, Ms Rich. It’s nice to know where you stand on social problems that affect us all.

It is worthwhile reflecting that since liquor laws were de-regulated in the mid 1980s (as part of the wave of Rogernomics “reforms”), that 25 years later things have gotten steadily worse. In those 25 years, the free market system has reigned practically unchallenged and unchanged.

Somehow I think “Nanny State” has little to do with it.

Nanny is still nursing a hang-over from the last 25 years.

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Related

A kronically inept government

Community Needs vs Business Demands

New Zealand 2011AD: Drunken Mayhem and a nice Family Day Out

Our ‘inalienable right’ to destroy communities through alcohol abuse

Govt’s consultants’ bill $375m and rising

 

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Treasury’s verdict on raising the Minimum Wage? – Part II

19 November 2011 2 comments

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Throughout this election, John Key has been criticising Labour’s policy to increase the minimum wage from $13 to $15 an hour, citing a Department of Labour (DoL) report that such a move would cost the country 6,000 jobs. Key even referred to this in his Leader’s Debates with Phil Goff.

Except… that Treasury has dismissed the DoL’s “claim” by stating that raising the minimum wage “has not been true in the past“.

John Key has been well aware of  Treasury’s debunking of DoL’s “claims”, according to a Official Information Act request made by TV3,

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Full Story

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Unless Treasury has become a  satrap of Socialist International, it seems pretty hard to dismiss their  conclusions. The DoL’s case is not helped by their own contradictions,

“…research from the United Kingdom suggests minimum wages may have no effect on employment, or that minimum wage effects may still exist, but they may be too difficult to detect and/or very small.” Ibid

I believe that the so-called  DoL “report” can be safely dismissed as not very intellectually rigorous.  And not even half clever.

The government claims that recent taxcuts, last year and in 2009, were “fiscally neutral”. But even this is not true.

National’s first round of tax-cuts, which took effect in April 2009, benefitted high income earners the most. Low income earners recieved very little,

The cuts are proportional to wages. Those earning $100,000 or more a year will get at least an extra $24 dollars a week. Anyone on the average income of $48,000 a year will get an extra $18 a week, and low income earners will get a $10 a week tax credit.

On a monthly basis, both tax cuts together will see those earning $100,000 pocketing an extra $225, and low income earners an extra $95 a month.” Source

The October 2010 round of tax cuts were just as bad for low income earners, and generous for high earners,

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Source

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Those on minimum wage recieved an extra $6.36.  Meanwhile someone earning $120,000 benefitted from between $46.08 to $89.04.

With growing inflation reaching a 21 year high, to 5.3%;  increasing ACC charges and rates; any gains made by low income earners and those on social welfare and superannuation were quickly eroded.

Little wonder that the end result was a transfer (“trickle up”) of wealth from the poor and middle classes, to the wealthy.

The report’s 2004 data – the latest available – reveals the richest 10 per cent collectively possess $128 billion in wealth, with median individual wealth of $255,000. In contrast, the poorest 10 per cent collectively possess $17.2b, with median individual wealth of $3200. While the richest 1 per cent held 16.4 per cent of the country’s net wealth, the poorest 50 per cent owned just 5.2 per cent. ” Source

Which, unsurpringly, means we are seeing more headlines like these in our media,

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Full Story

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The Dominion Post article goes on to state,

Data from the Organisation for Economic Co-operation and Development shows New Zealand’s income inequality climbed dramatically in the 1980s and 1990s after sweeping economic reforms and deregulation of labour markets.

Disparities have plateaued since 2000, largely thanks to Working for Families tax credits, bigger pay packets for middle and low-income earners and declining investment returns for the rich.

But the gap between rich and poor still ranked ninth worst in the developed world in 2008.” Ibid

How well have the top richest done in New Zealand?

About this well,

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Full Story

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The top 150 Rich Listers’ wealth grew by 20%.

That’s quite an achievement during one of the worst recessions in recent history. But even that increase in wealth isn’t sufficient for the Rich Listers. They wanted more,

Jeweller Sir Michael Hill, worth $245 million, told NBR: “Could not the Government give us a little freedom to be able to make common sense decisions for ourselves?”

John McVicar, managing director of a forestry group that puts his family’s worth at $70 million, said economic policy should be based on reducing costs for business and increasing productivity and revenue.

Construction company head Sir Patrick Higgins, worth $100 million, said: “The country needs to address excessive regulation if it is to improve wealth creation.”Ibid

Although at least one  United States think-tank and the “Wall Street Journal”  “rank New Zealand as already having the highest level of freedoms for business in the world.  The Heritage Foundation’s “index of economic freedom” puts New Zealand fourth overall, with a score of 99.9 for business freedom.

Clearly, tax cuts and increases in profits have shifted wealth upwards – not shared it around. Certainly the “trickle down” theory now applies only to meteorological services predicting upcoming rain falls.

This “gushing up” of wealth has been written about in the US “New York Times”. A very simple illustration showed where wealth has been accumulating – and who has been missing out,

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Source

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Interestingly, the great divergence of wealth, productivity, and incomes started around the late 1970s, early 1980s.  It was also about the time that Ronald Reagan and Margaret Thatcher were elected into office, and began neo-liberal, “free market” policies commonly referred to as “Reaganomics” and “Thatcherism“.

The New Right were ascendent, and implemented their policies with ruthless efficiciency. Those policies benefitted the rich – to the detriment of the unemployed, low-paid, and middle classes (who were too busy fighting each other to notice what was happening to them them).

New Zealand’s turn for a dose of  New Right came only a few years later, when Rogernomics took effect in 1984.

As wealth is accumulated upward (as the NBR so vividly illustrated), the real reason for denying low-paid workers an increase in the minimum  wage becomes more apparent; the rich would be forced to share some of that wealth. Their profits would be a little less.

Of course, this doesn’t stop some from gaining some very substantial wage increases,

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Full Story

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How They’re Paid

PRIME MINISTER New salary (backdated to July 1): $411,510. Was: $400,500.
DEPUTY PRIME MINISTER New salary: $291,800. Was: $282,500.
CABINET MINISTER New salary: $257,800. Was: $249,100.
MINISTER OUTSIDE CABINET New salary: $217,200. Was: $209,100.
SPEAKER AND OPPOSITION LEADER New salary: $257,800. Was: $249,100.
BACKBENCHERS New salary: $141,800. Was: $134,800.

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So remind me again, why we can’t increase the minimum wage? I’ve heard all the nonsensical, reactionary reasons – but they seem more predicated on a pathological disdain for the poor,  from  uninformed  middle class aspirationists, rather than any clear logic.

If New Zealanders want to continue  down the road of increasing wealth for the rich; growing disparity in incomes;  worsening poverty – this is the correct way to go about it. Our current policies and inequalities will achieve a society where the 1% Haves control most of the wealth; the vast majority remain in poverty or near-poverty; and the middle classes stagnate, blaming those on social welfare (the worst victims of these wretched policies) for their lack of upward mobility.

But the middle classes are looking the wrong way.

This may all sound like extremist left-wing politics. Maybe it is. But I don’t think so. The information I’ve gathered is freely available and easy to gather. The realities are all around us and the media – despite it’s glaring faults and preoccupations with trivia and crime stories – does present us with a view of what’s happening around us.

Many of us just choose not to look.

It’s easier to blame the poor; the unemployed; those of welfare.  And yet, if the current economic situation was not as distorted as it currently is – we wouldn’t have so many poor, unemployed, or on welfare.

An increase of $2 an hour would be a step in the right direction. Just ask the Prime Minister – taxpayers are paying him an extra $11,000 a year.

I wonder if paying all our MPs  those wage increases will result in any job losses?

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Treasury’s verdict on raising the Minimum Wage?

11 November 2011 8 comments

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It appears that even Treasury does not buy into the neo-liberal argument that raising the minimum wage will “destroy jobs”,

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Full Story

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National politicians,  employers, right-wing reactionaries, and some low-information voters have the strange notion that raising the minimum wage will “destroy jobs”. In the second Key-Goff debate, held in Christchurch and hosted by “The Press”, Key outlined how raising wages would affect a cafe selling coffee and muffins, and would result in either prices going up – or the employer sacking staff.

What people forget is this,

  1. ALL workers on minimum wage would have their rate increased to $15 an hour. That means ALL cafes would be on an equal, level, playing field when it comes to employing staff. So one cafe owner couldn’t pay, say, $12 an houtr and try to cut costs that way.
  2. Workers on low wages tend to spend ALL their disposable income. Remember how the Nats gave empoyees the option to reduce their contributions for Kiwisaver from 4% to 2%? That was done because the government considered those earning low incomes were contributing too much to Kiwisaver, thereby reducing the amount of their disposable incomes.
  3. So,  Let’s say that “Mary” currently works 40 hours a week and currently earns the minimum wage, $13 an hour, making a gross weekly income of $520.  After tax, she is left with $447.85. She spends over half of that on rent, power, insurance, transport, and phone, – perhaps leaving her with $50 to spend on herself. That’s $50 a week  on entertainment, clothing, saving for a weekend away, sporting/club/leisure activity or some other way to enjoy herself. That’s $50 that various retailers and service providers will get out of her.
  4. Now let’s calculate Mary earning $15 an hour. Her outgoings remain relatively the same. But she is now earning $600 a week, or $513.85 net.  She now has $66 a week left over for discretionary spending. That’s an extra $16 a week she can spend on entertainment, clothing, saving for a weekend away, sporting/club/leisure activity or some other way to enjoy herself.
  5. Mary now has a few dollars extra. And she shouts herself a coffee and a muffin at her local cafe, once  a week.
  6. The cafe owner’s turnover increases by the extra $5 week. Actually more than that – because Mark, Mathew, Melissa, Madison, and a whole heap of other workers on minimum wage are also frequenting that coffee shop, each spending around $5 a week.
  7. The coffee shop owner finds that his income has actually exceeded the slight rise in wages he has had to pay his staff.  By increasing the minimum wage, people have more cash in their pockets, and some of that is flowing into his cash register.

That is how raising wages works.

Increasing turnover at the coffee shop does not necessarily work by cutting taxes. Those on higher salaries will not buy any more coffee or muffins than they are already consuming. They are already consuming as much as they want.

To increase his  market share, the coffee shop owner has to “grow” his customer-base. And the best way to do that is to increase wages so people can buy his products.

That is how a consumer society works.

If anyone doubts the scenario I’ve just outlined – consider working it in reverse.  Cut wages in half.  Then figure out how much spare cash Mary will have to spend on consumer goods and services.

The clever chaps and chapesses at Treasury know all this, of course. That is why Treasury has stated,

The Department of Labour says the rise will cost 6000 jobs. But Treasury has a counter view; “This has not been true in the past. The balance of probabilities is that a higher minimum wage does not cost jobs.Source

Andy Martin agrees,

Andy Martin runs a pub, employing 26 people in Oamaru. He says put the wage up and people just spend more money – everyone wins.” – Ibid

Andy Martin is a shrewed businessman and understands this better than most National politicians,  employers, right-wing reactionaries, and some low-information voters who don’t understand the economics of increasing the minimum wage. Raising the minimum wage from $13 to $15 is not just being fair to workers.

It makes damn good business sense.

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Additional Reading

Key’s figures dodgy on minimum wage – blog

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+++ Updates +++

MPs get pay rise package of $7000

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That was Then, this is Now #8

26 October 2011 1 comment

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Previous Blog post

That was Then, this is Now #7

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$13 million taxdollars down the toilet. Thankyou, Mr Key, may we have another?

This government has thrown over 2000 state workers onto the unemployment scrapheap, despite having promised in 2008 to CAP the civil service – not fire workers.
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These 2000+ government workers  are ordinary New Zealanders; mums and dads; many of  whom have families to care for. Like the Van der Lems, who both lost their jobs within months of each other,

(See earlier story;A strong streak of masochism? Or a full moon?”)

This is not “capping” the state workforce -  it is deliberately throwing people out of their jobs after giving years of loyal service. It is gutting services – despite John Key promising – yet again – not to do so.

Now it is revealed that this government has wasted $13 million on a couple of hundred “consultants”??? Many of whom were “former public service chief executives and Treasury staffers contracting back to the organisation”!?

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This is ludicrous!

So much for John Key promising us in 2008,

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.Source

Yet again, we have another example of why National is not fit to be in government. Their idea of prudent economic “management” is a sick, pathetic joke.

Unfortunately, the joke will be on us if New Zealand voters are silly enough to re-elect these clowns.

By the way, I know of one civil servant who was made redundant in the early ’90s (again during a National Government) from the old Ministry of Works. They then found that his job was so specialised that the MoW had to rehire him as a “consultant” – at $50 an hour!!!

Thankyou, National. But wouldn’t it be quicker if I just flushed my tax dollars down the toilet myself?

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Meanwhile, the rest of us peasants have to make do with an extra 38c  an hour…

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I somehow don’t believe that this is quite what we had in mind when we voted for a John Key-led government in 2008.

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Further reading

2008: A Fresh Start forNew Zealand – A State of the Nation Speech

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It’s official – National is a poor manager of the Economy.

4 October 2011 1 comment

It’s official – National (and Labour under Rogernomics) was, and remains,  a poor manager of the economy. Treasury and international credit agencies back this up with their data.

Firstly, Treasury data of recent New Zealand history reaching back to Rob Muldoon’s administration show that credit agencies inevitably downgrade our sovereign credit rating whenever National is in office. The only exception to this is when Labour was in power – during it’s Rogernomics era.

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Source

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New Zealand’s sovereign credit rating is important because it affects the interest rate at which we borrow money from overseas. The lower the credit rating, the higher the interest we pay as we pose a higher degree of risk to lenders. (Although,  as has been pointed out by one commentator on Radio NZ, New Zealand has never defaulted on a loan repayment yet.)

The money that government borrows (sovereign debt) or that bank’s borrow (private sector debt) is all taken into consideration by overseas lenders.

It is worth noting the critical importance that governments place on sovereign credit ratings. Two years ago, John Key and Bill  English reminded us as to the significance of New Zealand’s credit rating,

Our primary focus for this Budget is to avoid a credit rating downgrade because we think that would add about 1.5% to mortgages for New Zealand homeowners.” – John Key,  May 2009. Source.

If a downgrade were to happen, it would add 1-2% of interest on the amount the government borrows, which is around $600 million each year. This is to be avoided at all costs.That’s every homeowner, every business, everybody paying 2% more. That would be irresponsible in my view for the government not to act. ”  – John Key,  May 2009. Source.

The No. 1 way to see New Zealanders down the road from their jobs is if their businesses cannot be funded. That is what happens when we have a credit downgrade, and that is what we would have had under a Labour Government.”  – John Key, June 2009. Source.

And as early as March this year, Finance Minister Bill English said,

There is no doubt that a credit downgrade would generally lead to somewhat higher interest rates.” – Bill English, March 2011. Source.

When a credit downgrade was averted in 2009, John Key was very quick to take the credit,

If I just look at our debt track and I compare that to the OECD debt track for other countries for 2012/2013 year, we have got a substantially lower debt exposure than most other countries.” – John Key, May 2009. Source.

Yet, on Radio NZ today he stated,

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Source

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Note the Prime Ministers comments,

“”With the greatest respect, I’m not responsible for what happens in Europe and the United States, nor technically was I in government when there was the enormous build-up in private sector debt.”

Instead, Mr Key says an increase in private sector debt when Labour was government has helped contribute to the downgrade. ” – John Key, 4 October 2011.

So in 2009 we “have got a substantially lower debt exposure than most other countries” – but only two years later we have “an increase in private sector debt when Labour was government “.

It seems that Mr Key is confused about our debt levels?

As for refusing to take responsibility for our credit down-grade – we might overlook that once. But how many times has New Zealand been downgraded when National was in office?

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New Zealand's foreign currency credit rating history - National's track record in downgrades.

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Standard & Poors have downgraded New Zealand’s credit rating three times during National governments; 1991, 1998, and this year.

Moody’s downgraded NZ in 1998 (National government).

Fitch, once, five days ago.

As an aside, both Moody’s and Standard & Poors downgraded NZ  during the neo-liberal reforms of Roger Douglas, in the mid-late 1980s.

It seems that credit agencies view neo-liberal economic policies as risky.

By contrast, Labour’s tenure of government was positively rated or upgraded by the three agencies.

All this makes a mockery of  National’s claims as being a “prudent fiscal manager” of the country’s economy. They are nothing of the sort. The verdict of credit agencies is clear: National is a poor manager of the economy.

This, of course, many of us new already.

There is a high degree of irony in this whole affair. National clearly refuses to accept any degree of responsibility for New Zealand’s credit downgrade. Yet, they are the government. They are the ones in charge. They pass laws and make policies that affect every single New Zealander.

Refusing to accept responsibility is poor form. Especially when, on February 17th, John Key made this observation about welfare recipients,

“”But it is also true that anyone on a benefit actually has a lifestyle choice. If one budgets properly, one can pay one’s bills.

“And that is true because the bulk of New Zealanders on a benefit do actually pay for food, their rent and other things. Now some make poor choices and they don’t have money left.“” Source

So welfare recipients are expected to be responsible for their actions.

But National Governments are not.

Is that how things work in John Key Land?

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Additional Reading

Reserve Bank – Household Debt

Treasury – Private-sector debt and factors affecting it

Moody’s credit rating definitions

Standard & Poors definitions

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Once upon a time…

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… this would not have been considered even remotely acceptable.

Once upon a time, every media in the country would have been chasing up this story.

Once upon a time, departmental heads would have rolled, and perhaps even a Minister of the Crown would have been called to account.

Once upon a time, there would have been a Commission of Inquiry called on this matter.

But not anymore. New Zealand, 2011AD, is a far different place than even 25 years ago.

Now the following seems quite acceptable;

$$$   Hundreds of corporate freebies – including pantomime, wine festival and horse racing tickets – were accepted by public sector staff.

$$$   A Treasury  register reveals Treasury staff have taken more than two hundred gifts in the past eleven months from banks like Barclays, Westpac, BNZ and ANZ.

$$$   The head of the Debt Management Office, Phil Combes, has been entertained at dozens of dinners and lunches as far afield as London and Tokyo and  went to a pantomime courtesy of the BNZ on December 9, 2010.

$$$   The newly-appointed chief executive of the Treasury, Gabriel Makhlouf, accepted theatre tickets to The Great Gatsby from law firm Chapman Tripp, on August 3, 2010.

$$$   Makhlouf, when he was deputy chief executive, was also a guest of Datacom at the Wellington Sevens this year. The then-Treasury head John Whitehead was also at the Sevens as a guest of KPMG.

$$$   Debt Management Office staff  recorded on a register as having accepted at least 165 gifts since July last year.Debt Management Office. (There are 24 staffmembers at DMO.)

$$$   Among the other gifts recorded on the register, Debt Management Office portfolio manager Matthew Collin was taken to a movie premiere by CBA in September 2010.

$$$   PriceWaterhouseCoopers (PWC) paid for deputy chief executive Andrew Kibblewhite’s World of WearableArts tickets.

$$$   Westpac and ANZ paid for Debt Management Office portfolio manager Matthew Collin to play golf on four separate occasions.

$$$   Matthew Collin was given  tickets to the Top Gear television show from CBA and to the cricket from ANZ Bank.

$$$   Collin and assistant portfolio manager Briar Fergusson both went to the boxing courtesy of Westpac.

$$$   Westpac also entertained five staff from the debt management office at the 2008 Wellington Sevens.

Quoted material above sourced to:

Foreign-owned banks wine and dine Treasury staff

‘Freebies’ lead to Debt Management Office audit call

Greens demand audit over corporate gifts

Fresh calls for Treasury ‘gifts’ inquiry

It seems that, as New Zealand society underwent a seismic transformation in the mid/late 1980s, it was more than just our economy was was turned on it’s head. As well, our social values have been up-ended. What was once considered corrupt practice and utterly unacceptable – now seems to pass with barely any eye-brows raised or fuss made.

The Greens have uncovered a culture of  (borderline ?) corrupt behaviour, and which merits only a week’s worth of headlines.

It is worth noting that, by comparison, a certain penguin attracted more attention; more scrutiny; and vastly more media coverage.

However, our British cuzzies are not quite so sanguin, as evidenced by a recent law enacted in the U.K…

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Once upon a time, civil servants accepting gifts from corporates would have been a scandal that would have rocked a government.

But, it seems, we have “moved on”  from such ‘niceties’.

Meanwhile, contrast this issue with that of “The News of the World” scandal in the U.K. Corrupt behaviour in that country is not taken as lightly, as a 180 year old newspaper is forced to close; senior Police officials have resigned; arrests have been made; people have gone to prison – and a corporate empire than spans the planet is itself under threat.

The question for us, here in New Zealand remains – how is ‘Happy Feet‘ doing?

Priorities, people; priorities.

- Thursday, 28 July 2011

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+++ Updates +++

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Full Story

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