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Capitalists in Space

25 July 2021 1 comment

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Billionaire Richard Branson did it.

Also-billionaire, Jeff Bezos, did it.

Both will be the first money-hoarders into space (or sub-orbital near-space, to be more specific).

Also-also-billionaire, Elon Musk – not content with sub-orbital ‘jaunts’ – has expressed a desire to go Full Interplanetary and personally colonise Mars.

Meanwhile, as billionaires play “Captain Kirk” in their own private rocketships – it is worth noting the hardship and misery they leave behind on Planet Earth.

As of July this year, Jeff Bezos’ net worth is a staggering US$211 billion. Elon Musk is not far behind at US$180.8 billion.  Richard Branson lags behind at single figures billions: US$4.8. (By comparison,  New Zealand’s annual GDP, last year, was a little over US$209 billion.)

Sadly, Bezos’ workers at Amazon (which, until recently, he was CEO of), are not quite in the billionaire range. Not even millionaires.

Amazon worker’s median wage was US$29,007 last year, up US$159 from 2019.  Those people work for a company that last year (2020) increased its profit by US$100 billion to US$386 billion.

So when Bezos thanked workers for paying for his flight;

“I also want to thank every Amazon employee and every Amazon customer because you guys paid for all of this.”

– the response was less than appreciative of his “gratitude”.

US representative Alexandria Ocasio-Cortez said on Twitter:

“Yes Amazon workers did pay for this – with lower wages, union-busting, a frenzied and inhumane workplace and deliver drivers not having health insurance during a pandemic. Amazon customers are paying for it with Amazon abusing their market power to hurt small businesses.”

“Jeff Bezos forgot to thank all the hardworking Americans who actually paid taxes to keep this country running while he and Amazon paid nothing.” 

Satirist/comedian, Trevor Noah, on The Daily Show put Bezos’ short flight into more human context;

“Jeff Bezos was in space for 5 minutes—or as its known at the Amazon warehouse, your allotted break time for a 16-hour day”

The joy-rides by multi-billionaires who pay little tax and exploit their workers with abysmal working conditions and pathetically low wages is nothing short of an obscenity.

It is not the future we envisaged when courageous men and women like Yuri Gagarin, Valentina Tereshkova, Neil Armstrong, et al, took humanity’s first tentative steps into infinity, leaving Cradle Earth behind.

When television producer, Gene Roddenberry created “Star Trek” – perhaps the most easily recognisable TV sf series ever made – he envisaged a benign future free of war, bigotry, inequality, poverty, and greed. It was a future where human beings were free to explore their fullest potential. It was a future where we devoted our energy to looking outward, to explore the vastness of the Universe and the myriad diversity it offered.

As one of the main characters explained;

“A lot has changed in three hundred years. People are no longer obsessed with the accumulation of “things.” We have eliminated hunger, want, the need for possessions…

… the economics of the future is somewhat different. You see, money doesn’t exist in the 24th century… The acquisition of wealth is no longer the driving force in our lives. We work to better ourselves and the rest of Humanity.”

It was not a future where men with obscene hoarded wealth took joyrides into space for their own aggrandisement.  It was not meant to be the future lauded by libertarian sf writer, Robert Heinlein, whose “hero” in “The Man Who Sold The Moon” was a self-serving businessman hell-bent on commercialising ownership of the Moon.

As an avid sf* reader and space enthusiast in my youth (and still am), I viewed humanity’s first baby-steps into outer space as positive for our species. Not only could we further advance our understanding and knowledge of the Universe; marvel at the beauty of what we saw with our eyes; and understand our place in the cosmos – but the very act of looking outward was uplifting to us collectively and brought out the best from us.

But when society is inward-looking it inevitably creates social division with an Us/Them culture of dis-trust. Xenophobia increases.  Creativity and artistic endeavour are stifled. Groups are pitted against groups.

A society that looks outward has self-confidence. A society that ceases being outward and turns in on itself will lose that confidence and fear and anxiety will hold sway.

Think of Brexit and why so many British voters turned their backs on Europe.

Think of the United States under Donald Trump. Now think of Trumpism taking hold for another four years, followed by his spawn.

Bezo’s space jaunt was paid by his workers who are poorly remunerated and badly treated. Amazon actively prevents unionisation of its workers.

So a vulgar wealth-hoarder exploited his workers to reach for the stars.

Not content with the worst of  humanity’s nature on Earth, billionaires are now taking our “darker angels” to the Heavens. This was not how visionaries intended our future to look like.

Perhaps the next time a libertarian capitalist suggests that businessmen and woman know better than governments how to spend their accumulated wealth, think of Richard Branson, Elon Musk, Jeff Bezos, et al, standing on the backs of their workers.

“I also want to thank every Amazon employee and every Amazon customer because you guys paid for all of this.” – Jeff Bezos, 20 July 2021.

“Fuck you.” – Every Amazon & other employee of billionaires, ever.

The exploration of the Final Frontier just lost some of it’s sheen.

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∗ Correct abbreviation for “science fiction” is “sf”. “Sci-Fi” is considered unsophisticated colloquialism.

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References

New York Times: What will it cost to fly Virgin Galactic to space?

Stuff media: Jeff Bezos blasts into space on board Blue Origin’s first passenger flight

Hindustan Times: Did Richard Branson really fly into space? Neil deGrasse Tyson weighs in

Axios: Elon Musk – There’s a 70% chance that I personally go to Mars

Time: Jeff Bezos Is the Richest Person Ever After His Net Worth Soars to $211 Billion

Knoema: New Zealand – Gross domestic product in current prices

Forbes: #589 Richard Branson

BBC: Jeff Bezos steps down as Amazon boss

Business Insider Australia: Amazon reveals how much it paid its median employee last year – $29,007

Forbes: Amazon’s Net Profit Soars 84% With Sales Hitting $386 Billion

Sky News: Jeff Bezos space flight – Backlash after world’s richest man thanks Amazon customers and staff for paying for his trip

Twitter: Alexandria Ocasio-Cortez – Jeff Bezos – Amazon workers – 21 July 2021

Twitter: Elizabeth Warren – Jeff Bezos – workers paid taxes – 21 July 2021

Twitter: Trevor Noah – The Daily Show – Jeff Bezos – Amazon workers – 21 July 2021

Wikipedia: Yuri Gagarin

Wikipedia: Valentina Tereshkova

Wikipedia: Neil Armstrong

Wikipedia: Gene Roddenberry

Memory Alpha: Money

Wikipedia: The Man Who Sold The Moon

CNN: The union loss at Amazon is another sign big companies have too much power

Forbes: What Entrepreneurs Really Want From Government

CNBC: What billionaires said about wealth inequality and capitalism in 2019

Twitter: @WendyCrossArt -21 July 2021

Twitter: @DanRather – 21 July 2021

Twitter: @meladoodle – 21 July 2021

Previous related blogposts

Trumpwatch – How Elon Musk can overcome Trump’s climate-change obstinacy

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Have your own thoughts? Leave a comment. (Trolls need not bother.)

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Judith Collins and National: It’s a trust thing

14 July 2021 1 comment

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national not to be trusted

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Clever strategies

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There are firm reasons why National continually fails to gain traction with the voting public (recent Roy Morgan poll notwithstanding, as one fall does a trend not make).

The ongoing in-fighting. The revolving door on leadership changes. It’s lack of coherent policy and direction. A current Caretaker Leader who struggles to be likeable with the public. More leaks than Auckland City’s water pipes. A tarnished image as a “prudent fiscal manager”. And lingering suspicions that the Nats would prioritise business demands to re-open the borders to allow entry to migrant fruit picking workers; hospo staff; tourists; Uncle Tom Cobbly; et al.

The last two are of particular interest.

Caretaker-Leader Judith Collins has berated the current government for poor fiscal management;

“It is irresponsible of the government continuing to spend money like it is with no thought as to where it comes from at the same time as we have 4500 kids in [emergency housing] hotels.

We are a small economy, we now have about $100 billion worth of debt, up from about $50b when the govt took over, and you can blame Covid all you like but ultimately – as those reports show – there was a problem before the government took over and the government had no plan for it…

… but it is ultimately the government’s decision to waste enormous amounts of money and not to actually put the focus on where it needs to be.”

Which is so deeply ironic that it could only be at home at the bottom of the Pacific Marianas Trench.

It was only last year that then-Finance spokesperson, Paul Goldsmith promised voters a tax cut (ie, an out-and-out bribe for votes).

When asked how National could possibly fund tax cuts when every economist was predicting a recession – if not outright Depression – Mr Goldsmith struggled to provide an answer. He eventually came up with a funding solution; raiding the Covid Relief Fund;

The change would not affect the National Party’s proposed temporary tax cuts, which are being paid for by drawing down $4.9 billion of the $14 billion Robertson had set aside from Covid-19 Response and Recovery Fund for future Covid-19 policies, if needed.

When the voting public heard National’s plan, they responded en masse to hand a historic majority Labour government. It was clear that most New Zealanders wanted National nowhere near the Treasury benches. Especially Paul Goldsmith who seemed fiscally inept beyond comprehension.

The 2020 General Election did more to undermine National’s “street cred” as a “prudent fiscal manager” than at any time in recent history.

A Newshub-Reid Research poll in July last year backed up National’s fall-from-fiscal-grace in the public eye.;

The latest Newshub-Reid Research Poll asked New Zealanders which party they trust to run the economy from now on through and after COVID-19.

A clear majority – 62.3 percent – trusts a Labour-led Government under Jacinda Ardern, while just over a quarter of the country – 26.5 percent – trusts a National-led Government under Judith Collins.

So when National’s Caretaker Leader Judith Collins accused the govt of being “irresponsible of the government continuing to spend money like it is with no thought as to where it comes from” and wast[ing] enormous amounts of money” – no one was listening.

While Ms Collins berates Labour for “continuing to spend money like it is with no thought as to where it comes from” – her Covid spokesperson, Chris Bishop, was demanding that government purpose-build isolation/quarantine facilities on “vacant land near Auckland Airport“. According to Mr Bishop;

We still think purpose built quarantine facilities makes sense. Using hotels in downtown Auckland was a good stop gap measure last year. But hotels simply aren’t built for quarantine and isolation.”

However, it was noticeable that Neither Mr Bishop, nor his (current) Leader, have offered any costing to purpose-build such a facility.

To provide some broad indication, a planned purpose built quarantine facility in Victoria, Australia, is estimated to cost A$15 million [NZ16 million] to design and a further “A$200 million [NZ$214 million] to build a 500-bed facility and around A$700 million [NZ$750 million]  if it was scaled up to 3,000 beds”.

By comparison, Aotearoa has between 4,000 to 4,500 beds in hotels in Auckland (18), Hamilton (3), Rotorua (3), Wellington (2) and Christchurch (6).

Using the above figures, building a 4,000 bed facility would cost the country well over a billion dollars. With inevitable cost over-runs, the final figure would be anyone’s guess.

Chris Bishop also called for returnees to be paid a wage whilst self isolating;

“We think the government needs to be more generous when it comes to supporting people when they’re told to self-isolate. Earlier this year we announced a policy of the government paying people’s wages when people are ordered to self-isolate. It’s pretty sensible – if the government is saying to you “stay home” and we don’t want you at work – they should pay.”

National’s calls have not been costed – and nor would they be. The agenda from the Opposition is not to demand a more effective Managed Isolation and Quarantine system. Instead, their unspoken aim is,

(A) to paint the Labour government as ineffective, for pure political point-scoring

(B) to pressure the Labour government to adopt costly policies, which would push up borrowing and debt.  Caretaker Leader Collins would then wag a disapproving finger; and tut-tuttingly exclaim,

“It is irresponsible of the government continuing to spend money like it is with no thought as to where it comes from… it is ultimately the government’s decision to waste enormous amounts of money and not to actually put the focus on where it needs to be.”

Clever strategy; force your rival to spend money – then blame them for spending money.

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Crazy incoherencies

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National’s Deputy Leader, Dr Shane Reti, has called for the retention of Aotearoa’s system of twenty District Health Boards (DHBs);

“So far the Government has employed 25 people with a budget of $5 million to reduce the number of DHBs. But this funding will never directly benefit patients.

Rather than spending millions on the unnecessary amalgamation of DHBs, this money would be much better spent in areas that will actually help New Zealanders.”

Dr Reti’s statement was backed up by his Caretaker Leader, Ms Collins;

“We have all sorts of issues right now. Now is not the time to be restructuring in the middle of a pandemic and an inability to get vaccines out.”

Meanwhile, National’s Covid spokesperson, Chris Bishop, has condemned DHB’s role in distribution of the vaccine;

“We’ve always said that relying on the DHB to do the rollout is not a particularly great model.”

Clearly, Dr Reti, Ms Collins, and Mr Bishop don’t talk much to each other. Based on the comments of those three, the public would be confused as to what National’s policy was regarding DHBs and the vaccine roll-out.

As Former Senior Policy & Communications Strategist for PM Ardern, Clint Smith, put it in a recent ‘tweet‘;

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This is called “incoherence”.

If  “relying on the DHB to do the rollout is not a particularly great model” – then what use are they? Why endorse a system that cannot carry out a task that is their raison d’etre – vaccinations?

Are they opposing reform of 20 DHBs for the sake of Opposition, when they clearly have no alternative solutions of their own?

Yes, they are.

And the public have noticed.

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Confusing irrevancies

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#Demandthedebate is a hashtag currently trending on social media – but not quite in the way National ever intended.

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Social media wits – notably on Twitter – have mercilessly lampooned the launch of National’s campaign to publicise and “debate” certain issues. The “serious” version;

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The more entertaining takes;

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There was more – much more. So much in fact that at last one media outlet realised what was happening and reported the hi-jacking and mass lampooning of National’s “Demand the Debate”.

The campaign has been clumsy since it released it’s initial press statement on

The Press Statement, in it’s entirety;

Leader of the Opposition Judith Collins says New Zealanders are being left out of important decisions by the Labour Government and today she has launched a campaign for Kiwis to ‘Demand the debate’.

“The Labour Government continues to make policy announcements that were never campaigned on and will have a significant impact on New Zealanders.

“From the Car Tax, cancelling promised infrastructure projects, the $785m Auckland cycle bridge, rushed law changes to deliver Māori wards, to the hastily announced oil and gas exploration ban; New Zealanders are starting to feel left out.

“At the same time more than 4000 children are left to grow up in motels, mental health services are in crisis, the Government is looking to criminalise speech they disapprove of and tell you what car you can drive.

“Let’s be clear, Labour was elected on a Covid-19 mandate and nine months later we are still waiting for border workers to be properly vaccinated and MIQ beds sit empty while migrant families wait in desperation to be reunited. We are still last in the developed world for Covid-19 vaccinations. Kiwis deserve better.

“Every week, I’m contacted by thousands of Kiwis who are worried they just don’t have a say in the future of their country anymore. They’re being kept in the dark and their questions go unanswered by Ardern’s Government. So today, we launch the first in a series of billboards on important issues that Kiwis deserve to have their say on.

“The first campaign relates to the Government’s 2019 He Puapua report. Kiwis were never told about it at the time and it was never campaigned on by Labour. It has recently been considered by Cabinet and is being consulted on with a select few New Zealanders.

“The He Puapua report contains recommendations for fundamental changes to our legal, constitutional, and democratic governance arrangements. Changes like separate health and justice systems, separate RMA rules, and separate electoral arrangements. These proposals must be taken to an election so all Kiwis can have their say.

“While they claim publicly it’s not their policy, the Labour Government has already started to implement large parts of He Puapua like Māori Wards and a Māori Health Authority, without the wide-ranging public debate that these changes deserve.

“The Government’s parliamentary majority is not a mandate for Labour to promote their ideological wish list. New Zealanders deserve a say on their country’s future and together we must demand the debate.”

As many have pointed out, National’s claim that “He Puapua report. Kiwis were never told about it at the time and it was never campaigned on by Labour“. Which is bizarre. The report was just that; a report. How could a political party campaign on a “report” that had no standing as it had not even been accepted as party policy?

Government departments create hundreds, if not thousands of reports. Campaigning on each one would be impossible.

This is desperate mischief-making taken to ridiculous levels.

Whilst mentioning the He Pua Pua report as the “first campaign”, it only hints at successive topics; “the Car Tax, cancelling promised infrastructure projects, the $785m Auckland cycle bridge, rushed law changes to deliver Māori wards, to the hastily announced oil and gas exploration ban.”

The craziest part of the press statement is this “gem”;

“The Government’s parliamentary majority is not a mandate for Labour to promote their ideological wish list…”

It’s almost as if the 2020 election never happened and Labour never won a historic 65 seat majority – the first in a MMP Parliament.

Then again, when it comes to “mak[ing] policy announcements that were never campaigned on and will have a significant impact on New Zealanders” – National has some experience in this area;

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Then he raised GST.

If these are the issues that National wants to debate, they have been living in the Wellington Beltway longer than is healthy. Most people would not care greatly about these issues and a considerable number might even agree with them; eg the oil and gas exploration ban.

(Which, by the way, was announced in April, 2018 – two years before the 2020 election.)

These are not debating issues. They are not even “talking points”.

They are a lame attempt for National to be relevant.

And even here, they have failed miserably. Because very few  – perhaps no more than National’s current voting base – would be greatly interested in these so-called issues. They are perhaps Issues of National Significance for National only.

The real issues confronting this country – housing; climate change; staying safe during the covid pandemic – have been all but ignored.

This is by design, not by accident. For not only does National not have anything “fresh” to offer on these issues – but it has actively contributed to one (the housing crisis) and is distrusted on another (keeping us safe from covid).

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Callous indifference

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When Boris Johnson announced that Britain would be easing covid restrictions by 19 July, it was met with incredulity and fear. Even as a covid was surging through the country, PM Johnson was announcing the unthinkable;

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PM Johnson’s statement was nothing less than a death sentence for thousands of unvaccinated British people;

We’re seeing rising hospital admissions and we must reconcile ourselves, sadly, to more deaths from COVID. In these circumstances we must take a careful and a balanced decision.

It was surrender to covid and prioritisation of business over peoples’ lives;

“We have to balance the risks of the disease and of continuing with legal restrictions, with their impact on people’s lives and livelihoods.”

The stats speak for themselves; – over 31,000 new cases and 26 deaths, daily;

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No wonder the interim director for Royal College of Nursing, Jude Diggins, was scathing;

“This disease does not disappear on 19 July. No available vaccine is 100% effective … Public mask-wearing is straightforward and well-established – government will regret the day it sent the wrong signal for political expediency.”

Chair of the Winton Centre for Risk and Evidence Communication at Cambridge University, David Spiegelhalter, described PM Johnson’s 19 July decision is chilling terms;

This is an experiment, and I think we’ve got to call it that. I respect the judgments by Chris Whitty and others who say that if you’re going to do this, this is the right time to do it.”

In The Lancet, 122 scientists wrote an open letter condemning Boris Johnson and his government;

In light of these grave risks, and given that vaccination offers the prospect of quickly reaching the same goal of population immunity without incurring them, we consider any strategy that tolerates high levels of infection to be both unethical and illogical. The UK Government must reconsider its current strategy and take urgent steps to protect the public, including children. We believe the government is embarking on a dangerous and unethical experiment, and we call on it to pause plans to abandon mitigations on July 19, 2021.

 

New Zealanders look aghast at covid out of control in India and Fiji; the virus taking hold in New South Wales; and then a British Prime Minister stating matter-of-factly that his country will lift all restrictions – even if it means “we must reconcile ourselves, sadly, to more deaths“.

Then they look at Jacinda Ardern and Judith Collins…

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… and they wonder. They wonder if, in National’s Caretaker Leader, Judith Collins, there lurks a “Boris Johnson” waiting to throw open the doors to the rest of the world – and a virus.

With Judith Collins and National, it’s a trust thing.

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#NationalNotFitToGovern

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References

Roy Morgan: Is the COVID-19 ‘honeymoon’ over for PM Jacinda Ardern?

RNZ: Ardern stays firm on superannuation age after Treasury flags rising cost pressures

Stuff media: Election 2020 – ‘Fair cop’ – National’s Paul Goldsmith admits to accounting mistake as Labour points out $4b hole

Stuff media: Election 2020 – National’s fiscal hole appears to double to $8 billion as Paul Goldsmith denies double count mistake

Newshub: Newshub-Reid Research Poll – Kiwis trust Labour more than National to run the economy

Business Insider: Boris Johnson told the UK to reconcile itself to more COVID-19 deaths as the country lifts almost all restrictions amid a new surge

TVNZ News: National proposes building of purpose-built quarantine facility on Auckland’s outskirts

National Party: Our approach to COVID-19 and the vaccine roll-out

ABC News: Melbourne COVID-19 quarantine facility approved as Commonwealth, Victoria agree on site

Managed Isolation and Quarantine: Managed Isolation and Quarantine capacity

Stuff media: Covid-19 – Why the Government isn’t using purpose-built quarantine facilities

National Party: Ditch DHB merger, spend funding on medicines instead

Stuff media: Judith Collins lashes DHB overhaul as too much Wellington bureaucracy, and a ‘separatist model’

Twitter: Morning Report – Chris Bishop – vaccine rollout (RNZ: Morning Report – Chris Bishop on vaccination rollout)

Twitter: Clint Smith – 8 July 2021

Stuff media: National launches billboard campaign to ‘demand debate’ on Government policies

Newshub:  ‘Pineapple on pizza? Demand the debate’: National’s new campaign parodied in memes

Scoop media: National Launch Campaign To Demand The Debate For All New Zealanders

NZ Herald; Prime Minister Jacinda Ardern bans oil exploration

Electoral Commission: 2020 General Election official results

ODT:  Key ruled out GST increase in 2008

RNZ: PM defends proposed GST increase

Business Insider: Boris Johnson told the UK to reconcile itself to more COVID-19 deaths as the country lifts almost all restrictions amid a new surge

The Independent: Big majority of Britons ‘worried’ about Boris Johnson’s plan to lift all Covid restrictions, poll reveals

TVNZ: Covid-19 cases in the UK surge to highest levels in five months

Gov.Uk: Coronavirus (Covid-19) in the UK

The Guardian: New Zealand not willing to risk UK-style ‘live with Covid’ policy, says Jacinda Ardern

The Guardian: Boris Johnson to scrap most of England’s Covid rules from 19 July

Reuters: Analysis – UK PM Johnson’s new COVID gamble worries some scientists

Sky News: COVID-19 – Tolerating high levels of COVID infections is both ‘unethical and illogical’, scientists warn

The Lancet: Mass infection is not an option – we must do more to protect our young

The Guardian: New Zealand not willing to risk UK-style ‘live with Covid’ policy, says Jacinda Ardern

TVNZ: Judith Collins ‘very hopeful’ Covid-19 alert level restrictions will lift today

TVNZ: ‘New Zealand cannot afford any more lockdowns’ – Judith Collins

NZ Herald: Covid 19 coronavirus – National leader Judith Collins calls on Government to open travel bubble with Australia

Stuff media: Covid-19 – Judith Collins says Government should look into vaccinated people skipping managed isolation

Previous related blogposts

Life in Level 1: The Taxpayer’s Coin

Life in Level 1: The Doom of National

Life in Level 2: National’s Barely Secret Agenda

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Acknowledgement: Rod Emmerson

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Have your own thoughts? Leave a comment. (Trolls need not bother.)

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NZ Initiative – Bulk Funding Schools

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Insanity: doing the same thing over and over again and expecting different results. – Albert Einstein.

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On 6 July, the  “NZ Initiative” – a re-branded right-wing think-tank previously known as the NZ Business Roundtable – released a propaganda-piece entitled, ‘Amplifying Excellence: Promoting Transparency, Professionalism and Support in Schools‘. The so-called “report” advocated more sly “free market” forces unleashed onto our constantly-changing education system.

The title of the  “report” sneakily implies our education system is not transparent; is un-professional; and our schools un-supported.

Amongst the several vague recommendations was this one;

True to New Zealand’s self-managed school landscape, the government largely lets school boards and principals get on with leading their schools. However, in other respects, school leaders can be hamstrung by bureaucratic restrictions; for example, the Ministry prescribes how school leaders should spend parts of their teaching resource budgets.

Recommendation 6: Effective leaders should be trusted as true professionals and granted total budget autonomy to lead their schools.

“Total budget autonomy” is code for bulk-funding – a favourite agenda from the New Right.

Bulk-funding had previously been introduced as part of National’s “Ruthenasia reforms” in the 1990s. It was done away with by the Labour-Alliance government in 2000.

In June last year, then-Education Minister Hekia Parata attempted to resurrect the corpse of Bulk Funding under a new guise, “Global Funding“;

The change would set a “global budget” for each school, delivered as cash instalments for school expenses, and a credit system for salaries.

According to the documents, this would mean:

• Principals would determine the split between cash and credit, with the flexibility to make adjustments during the year.

• Unspent credit would be paid out at the end of the year and a process for recovering credit overspends would be established.

• Teaching staff salaries would be charged against the “credit” portion at an average rate.

• Non-teaching staff salaries would be charged against the “credit” portion at actual cost.

The global budget system would not be the same as the controversial bulk funding of teacher salaries that sparked protests 20 years ago, the proposal said. The documents said: “This is a significant difference from historical bulk funding proposals which would have seen schools charged the actual salary.”

The reaction was predictable, and Post Primary Teachers’ Association (PPTA) president, Angela Roberts, spoke for many when she warned;

“It is bulk funding. It is minor technicalities that make it something different, and I think it’s very cynical of the ministry to think that they can con people with a change in language.”

The schools get to decide how they spend that, how many teachers they purchase effectively and how many teacher aides. So schools will be incentivised through the averaging out to have cheaper teachers or fewer teachers because they can cash that money up.

Bulk funding was resoundingly rejected by the community 20 years ago because everybody understood the cost would be borne by the school when the government couldn’t be bothered putting more money into the system.”

Opposition to Parata’s Bulk-Funding-In-Drag plan was met with heated opposition by parents, teachers, school principals. Donna Eden, a teacher with 20 years’ education experience explained why she was so vehemently opposed to “Global Funding”;

“Teachers really don’t like bulk funding, so much so that they have been out of the classrooms meeting and rallying. And they’re talking to anyone who will listen about how our kids will be worse off.

And they will.

Why? Well, it will mean bigger classes and fewer teachers. It will mean our kids have less time with their teacher because instead of sharing him or her with 15 other children there will be 30 or more classmates needing the attention of their kaiako. It will mean less support for the kids that need it. It will mean fewer teacher aides for fewer hours.

It will likely mean untrained teachers in the classroom because they will be cheaper to pay.

It will mean winners and losers, and that, my friends, is not okay. Every child deserves the best, all of them, all over our country.

It’s simply that schools will be given a lump sum of money. And from this lump sum they will pay teachers’ salaries (which are currently centrally funded, meaning they don’t cost schools) and for everything else (think the power, water, supplies, first aid supplies, the caretaker, the office staff , support staff like teacher aides, any class room resources…)

There will be a separate pool of money for maintenance – property repairs and the like.

Why is it bad news?

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Firstly, because there is no new money. It’s just moving around the money that is already there. And it’s already not enough.

For the first time ever school operations grants, the cash that keeps schools running, have been frozen.

While costs rise, this budget won’t keep up. This means cuts to what schools can offer. It will start with trimming the extracurricular stuff. It won’t stop from there.

Hekia Parata is looking to remove the caps to class sizes and the guaranteed teacher funding this brings. It will mean that classes will get bigger – they will have to in order to stay within budget.

It’s like trying to do the grocery shopping with the usual budget when you have four extra people staying for the week. It just won’t stretch; something will have to give.

If it comes down to a choice between paying the power bill and paying a teacher, it is principals and boards of trustees that will have to decide who goes. What a horrible decision to have to make.”

On 18 November last year, Parata caved to mounting public pressure and announced that National would not proceed on it’s “Global Funding” policy;

“I have therefore recommended, and Cabinet has agreed, that the global budget proposal not proceed. The global budget was a mechanism for payment, not for determining the level of funding, so this decision will not affect the core purpose of the review.”

The successor to Ruth Richardson’s Bulk Funding, Parata’s “Global Funding”, was quietly returned to the Historical Rubbish Bin of Very Bad Ideas.

Barely a year later and the NZ Initiative/Business Roundtable has attempted to breathe life back into Bulk Funding/Global Funding. This time referring to the model as ‘Total Budget Autonomy‘. (No doubt  Crosky-Textor or some other tax-payer funded spin-doctor will come up with some new clever, shiny name.)

But it’s still a pig. Perhaps with a new shade of lipstick. But a pig still.

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The question is, why the Neo-libs keep beating the same drum?  Why keep trying to implement a policy that has been tried; failed; and almost no one wants.

More importantly, the evidence is that Donna Eden’s fears are well-based and grounded in reality.

New Zealand has had bulk-funding in another area of the State Sector – and it has proven to be a dismal failure;

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Analysing budget short-falls and DHB deficits two years ago, Fairfax journalist Stacy Kirk wrote;

Specifically, [Treasury]  documents say DHB underfunding will put pay increases for public sector health workers, including nurses and doctors, at risk.

Cost pressures mean DHBs have not been fully funded to cover wage increases for the 40,000 workers whose contracts are up for renegotiation shortly.

Ms Kirk reported Treasury officials as saying;

“The fiscal strategy presents some tough choices for Budget 2015, there are a number of fiscal pressures across the social sector, and Ministers will need to review options and trade-offs to determine an appropriate Budget package.”

The Treasury document that Ms Kirk quotes makes this observation on funding DHBs;

There are material cost pressures affecting the Ministry-managed NDE [non-
departmental expenditure] service lines that need to be managed as part of
this process. These cost pressures will include demographic demand growth,
wage and price inflation, and other factors. As for DHBs, it is unlikely that
these pressures can be fully funded, so we will be looking to the sector to
deliver substantial efficiencies. To maintain current levels of service
provision, it is likely that a reasonably large injection of new funding will
be needed – in addition to the $275 million already agreed for DHBs – or
Ministers will need to make choices on what services are to be altered or cut back.

Note this bit; “…cost pressures will include demographic demand growth, wage and price inflation, and other factors. As for DHBs, it is unlikely that these pressures can be fully funded, so we will be looking to the sector to deliver substantial efficiencies”.

Treasury’s admonition that “it is unlikely that these pressures can be fully funded” for DHBs is borne out by the number of Boards that are in deficit – and  worsening. A forecasted $58.7 million deficit has blown out to $89.9 million. Half of DHBs either in the red, or perilously close to it;

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In the case of Capital and Coast DHB – currently $28 million in deficit – it is noteworthy that there financial woes started in the mid-1990s;

In 1995-96 Capital Coast Health reported a deficit of $26m, which the following year grew to $70m. Chief financial officer Tony Hickmott said the $68m debt hole left by the construction of the regional hospital in 2008 had contributed to deficits for the past 10 years.

Increased demand for services, high labour costs, increased complexity of patients, and the increasing and ageing population had compounded the issue.

Building construction. Labour costs. Demand for services. Increased complexity. Increasing population. Each one of those factors can easily be translated into the education sector which also requires building upgrades or building entire new class-rooms; growing students rolls; increasing special-needs; and rising population due to National’s exploitation of migration to create the illusion of economic growth.

Now add Bulk Funding/Global Funding/’Total Budget Autonomy’ into the mix for schools.

How long would it be before schools found themselves in precisely the same precarious  financial woes that our DHBs are currently suffering?

As things currently stand, parents/guardians are having to dip more and more into their pockets to pay “school donations”, to make up for obvious shortfalls in the Vote Education budget;

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Of course, the National government still claims – without a hint of self-awareness of the Big Lie – that education is still free in New Zealand;

It’s free to go to a state school — but the school can ask for donations towards their running costs.

But at least one school – St Heliers – is unashamedly upfront in why school “donations” are necessary;

A donation is requested of parents to contribute towards the shortfall in funding from the Government.

Even with direct Ministry funding, schools are still having to make up a “shortfall in funding from the Government“. This dire situation has been compounded by National’s decision to freeze school operational funding this year;

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The above Herald story goes on to report;

The targeted approach means more than 1300 schools will get less money than they would have received, had that money been used for a general increase.

The difference ranges from a few hundred dollars up to $24,000.

About 816 schools will get more, and information on a further 242 schools is suppressed for privacy reasons because fewer than five students are at-risk.

Now imagine the funding constraints that  schools would have to deal with if Bulk Funding/Global Funding/’Total Budget Autonomy’ was re-introduced for their sector.

But we don’t have to imagine, do we? Because half the District Health Boards in this country have already shown us what would be in store for schools throughout the country.

Which is something that the  NZ Initiative/Business Roundtable seems to have studiously over-looked when they compiled their rubbish report, ‘Amplifying Excellence: Promoting Transparency, Professionalism and Support in Schools‘.

Never under-estimate the ability of the New Right to suggest policies that that been tried, tested, and failed. Just keep repeating the experiment over and over and over again.

One day the result will be different.

Of course it will. Just ask Albert Einstein.

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References

NBR:  Roundtable and NZ Institute morph into new libertarian think tank

NZ Initiative: Amplifying Excellence: Promoting Transparency, Professionalism and Support in Schools

Victoria University: The Bulk Funding of Teacher’s Salaries – A Case Study in Education Policy

NZ Herald:  New funding system for schools including a ‘global’ salary criticised

Radio NZ:  Teachers fear ‘bulk funding in new guise’

The Spinoff:  A teacher tells you what you need to know about bulk funding

Fairfax media:  Education Minister signals end of school bulk funding and decile systems

Fairfax media:  DHBs ‘considerably’ underfunded – and more deficits predicted

Treasury NZ: Treasury Budget 2015 Information Release Document July 2015

Fairfax media:  DHB deficits blowing to $90m. Health sector dying ‘by 1000 service cuts’ – Labour

Fairfax media:  Capital & Coast DHB’s debt hole deepens as boss admits 20 years of deficits

Fairfax media:  Parents prop up schools to tune of $250m

NZ Herald:  School costs – $40,000 for ‘free’ state education

NZ Herald: Parents fundraise $357m for ‘free’ schooling

NZ Herald: Parents paid $161m for children’s ‘free education

NZ Government: Education – school fees

NZ Herald: ‘At risk’ school funding revealed – with 1300 to lose out under new model

Other Blogs

Save our Schools:  Parata backs down on bulk funding plans

Chris Trotter: Morbid Symptoms – Neoliberalism’s Room for Manoeuvre Keeps Shrinking

Previous related blogposts

Can we afford to have “a chat on food in schools”?

Cutting taxes toward more user-pays – the Great Kiwi Con

The Legacy of a Dismantled Prime Minister

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This blogpost was first published on The Daily Blog on 15 July 2017.

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Steven Joyce rails against low mortgage interest rates; claims higher interest rates “beneficial”

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National is increasingly on the back-foot with New Zealand’s ever-worsening housing crisis. Ministers from the Prime minister down are desperately trying to spin a narrative that the National-led administration “is getting on top of the problem“.

Despite ministerial ‘reassurances’, both Middle and Lower Working  classes are feeling the dead-weight of a housing shortage; ballooning house prices,  and rising rents.

Recently-appointed Finance Minister, Steven Joyce,  has found a new unlikely scapegoat, blaming the housing bubble and worsening housing affordability  on current low interest rates.  On 11 May, on Radio NZ’s Morning Report, he said;

“We have very, very low interest rates historically, and as a result that’s directly linked to how much house prices are being bid up around the world. It’s not the sole reason for why we have high asset prices around the world, it’s not just houses, it’s shares and everything else. But it is certainly one of the dominant reasons for that. And unfortunately it’s going to be a little bit of time yet before that changes, although there’s indications that this period of ultra-low interest rates that the world has seen is coming to an end. And so I think that, that, will improve affordability over time.”

Radio NZ’s Guyon Espiner reacted with predictable incredulity that Joyce was relying on interest rates rising to “improve affordability over time“.

Joyce’s finger-pointing and blaming “very, very low interest rates historically” is at variance with a speech that former Dear Leader, John Key, gave in January 2008 where he specifically indentified higher interest rates as a barrier to home ownership;

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

[…]

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

Good questions, Mr Key

Got any answers, Mr Joyce?

Because according to Statistics NZ, home ownership rates have worsened since John Key gave his highly-critical speech, nine years ago;

Home ownership continues to fall

  • In 2013, 64.8 percent of households owned their home or held it in a family trust, down from 66.9 percent in 2006.

  • The percentage of households who owned their home dropped to 49.9 percent in 2013 from 54.5 percent in 2006.

Home ownership reached a peak of 73.8% by 1991. Since then, with  the advent of neo-liberal “reforms” in the late ’80s and early ’90s, home ownership has steadily declined.

Those who have benefitted have tended to be investors/speculators. In 2016, 46% of mortgages were issued to property investors/speculators in the Auckland region. Despite a watered-down, pseudo-capital gains tax,  referred to as the “bright line” test implemented in October 2015, investors/speculators still accounted for 43% of house purchasers by March of this year.

The same report revealed the dismal fact that first home buyers constituted only 19% of sales.

John Key’s gloomy plea, “Why can’t our hardworking kids afford to buy their own house?” rings truer than ever.

Poorer families are fairing no better.

National’s abysmal policy to sell off state housing has left a legacy of families living in over-crowded homes; garages, and cars. This scandal has reached the attention of the international media.

From the Guardian;

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From Al Jazeera;

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As with our fouled waterways, we have developed another unwelcomed reputation – this time for the increasing scourge of  homelessness.

But it is not just the sons and daughters of the Middle Classes that are finding housing increasingly out of their financial reach. The poorest families in our society have resorted to living in over-crowded homes or in garages and in cars.

National has spent millions of taxpayer’s dollars housing families in make-shift shelters in motels. At the behest on National ministers, WINZ have made it official policy to recoup money  “loaned” to beneficiaries to pay for emergency accommodation;

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National’s track record on this growing community cancer has been one of ineptitude.

In 2015, Dear Leader Key made  protestations that  no problem exists in our country;

“No, I don’t think you can call it a crisis. What you can say though is that Auckland house prices have been rising, and rising too quickly actually.”

He kept denying it – until he didn’t;

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Unfortunately, former-and current State beneficiary, and now Social Housing Minister, Paula Bennett, apparently ‘did not get the memo’. She still denies any housing crisis in this country;

“I certainly wouldn’t call it a crisis. I think that we’ve always had people in need. So the other night on TV I heard the homeless story was second in and then the seventh story was a man who’d been 30 years living on the streets.”

Despite  being in full denial, in May last year Bennett announced that National would be committing $41.1 million over the next four years  for emergency housing and grants.

By April this year  it was revealed that National had already spent $16.5 million on emergency accomodation. It had barely been a year since Bennett issued her Beehive statement lauding the $41.1 million expenditure, and already nearly a third of that amount has been spent.

This is clear evidence as to how far out-of-touch National is on social issues.

The stress and pressure on Ministers and state sector bureaucrats has become apparent, with threats of  retribution flying.  This month alone, a MSD manager and associate minister of social housing, Alfred Ngaro, were revealed to have warned critics of the government not to talk to the media;

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Bennett went on to make this extraordinary statement;

“I spend the bulk of my time on social housing issues and driving my department into seriously thinking about different ways of tackling this.”

Her comment was followed on 20 May, on TV3’s The Nation, when current Dear Leader, Bill English tried to spin a positive message in  National’s ‘fight against homelessness’;

“Our task has been to, as we set out three or four years ago, to rebuild the state housing stock. And that’s what we are setting out to do.”

English and Bennett’s claims would be admirable – if they were not self-serving hypocrisy.

In 2008, Housing NZ’s stock comprised of  69,000 rental properties.

By 2016, that number had fallen to 61,600 (plus a further 2,700 leased).

In eight years, National has managed to sell-off 7,400 properties.

No wonder English admitted “we set out three or four years ago, to rebuild the state housing stock“. His administration was responsible for selling  off over ten percent of much-needed state housing.

No wonder families are forced into over-crowding; into garages and sheds; and into cars and vans.

Confronted by social problems, National ministers duck for cover. Especially when those same social problems are a direct consequence of their own ideologically-driven and ill-considered policies.

National ministers English, Bennett, Joyce, Nick Smith, et al are responsible for our current homelessness.

Parting thought

Left-wing parties and movement are generally proactive in identifying and resolving critical social problems and inequalities. It is the raison d’etre of the Left.

The Right seem only able to belatedly react to social problem and inequalities.

Especially when they caused it.

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References

Interest.co.nz: PM says no housing crisis in Auckland

NZ Herald: Housing shortage growing by 40 homes a day

Fairfax media: House prices rise at an ‘eye-popping’ rate for 6 NZ regions – Trade Me

Interest.co.nz: Median rents up $50 a week over last 12 months in parts of Auckland

Radio NZ: Lessons for NZ in Australia’s Budget

NZ Herald: John Key – State of the Nation speech

Statistics NZ: 2013 Census QuickStats about national highlights

Statistics NZ: Owner-Occupied Households

Radio NZ: Homeless family faces $100k WINZ debt

Interest.co.nz: New official Reserve Bank figures definitively show that investors accounted for nearly 46% of all Auckland mortgages

Simpson Grierson: New “bright-line” test for sales of residential land

Property Club: First buyers still missing out in Auckland’s most affordable properties

The Guardian: New Zealand housing crisis forces hundreds to live in tents and garages

Al Jazeera: New Zealand’s homeless – Living in cars and garages

NZ Herald: No house, not even a motel, for homeless family

Radio NZ: Key denies Auckland housing crisis

Radio NZ: No housing crisis in NZ – Paula Bennett

Beehive: Budget 2016 – 3000 emergency housing places funded

Mediaworks: Homeless crisis costing Govt $100,000 a day for motels

Radio NZ: Emergency housing providers instructed not to talk to media

Radio NZ: Ngaro apologises for govt criticism

TV3: The Nation – Patrick Gower interviews Bill English

Housing NZ: Annual Report 2008/09

Housing NZ: Annual Report 2015/16

Previous related blogposts

Can we do it? Bloody oath we can!

Budget 2013: State Housing and the War on Poor

Budget 2013: State Housing and the War on Poor

National recycles Housing Policy and produces good manure!

Our growing housing problem

National Housing propaganda – McGehan Close Revisited

Housing; broken promises, families in cars, and ideological idiocy (Part Tahi)

Housing Minister Paula Bennett continues National’s spin on rundown State Houses

Another ‘Claytons’ Solution to our Housing Problem? When will NZers ever learn?

Government Minister sees history repeat – responsible for death

Housing Minister Paula Bennett continues National’s spin on rundown State Houses

Letter to the Editor – How many more children must die, Mr Key?!

National under attack – defaults to Deflection #1

National’s blatant lies on Housing NZ dividends – The truth uncovered!

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Problem…

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Solution.

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This blogpost was first published on The Daily Blog on 21 May 2017.

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2017 – Ongoing jobless tally

21 March 2017 2 comments

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Unemployment logo

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Continued from: 2016 – Ongoing jobless tally

By the numbers, for this year;

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Events

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January

February

March

April

Otago University: unknown

May

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Unemployment Statistics* at a Glance

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(*  See caveat below)

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Caution: Official Unemployment Statistics

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On 29 June 2016, Statistic NZ announced that it would be changing the manner in which it defined a jobseeker. This   so-called “revision”  would materially affect how unemployment stats were counted and reported;

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statistics-nz-logo

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Change: Looking at job advertisements on the internet is correctly classified as not actively seeking work. This change brings the classification in line with international standards and will make international comparability possible.

Improvement: Fewer people will be classified as actively seeking work, therefore the counts of people unemployed will be more accurate.

The statement went on to explain;

Change in key labour market estimates:

  • Decreases in the number of people unemployed and the unemployment rate
  • Changes to the seasonally adjusted unemployment rate range from 0.1 to 0.6 percentage points. In the most recent published quarter (March 2016), the unemployment rate is revised down from 5.7 percent to 5.2 percent
  • Increases in the number of people not in the labour force
  • Decreases in the size of the labour force and the labour force participation rate

When Statistics NZ ‘re-jigged’ its criteria for measuring unemployment in June, unemployment dropped from 5.7% to 5.2% (subsequently revised again down to 5.1%).

All  unemployment data from Statistics NZ should therefore be treated with caution. Unemployment is  likely to be  much higher than Statistics NZ figures indicate.

 

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References

Statistics NZ: Household Labour Force Survey – Revisions to labour market estimates

Statistics NZ: Labour Market Statistics – June 2016 quarter

Trading Economics: New Zealand Unemployment Rate  to January 2017

Previous related blogpost

Lies, Damned lies and Statistical Lies

National exploits fudged Statistics NZ unemployment figures

Lies, Damned lies and Statistical Lies – ** UPDATE **

2016 – Ongoing jobless tally and why unemployment statistics will no longer be used

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The Mendacities of Mr Key # 19: Tax Cuts Galore! Money Scramble!

2 December 2016 6 comments

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In troubled times, we are community

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On 14 October, eight hours after two massive 7.8 earthquakes simultaneously rocked the entire country, our Dear Leader John Key made an impassioned (for him, it was impassioned) appeal to the people of Aotearoa on Radio NZ’s ‘Morning Report‘;

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john-key-web-rob2_10

The one thing I’d we’d just say to New Zealanders at the moment is stay close to your family and friends. Make sure you listen to the radio and listen to the best information that you’re getting. And if you do have certainly older neighbours or family, if you could go in and check up on them that would be most appreciated. Because there will be people feeling genuinely alone.“

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It was  an appeal to a sense of community that is rarely made by right-wing governments or their leaders. It was a tacit acknowledgement that No Man or Woman is an Island that that only by acting collectively can human beings survive  and improve their own circumstances and for their children.

Unfortunately, a week later, Key’s sense-of-community-spirit  was returned to it’s hermetically-sealed casket and re-buried alongside cryo-capsules containing New Zealand’s Once-Egalitarian-Spirit and International-Independent-Leadership-On-Moral Issues.

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National dangles the “carrot”

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On 21 November, Key announced that tax cuts were once again “on the table” and Little Leader/Finance Minister, Bill English confirmed it.

With a statement that was more convoluted than usual, Key said;

“We’ve identified from our own perspective if there was more money where would be the kinds of areas we want to go, not what is the make up … for instance, of a tax or family package, what is the make up of other expenditure we want?

Tax is one vehicle for doing that, it’s not always the most effective vehicle for doing that for particularly low income families.”

Tax could be effective higher up the income scale, but lower down it was not that effective because base rates were low or it was very expensive.

Over the fullness of time we’ll have to see whether we’ve got much capacity to move.

Making sure they can keep a little more of what they earn or get a little bit more back through a variety of mechanisms is always something we can consider. It could be a mix, yes.

In the end it’s about equity for New Zealanders and about .. having a rise in their standard of living, and there’s a number of ways you could deliver that.”

Key has once again dangled a billion-dollar carrot in front of New Zealanders as the country heads towards next year’s election.

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National’s previous election “carrots”

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During the 2008 General Election,  as the Global Financial Crisis was impacting on our own economy, Key was promising tax cuts. In May 2008, he said;

“But in 2005 we promised tax cuts which ranged from about $10 to $92 a week, roughly $45 a week for someone on $50,000 a year.

“I described it as a credible programme of personal tax cuts and I’m committed to a credible programme of personal tax cuts,” he said.

Questioned on whether National’s tax cuts programme of 2005 was credible today given the different economic circumstances, Mr Key said: “Well, I think it is.”

At the time, then Labour’s Finance Minister, Michael Cullen  described National’s tax-cut-bribe as ‘reckless‘.

By October 2008, as NZ Inc’s economic circumstances deteriorated, Treasury issued dire warnings that should have mitigated against any notions of affordable tax-cuts;

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.

Key’s government won the 2008 election and proceeded with tax-cuts in 2009 and 2010.

Predictably, government debt – which had been paid down by the Clark-Cullen government – ballooned as the recession hit New Zealand’s economy and tax revenue fell;

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National government debt - tax cuts

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Key himself estimated tax cuts to be worth between $3  or $4 billion.

In 2008, New Zealand’s core government debt stood at nil (net)

Current government debt now stands at $62.272 billion (net).

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Nature intervenes in National’s “cunning plan” for a Fourth Term

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According to Dear Leader Key, estimates for the re-build of earthquake damage in and around Kaikoura; State Highway One, and the rest of the South Island  is likely to be at least “a couple of billion dollars“.

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 The repair bill from Monday's earthquake near Hanmer Springs is estimated to be billions of dollars. Photo: RNZ / Rebekah Parsons-King

The repair bill from Monday’s earthquake near Hanmer Springs is estimated to be billions of dollars. Photo: RNZ / Rebekah Parsons-King

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Finance Minister Bill English has hinted the cost may be much more;

“The combination of significant infrastructure damage in Wellington, obvious damage in Kaikoura – all roading and rail issues – this is going to add up to something fairly significant. We also know that those estimates change over time.”

No wonder Labour leader Andrew Little was less than impressed at tax cuts being mooted. Echoing Michael Cullen from eight years ago, he condemned the irresponsible nature of Key’s proposal;

“Well this is crazy stuff, I mean in addition to a government having $63 billion worth of debt it is yet to start repaying, and you’ve got a billion dollars extra each year just in the cost of superannuation.

Now we have another major civic disaster that is going to cost in terms of repairs. I do not see how John Key can say tax cuts are justified in the present circumstances.”

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National spends-up large on new prison beds

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On top of which, English announced last month that National was planning to spend over $2.5 billion on new prison beds. He questioned whether tax cuts were affordable with such looming expenditure;

Finance Minister Bill English has warned an announcement today of plans for an extra 1,800 prison beds will reduce the room for the Government to consider tax cuts before next year’s election.

English told reporters in Parliament the extra beds would cost NZ$1 billion to build and an extra NZ$1.5 billion to run over the next five or six years.

“It will have an impact because it is a very large spend and, two or three years years ago, we probably thought this could be avoidable,” English said when asked if the extra spending would make it harder for the Government to unveil tax cuts and other spending before the next election.

“It’s all part of this rachetting up of tougher sentences, tighter remand conditions, less bail and taking less risk with people who commit serious offenses,” he added.

Asked if that meant there would be less room for tax cuts, he said: “I wouldn’t want to judge that because it is a bit early, but certainly spending this kind of money on prison capacity is going to reduce other options.”

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The inevitable cost of tax-cuts

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As billions more is wasted on prisons, money spent on health, education, housing, and other social services is being frozen; cut back, or not keeping pace with inflation.

This has resulted in appalling cuts to services such as recently experienced by  96-year-old Horowhenua woman, Trixie Cottingham;

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dhb-threatens-to-cut-off-96-year-olds-home-help-in-levin

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Other social services have also been wound back – as previously reported by this blogger;

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relationships-aortearoa-funding-cuts-anne-tolley-budget-2015

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Cuts to the Health budget have resulted in wholly predictable – and preventable – negative outcomes;

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patients-have-severe-loss-of-vision-in-long-wait-for-treatment

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A critic of National’s under-funding of the health system, Phil Bagshaw, pointed out the covert agenda behind the cuts;

New Zealand’s health budget has been declining for almost a decade and could signal health reforms akin to the sweeping changes of the 1990s, new research claims.

[…]

The accumulated “very conservative” shortfall over the five years to 2014-15 was estimated at $800 million, but could be double that, Canterbury Charity Hospital founder and editorial co-author Phil Bagshaw said.

Bagshaw believed the Government was moving away from publicly-funded healthcare, and beginning to favour a model that meant everyone had to pay for their own.

“It’s very dangerous. If this continues we will slide into an American-style healthcare system.”

As the public healthcare system faces reduction in funding – more and New Zealanders will be forced into taking up  health insurance. In effect, National is covertly shifting the cost of healthcare from public to private,  funding the public/private ‘switch’ through personal tax-cuts.

Tax dollars have previously been allocated to social services such as Education or Health. By implementing tax cuts, those “Health Dollars” become “Discretionary Dollars”; Public Services for Citizens becomes Private Choice for Consumers.

And we all know how “well” that model has worked out in the United States;

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how-the-u-s-health-care-system-fails-its-sickest-patients

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(Yet another) Broken promise by Key

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But equally important is that, in promising to spend the government surplus on tax-cuts, Dear Leader Key has broken yet another of his promises to the people of New Zealand.

In July 2009, National suspended all contribution to the NZ Superannuation Fund. At the time  Bill English explained;

“The Government is committed to maintaining National Superannuation entitlements at 66 per cent of the average wage, to be paid from age 65.

[…]

The suspension of automatic contributions will remain until there are budget surpluses sufficient to fund contributions. Under current projections, the Government is not expected to have sufficient surpluses for the next 11 years.

[…]

Once surpluses sufficient to cover automatic contributions return, the Government intends to contribute the amount required by the Fund formula.”

In 2010, English said;

“We’re managing government spending carefully, the economy is improving a bit faster than we expected, and that means it’s six years instead of 10 years until we start making contributions to the fund. If the economy picks up a bit faster again, we’ll get to that point sooner.”

In 2011, John Key said;

“Once we’re back to running healthy surpluses, we’ll be able to auto-enrol workers who are not members of KiwiSaver, pay down debt and resume contributions to the Super Fund.”

In 2012, English said;

“The Government’s target is to return to surplus by 2014-15 so that we will then have choices about repaying debt, resuming contributions to the New Zealand Superannuation Fund, or targeting more investment in priority public services.”

In 2013, English said;

“It remains our intention that contributions will resume once net debt has reduced to 20 percent of GDP, which is forecast for 2020.”

In 2014, English told Patrick Gower;

“… In this Budget we will have a paper-thin surplus , I mean we’ll just have a surplus but that’s the beginning of a series of surpluses and that means we have choices. And there’s a lot of choices. We’ve got the New Zealand Super Fund to resume contributions, an auto-enrolment for KiwiSaver, paying off debt more quickly, something for households to help them along. Those are choices that New Zealand fortunately will have if we have a growing economy and we stick to being pretty careful about our spending.”

In 2015, Key and English issued a joint  statement saying;

“Through Budget 2015, the National-led Government will…

[…]

Reduce government debt to less than 20 per cent of GDP by 2020/21 when we can resume contributions to the NZ Super Fund.”

In October this year, English said;

“There has not been any broken commitment regarding the Superannuation Fund. We have said for some time that when the Government returns to a sufficient budget surplus and can contribute genuine savings rather than borrowing, National will resume contributions to the New Zealand Superannuation Fund. The straightforward issue is that even when the Government shows surpluses under the operating balance before gains and losses measure, it does not always have cash surpluses until those accounting surpluses get reasonably big.

[…]

I remember that Sunday in 2009 in vivid detail, in fact, and constantly go back to it. The Government has outlined its position many, many times since 2009, and when there are sufficient surpluses and when we have debt down to the levels we think are prudent, which is 20 percent of GDP by 2020, then we will resume contributions, which we would like to do.”

In every year since National ceased contributing to the NZ Super (“Cullen”) Fund, both Key and English have reiterated their committment to resume payments when government books returned to surplus.

By hinting at tax cuts instead, Key and English have broken their promises, made over a seven year period.

Even their “qualifyer” of resuming contributions “when we have debt down to the levels we think are prudent, which is 20 percent of GDP by 2020” becomes untenable with their hints of an election-year tax-cut bribe.

By cutting taxes instead of paying down debt, resuming contributions to the NZ Super Fund is pushed further out into the dim, distant future.

The very suggestion of tax cuts is another potential broken promise.  What’s one more to add to his growing list of promises not kept?

After all, there is an election to be fought next year.

Since National has not thought twice at under-funding the Health Budget, it certainly does not seem troubled at using tax-cuts as an election bribe, and undermining this country’s future superannuation savings-fund for selfish political gain.

Muldoon did it in 1973 – and got away with it.

Carrot, anyone?

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References

Radio NZ: Morning Report – John Key urges New Zealanders to look out for their neighbours

Radio NZ: Morning Report – Key not ruling out tax cuts despite billion-dollar Kaikoura bill

Radio NZ: Morning Report – Government not ruling out tax cuts despite $1B Kaikoura bill

Fairfax media: John Key reveals plans for ‘tax and family’ package, but quake might affect plans

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

Beehive: National ignores inflation warning

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

NZ Treasury:  Financial Statements of the Government of New Zealand for the Year Ended 30 June 2010 – Debt

Fairfax media: $4b in tax cuts coming

NZ Treasury: Fiscal Indicator Analysis – Debt  as at 30 June 2008

NZ Treasury:  Financial Statements of the Government of New Zealand for the Year Ended 30 June 2016

Radio NZ: Earthquake’s billion-dollar bill won’t compare with Chch

Radio NZ: PM ‘irresponsible’ to talk tax cuts after quake – Labour

Interest.co.nz: English says NZ$1 bln capital cost and NZ$1.5 bln of operating costs for extra 1,800 prison beds reduces room for tax cuts

Radio NZ: Checkpoint – DHB threatens to cut off 96-year-old’s home help in Levin

Dominion Post: Women’s Refuge cuts may lead to waiting lists

NZ Herald: Govt funding cuts reduce rape crisis support hours

NZ Doctor: Christchurch’s 198 Youth Health Centre to close its doors as management fails to implement directives from CDHB

TV1 News: ‘Devastating news for vulnerable Kiwis’ – Relationships Aotearoa struggling to stay afloat

Radio NZ: Patients have ‘severe loss of vision’ in long wait for treatment

Fairfax media: Researchers claim NZ health budget declining, publicly-funded surgery on way out

Radio NZ: Patients suffering because of surgery waits – surgeon

Fairfax media: 174,000 Kiwis left off surgery waiting lists, with Cantabrians and Aucklanders faring worst

Fortune: How the U.S. Health Care System Fails Its Sickest Patients

NZ Super Fund: Contributions Suspension

Beehive: New Zealand Super Fund – fact sheet

Fairfax media: English signals earlier return to Super Fund payments

Scoop media: John Key’s Speech to Business New Zealand Amora Hotel Wgtn

Parliament Today: Questions and Answers – November 7

TV3 News: $23 billion in NZ Super Fund

Throng: Patrick Gower interviews Finance Minister Bill English on The Nation

Beehive: Budget 2015

Scoop: Hansards – Questions and Answers – 18 October 2016

Fairfax media: Compulsory super ‘would be worth $278 billion’

Additional

The Standard: The great big list of John Key’s big fat lies (UPDATED)

Other Blogs

The Standard: The eternal tax-cut mirage

Previous related blogposts

“It’s one of those things we’d love to do if we had the cash”

Tax cuts & school children

The Mendacities of Mr Key #3: tax cuts

The consequences of tax-cuts – worker exploitation?

Plunket and the slow strangulation of community organisations

The cupboard is bare, says Dear Leader

An earthquake separates John Key and ‘The Iron Lady’, Margaret Thatcher

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This blogpost was first published on The Daily Blog on 27 Novembr 2016.

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2016 – Ongoing jobless tally and why unemployment statistics will no longer be used

14 November 2016 9 comments

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Unemployment logo

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Continued from: 2015 – Ongoing jobless tally

So by the numbers, for this year;

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Events

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January

February

March

April

May

June

July

August

October

November

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Statistics

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This blogger previously reported how Statistics NZ recently implemented a so-called “revision” which would materially affect how unemployment stats were counted and reported;

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statistics-nz-logo

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On 29 June 2016, Statistic NZ announced that it would be changing the manner in which it defined a jobseeker;

Change: Looking at job advertisements on the internet is correctly classified as not actively seeking work. This change brings the classification in line with international standards and will make international comparability possible.

Improvement: Fewer people will be classified as actively seeking work, therefore the counts of people unemployed will be more accurate.

The statement went on to explain;

Change in key labour market estimates:

  • Decreases in the number of people unemployed and the unemployment rate
  • Changes to the seasonally adjusted unemployment rate range from 0.1 to 0.6 percentage points. In the most recent published quarter (March 2016), the unemployment rate is revised down from 5.7 percent to 5.2 percent
  • Increases in the number of people not in the labour force
  • Decreases in the size of the labour force and the labour force participation rate

The result of this change? At the stroke of a pen, unemployment fell from 5.7% to 5.2%;

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nz-unemployment-rate-october-2015-to-october-2016

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And on-cue, National was quick to capitalise on Statistics NZ’s figure-fudging;

On 2/3 July, TV3’s The Nation, Dear Leader Key told Corin Dann;

“The unemployment rate in New Zealand is now falling pretty dramatically.”

On 8 August, Key was quoted on Interest.co.nz;

“On the other side, we need these people in an environment where unemployment is 5.2% and where growth is still very, very strong. You’ve just got to be careful when you play around with these things that you don’t hamstring certain industries that need these workers.”

On 12 August, in Parliament, English also gleefully congratulated himself on the “fall” in unemployment;

“The Reserve Bank is forecasting an increase of about 1 percent more growth in the economy over the next 3 years, compared with what it thought 3 months ago. It is forecasting that unemployment is going to continue falling from 5.2 percent this year to 4.5 percent by 2019 and that job numbers will increase by more than 2 percent on average over the next 2 years. A significant component of that, of course, will be the construction boom, where thousands of houses will be built over the next 2 or 3 years. These forecasts are in line with Treasury’s forecast for the labour market and show an economy that is delivering more jobs, lower unemployment, and real increases in incomes when in many developed countries that is not happening.”

The latest Statistics NZ (soon to be re-branded Ministry of Truth) unemployment figures showed another “fall”. The unemployment rate for the September 2016 Quarter is now purportedly 4.9%;

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unemployment-sept-2016-household-labourforce-survey-statistics-nz

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Can that figure – 4.9% – be trusted?

When Statistics NZ “re-jigged” its criteria for measuring unemployment in June, unemployment dropped from 5.7% to 5.2% (subsequently revised again to 5.1%);

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unemployment-june-2016-household-labourforce-survey-statistics-nz

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Predictably, National were quick to once again exploit the September statistics, as their Twitter-feed showed on 2 November;

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national-party-twitter-2-nov-2016-unemployment

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And three days later;

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national-party-twitter-5-nov-2016-unemployment

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It’s all nonsense, of course – made worse by Statistics NZ’s other dodgy criteria used when considering their definition what constitutes being “employed”;

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

  • worked for one hour or more for pay or profit in the context of an employee/employer relationship or self-employment
  • worked without pay for one hour or more in work which contributed directly to the operation of a farm, business, or professional practice owned or operated by a relative

Statistics NZ’s mis-representation of our “low unemployment” environment has gone largely unnoticed and unchallenged. No one in the mainstream media has picked up on the questionable data;

This meant the size of the labour force rose 33,000 and unemployment fell by just 3,000 to 128,000. The unemployment rate fell to 4.9% from a revised 5.0% in the June quarter. This was the lowest unemployment rate since the December quarter of 2008. Unemployment has fallen by 7,000 over the last year and is up 1,000 from two years ago.Interest.co.nz

Unemployment has fallen below 5 percent for the first time in nearly eight years thanks to the growing economy, but it is still not translating into booming wages. Official figures show the unemployment rate declined to 4.9 percent in the three months to September, or 128,000 people, the lowest rate since December 2008.Radio NZ

According to Statistics New Zealand, the unemployment rate fell to 4.9% in the September 2016 quarter. This is the lowest unemployment rate since the December 2008 quarter. There were 3,000 fewer people unemployed than in the June 2016 quarter and 10,000 fewer over the year.Maori TV

The unemployment rate has fallen to 4.9 percent for the September 2016 quarter, according to new figures from Statistics NZ. That’s the lowest it’s been since December 2008. – TV3 News

New Zealand’s unemployment rate fell below 5 percent for the first time since December 2008 as employers took on more staff than expected, although that didn’t spur wages to rise at a faster pace. The kiwi dollar rose on the figures. The unemployment rate fell to 4.9 percent in the three months ended Sept. 30 from a revised 5 percent rate in June, Statistics New Zealand said.Sharechat

New Zealand has recorded its best unemployment rate in almost eight years with third quarter figures falling to a better than expected 4.9 per cent. The jobless rate declined from a revised 5.0 per cent in the June quarter, according to Stats NZ, taking it to its lowest point since December 2008. – NZCity/NZ News

New Zealand’s unemployment rate fell below 5 per cent for the first time since December 2008 as employers took on more staff than expected, although that didn’t spur wages to rise at a faster pace. The kiwi dollar rose on the figures.

The unemployment rate fell to 4.9 per cent in the three months ended September 30 from a revised 5 per cent rate in June, Statistics New Zealand said.NZ Herald

New Zealand’s unemployment rate fell more than expected in the third quarter to drop to 4.9 per cent – the lowest rate since last 2008. The jobless rate declined from a revised 5.0 per cent in the June quarter, according to Stats NZ taking it to its lowest point since the December quarter nearly eight years ago. There were 3,000 fewer people unemployed than in the previous quarter and 10,000 fewer over the year. – TVNZ News

Of course there were “3,000 fewer people unemployed than in the previous quarter and 10,000 fewer over the year“! Ten thousand unemployed people vanished from the data, at the click of a mouse, as Statistics NZ worked their “magic”.

Statistics NZ could potentially make unemployment vanish entirely, overnight, by changing the unemployment criteria to people with only two hearts and scaly blue skin.

Only Hamish Rutherford, at Fairfax media, pointed out the questionable value of Statistics NZ’s data;

Unemployment has fallen to the lowest level in almost eight years, as the economy creates more than 10,000 new jobs a month. Official figures show the unemployment rate dropped to 4.9 per cent in the the September quarter, the first time it has fallen below 5 per cent since December 2008.

Earlier this year Statistics New Zealand revised the way it conducts the quarterly household labour force survey (HLFS), in a bid to bring the survey more in line with international standards. However the changes mean Statistics New Zealand cannot make confident comparisons with all of the figures from previous surveys.

But even in Rutherford’s article, the all-important point of dodgy stats was lost amongst the ‘rah-rah‘ of the mythical drop in unemployment.

The Otago Daily Times made an even less impressive, passing, reference to Statistics NZ’s fudged figures;

Unemployment in New Zealand is at its lowest level since 2008 but there will be lingering concerns about the lack of wage growth and the impact this will have on the inflation outlook.

Statistics New Zealand has changed some of its survey data to measure unemployment and employment and those changes are still bedding in.Otago Daily Times

Government Statistician, Liz MacPherson, has rejected any suggestion of political partisanship in the way unemployment data is now being presented.

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grant-robertson-liz-macpherson

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She was defensive in the face of criticism from Labour’s Grant Robertson and on  16 August, Ms MacPherson stated;

Like my predecessors I am fiercely protective of the statutory independence of the role of the Government Statistician and strongly refute any assertions made by Grant Robertson that there has been political interference in the production of official statistics.

This independence means that I maintain the right to make changes necessary to ensure the relevance and quality of our official statistics. Changes to the Household Labour Force Survey have been made to ensure that we produce the best possible measure of the current state of the labour market and to maintain consistency with international best practice.

Far from ignoring technological change during the past 30 years, such as the advent of the internet, we are incorporating these changes so as to be technology neutral.

Within the survey questions, to be regarded as actively looking for a job you must do more than simply look at job advertisements, whether it is online or in a newspaper.

It is not uncommon for revisions to be made to official statistics as a result of more accurate information becoming available or changes to international standards and frameworks.

In addition we are introducing new measures – for example underutilisation – enabling a deeper, richer understanding of New Zealand’s labour market.

When this does occur it is standard practice for Statistics NZ to communicate reasons for revisions and anticipated changes well in advance of their official release, as we did on 29 June 2016. […]

Statistics NZ has a legislative obligation to release objective official statistics. We will continue to do this at all times.

One of many ironies not lost on this blogger is that other government departments extoll the virtues of jobseeking on-line. As CareersNZ and WINZ state the blindingly-obvious, “most job vacancies are listed online”;

Careersnz;

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careersnz-use-the-internet

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WINZ;

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work-and-income-where-to-look

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Ms MacPherson’s assertion that Statistics NZ has changed it’s definitions of unemployment and jobseeking  “to maintain consistency with international best practice” is not an acceptable explanation.

If “international best practice” does not recognise on-line jobseeking as constituting a definition of unemployment – then that in itself is worrying and suggests that global unemployment may be much, much higher than current international statistics portray.

As a consequence of Ms MacPherson’s decision to exclude on-line jobseekers from official stats, this blogger concludes that official unemployment data is  severely flawed and unrepresentative of our real unemployment numbers.

In simple terms; the numbers are a sham.

Unemployment statistics will no longer be presented in on-going up-dates of the Jobless Tally.

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This Statement has not been endorsed by MiniTruth (formerly StatsNZ)

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ministry-of-truth-logo

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Addendum1: Definition of Employment

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

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

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

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

Source

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References

Statistics NZ: Household Labour Force Survey – Revisions to labour market estimates

Scoop media: On The Nation – Patrick Gower interviews John Key

Interest.co.nz: Key deflects calls for migration review; says migration needed with 5.2% unemployment

Scoop media: Parliament – Questions & Answers – 11 August 2016

Statistics NZ: Labour Market Statistics – September 2016 quarter

Statistics NZ: Labour Market Statistics – June 2016 quarter

Twitter: National (2 Nov)

Twitter: National (5 Nov)

Interest.co.nz: Jobs grew 35,000 or 1.4% in Sept quarter, but unemployment fell just 3,000 and jobless rate falls to 4.9%

Radio NZ: Unemployment drops to lowest level since 2008

Maori TV: Work force grows despite youth unemployment

TV3 News: Unemployment drops to lowest rate since 2008

Sharechat: NZ jobless rate falls below 5% for first time since 2008, wage inflation muted

NZCity/NZ News: Jobless rate falls to near eight-year low

NZ Herald: NZ jobless rate falls below 5 per cent for first time since 2008, wage inflation muted

TVNZ News: Unemployment rate falls to near eight-year low

Fairfax media: Unemployment drops to lowest level since 2008 on booming job creation

Otago Daily Times: Unemployment lowest in eight years

Radio NZ: Statistician denies political interference over job seeker figures

Statistics NZ: Government Statistician responds to Grant Robertson

Careersnz: Job hunting tips

Work and Income: Where to look

Additional

TVNZ: Q+A – Interview with John Key

Previous related blogpost

Lies, Damned lies and Statistical Lies

National exploits fudged Statistics NZ unemployment figures

Lies, Damned lies and Statistical Lies – ** UPDATE **

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This blogpost was first published on The Daily Blog on 9 November 2016.

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National and the Reserve Bank – at War!

15 July 2016 4 comments

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reserve bank vs government

 

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Open warfare has broken out between the National regime and  the Reserve Bank. Recent media statements indicate that we are seeing an increasingly bitter  war-of-words; a battle of wills, taking place over the growing housing crisis.

National is demanding that the Reserve Bank implement policies to “get on with it” to rein-in ballooning Auckland housing prices. The Reserve Bank is resisting, in an almost Churchillian-way.

In April this year, Key denied flatly that there was any “housing crisis” in this country;

“No, I don’t think you can call it a crisis. What you can say though is that Auckland house prices have been rising, and rising too quickly actually.”

But a year ago, on 15 April 2015, Reserve Bank deputy governor Grant Spencer warned that investors/speculators were becoming a major problem in the housing market;

“Investors are often setting the marginal market prices that are then applied to the full housing stock within a regional market.”

Spencer went on to issue what must be the most prescient statement ever uttered by a senior civil servant;

“Indicators point to an increasing presence of investors in the Auckland market and this trend is no doubt being reinforced by the expectation of high rates of return based on untaxed capital gains.”

Predictably, Key rejected taxing capital gains as an instrument to control rampant speculation;

“I remember when everyone said to [introduce] the equivalent of a [capital gains] bright line test, it will solve the issues. Well, it really didn’t.”

Key also rejected calls by the Reserve Bank to curb high levels of  immigration which was exacerbating demand for housing. Key was blunt;

“We’re going to stick with the plan we’ve got.”

Of course Key is not prepared to reduce immigration . It is one of the few drivers for current economic growth that is stimulating the economy. Curb migration and the economy stalls. Stall the economy and National would have nothing to take to the election next year.

As National’s own minister, Jonathan Coleman stated in 2011;

“It’s important to highlight the economic value of Immigration here…

[…]

…New migrants add an estimated $1.9 billion to the New Zealand economy every year.

Immigration recognises the strategic importance of the tourism and export education sectors and the direct links they provide to employers.

Given these compelling figures, my number one priority has been to ensure Immigration is contributing to the Government’s economic growth agenda.”

Coleman’s 6 May 2011 press release was entitled, “Immigration New Zealand’s contribution to growing the economy”.

Key deflected criticism and instead blamed the Auckland Council. In a blustering attack reminiscent of the late Robert Muldoon, Key threatened the Auckland Council with over-riding it’s Unitary Plan;

“The effect of the [government] National Policy Statement would vary around the country, but in essence it linked the price of land to demand in the economy. If the land price is going up too quickly (councils) have to amend their plans to release enough land, and if they don’t do that they’ll breach the law. If the Unitary Plan doesn’t meet the demands of Auckland, the National Policy Statement because of the way it works will drive it, mark my words.”

His solution? Build more;

“Look, in the end, we’ve been saying for some time it is not sustainable for house prices to rise at 10, 12, 13 percent a year. The only answer to that is do what we’re doing: allocate more land and build more houses.  It certainly will stop it, there’s no question about that, because if you build enough supply, you eventually satisfy demand.

The mantra to ‘build more, build more‘ overlooks recent statistics which showed that nearly fifty percent of housing in Auckland was being purchased by  investors/speculators;

The Reserve Bank has for the first time unveiled official figures that break out the Auckland market from the rest of the country’s mortgage lending figures. The figures confirm what some previous research and anecdotal evidence has pointed to. Investors are huge in the Auckland market.

The figures show that in April, investors committed to $1.623 billion of the $3.536 billion worth of mortgages advanced in Auckland. That’s just a tick under 46% of the total.

Labour’s Phil Twyford said that in some areas of Auckland, up to 75% of housing was being grabbed by investors/speculators. Twyford said;

“They should start immediately by banning non-resident foreign buys from speculating in New Zealand property, unless they build a new dwelling. That’s the Australian Government policy and we think it makes a lot of sense.”

So unless National is prepared to ban foreigner and local  investors/speculators from purchasing around half of all new housing in Auckland, building new homes will not address the growing crisis.

On the issue of foreign-ownership of residential property, Key was adamant that his open-door, free-market policy of foreign ownership of housing  would be unchanged. Even if it meant New Zealander’s would find  it harder and harder to buy their own home, in their own country. As he said to Corin Dann on TVNZ’s Q+A last year;

“But the point here is simply this – I don’t want to ban foreigners from buying residential property.”

But Deputy Mayor, Penny Hulse, was having none of  Key’s bullying tactics. She responded with her own tough message;

“We’ve got six and half years of land planned for, infrastructure in the ground and ready to go. Government themselves have got more than 20 special housing areas that belong to Housing New Zealand that are ready to go.  There’s no shortage of places to build. Our question to government would be, perhaps you just need to get on with it.”

The reality is that National is unwilling to implement any policy that might lower property prices. As Key has said previously;

“If it is left unchecked, some buyers could find themselves substantially overexposed in an overvalued market, and we all know what happens if those values start to fall.” –  John Key, 23 July 2013

“Let’s just take the counter-factual for a moment. Would you want your house price going down?  And what most Aucklanders say to me is ‘I’d rather my house price went up, but I’d rather it went up a little more slowly than this’.” – John Key, 6 August 2015

So Key is in a bind. His government’s  continuing popularity is at the pleasure of property-owners with bloated housing values.

Build too many houses or implement too many restrictions (including new taxes), and property values in Auckland and elsewhere in New Zealand might begin to fall, as they did in the late 1990s. That would be a financial shock for many New Zealanders who, through rising property values, are feeling like “millionaires”, albeit on paper.

If that happens, National’s popularity – riding high on 47% – would finally crash and burn, paving way for a Labour-Green(-NZ First?) coalition government next year.

However, National’s desperation to resolve what has become a major public crisis has apparently found a new scape-goat – the Reserve Bank.

National’s cunning plan is for the Reserve Bank to do their “dirty work” for them. If the RBNZ were to implement policies that would result in property values levelling off – or even dropping – then Key and English would have “plausible deniability”. They could point to the Reserve Bank as an independent body and wash their hands of its actions.

Recent demands from John Key for the RBNZ to “get on with it” are not the first time that National has interfered with  the independence of the bank.

In April last year, in a classic example of nepotistic cronyism, Bill English’s brother was appointed to the RBNZ as an “advisor”;

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Finance Minister Bill English's brother to advise Reserve Bank on interest rates

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A year later, in April this year, Bill English took an unprecedented step in demanding greater over-sight of Graeme Wheeler, the RBNZ’s Governor;

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Bill English seeks talks on Reserve Bank governor's performance 'from time to time'

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According to the Fairfax report, English said;

“The duties of the board include keeping under review the performance of the governor. I would expect to discuss your assessment of the governor’s performance from time to time.”

On National’s* own website, English went further;

“Ministers typically send letters of expectation to the Boards of entities in their portfolio. This letter was prepared after The Treasury identified an opportunity to bring the accountability framework into line with other Crown agencies.”

This is naked interference in an institution that, since 1989, was to be protected from partisan-political interference. The RBNZ supposedly acts according to legislation – not the demands of the Finance Minister. Not since the Muldoon era has the RBNZ been controlled directly by a government minister.

It can only be assumed that National is meeting stiff resistance from the bank’s Governor, Graeme Wheeler, as English attempts to assert direct ministerial “over-sight” (ie, control) over the institution.

The fact that a recent war-of-words has erupted over the RBNZ’s involvement in Auckland’s housing crisis suggests that English’s Very Kiwi Coup may not have been successful.

In fact, the Cold War has become a Hot Conflict.

In the last week, the ‘battleground’ between National and the Bank became more public, as government minister and chief Head-Kicker, Steven Joyce and Grant Spence continued their war-of wills.

6 July, 1.10 AM

John Key;

But my sense is potentially one of the risks is you have got people buying rental properties at the moment, borrowing more money but fearful that the Reserve Bank is going to move. If they are going to make changes, probably they should just get on with it.”

7 July

Grant Spencer (RBNZ);

“Increased housing demand has been driven by record net immigration, low mortgage interest rates and increasing investor participation. Net migration flows continue to hit new records, with annual net PLT migration now approaching 70,000 persons…

[…]

A dominant feature of the housing market resurgence has been an increase in investor activity. In recent months, investors have accounted for around 43 percent of sales in Auckland and 38 percent in other regions […] The prospect of capital gains appears to remain a key driver for investors in the face of declining rental yields. 

The declining affordability of New Zealand housing and increasing investor presence have seen a downward trend in the share of households owning their own home. This ratio has fallen steadily since the early 1990s, reaching 64.8 percent at the 2013 Census. The recent increase in investor housing activity suggests that the home-ownership rate may have declined further since 2013.

The Reserve Bank considers that rising investor participation tends to increase the financial stability risks relating to the household sector in severe downturn conditions.

[…]

…However, we cannot ignore that the 160,000 net inflow of permanent and long-term migrants over the last 3 years has generated an unprecedented increase in the population and a significant boost to housing demand. Given the strong influence of departing and returning New Zealanders in the total numbers, it will never be possible to fine-tune the overall level of migration or smooth out the migration cycle. However, there may be merit in reviewing whether migration policy is securing the number and composition of skills intended. While any adjustments would operate at the margin, they could over time help to moderate the housing market imbalance.”

8 July, 7.46am

Don Brash (Former Reserve Bank governor);

The Reserve bank has no statutory responsibility for Auckland house prices or indeed house prices anywhere else…

[…]

The Prime Minister wants to pretend this is somebody else’s responsibility.  I think the Reserve bank is absolutely right, that this responsibility for Auckland house prices lies first and foremost with local government Auckland and central government in Wellington.

Central government, because it controls the rate of migration, which is by any international standards a very high level, that pushes  demand for housing.  And of course the Auckland Council,  not just now, but for the last couple of decades has restrained the availability of land on which to build Auckland houses...”

8 July, 7.51am

Steven Joyce (Minister for Economic Development);

“Migration is a contributing factor to housing demand…

[…]

The prime minister’s comment was entirely fair, which is to to suggest to the Reserve Bank [that] if you’re going to these things then, then  do move on them quickly…

[…]

The Prime Minister’s comments on Tuesday were just to highlight the fact that actually if you’re going to make these sorts of changes, do make them reasonably  quickly…

8 July, 7.57am

Grant Spencer (RBNZ);

“What we’re saying is that the, what we’re seeing in the last three years is 160,000 net  in-flow is unprecedented and it’s an important driver of the current housing situation and therefore it  can’t be ignored….

[…]

“You can’t manage or fine tune the migration cycle, we know that, but all we’re saying is that given it’s an important driver that we should be taking a look at that policy – making sure that we’re getting the numbers and the skills that government’s really targeting.”

It’s an important driver in the housing market, yes. There’s no doubt about that. But we’re also saying there’s no easy solution. You can’t manage or fine tune the migration cycle, we know that, but all we’re saying is that given it’s an important driver that we should be taking a look at that policy – making sure that we’re getting the numbers and the skills that government’s really targeting.”

[…]

We’re running at a rate of 60,000 at present, but how many years can we continue running at a rate of 60,000 and continue to absorb that rate. It get’s more and more difficulty when the country doesn’t have that absorbtive capacity.”

Current battle-status: stalemate.

Controlling house prices, as former Reserve Bank governor, Don Brash said, is beyond the bank’s statutory responsibility. On top of which, the RBNZ is unwilling to be the “patsy” for implementing policies (even if it could) that might crash house prices, and make them the Bad Guys in this worsening crisis.

Only a government can act decisively in such matters – but to do so would be political suicide for Key and his fellow ministers.

Fran O’Sullivan is usually sympathetic to the National government, but her column on 6 July was damning of Key’s inaction;

Most National Cabinet ministers and MPs are well invested in “real property”. So are many of their counterparts from other political parties.

Like most of us who are “established” – that is those of us who bought into the housing market a decade or more ago – the MPs have seen their own on-paper wealth double.

Having rejoiced at the wealth effect, neither the MPs nor the rest of us want to take a financial haircut. Key is right on that score.

But it is a pretty crap society that pulls the ladder up on younger people or those less well off just because they want to preserve their new unearned wealth.

[…]

Key again duck-shoved the issue, suggesting it was the Reserve Bank’s responsibility to “have a look at the question around investors”.

What’s notable is his Government will not slap investors with an effective capital gains tax, preferring a “bright line” test which is easily avoided by holding a housing investment for more than two years; refuses to introduce specific taxes to punish land bankers; and will not introduce rules to preserve the acquisition of existing residential housing for citizens or curb migration.

Key could pass special legislation to do this.

The question is why won’t he.

“Why”? Because Key doesn’t want to lose the 2017 election.

This is National’s Achille’s Heel, and it is fully exposed.

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Addendum1

In May this year, a TV3/Reid Research Poll was scathing of National’s inaction on the housing crisis. Even National voters were getting ‘grumpy’;

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tv3-news-housing-poll

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Addendum2

Current ballooning property prices are the highest in the developed world;

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Real house price growth - annual % change

Ad

Addendem3

Latest house price figures:

• $975,087- Auckland: Average house price, up 4.7% in past three months and 16.1% since June last year

• $492,403- Hamilton: Average house price, up 6.9% in past three months and 29% since June last year

• $599,915- Tauranga: Average house price, up 4.9% in past three months and 23.6% since June last year

Latest Inflation Rate:

Inflation is currently at 0.4%, according to Statistics NZ.

Notes

* I have downloaded and retained a copy of the National Party webpage. In the past, National Party webpages tend to “disappear”, and are no longer searchable, making referencing and verification of quotes problematic. If this webpage disappears, English’s comments can still be verified to anyone requesting it. – Frank Macskasy

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References

Radio NZ: Key denies Auckland housing crisis

Fairfax media: Reserve Bank call to look at untaxed property gains

NZ  Herald: John Key to Reserve Bank – Housing measures ‘not terribly effective’

Radio NZ: No change on immigration, says John Key

NZ Herald: Housing crisis – Reserve Bank calls on Government to curb immigration

Beehive.govt.nz: Immigration New Zealand’s contribution to growing the economy

Fairfax media: Key gets tough on Auckland with new policy forcing councils to release land

Interest.co.nz: Investors accounted for nearly 46% of all mortgage monies in Auckland

Radio NZ: Auckland’s home ownership rates ‘collapsing’ – Labour

Scoop media: PM – I don’t want to ban foreign buyers from buying

Radio NZ: Get on with it – Auckland Council tells govt

Fairfax media: Key expects LVRs to go ahead

Interest.co.nz: Key says non-Aucklanders tell him they would love it when house prices are rising

QV.co.nz: How fast is the current property market rising compared to the past? (2013)

TV3: Newshub poll – Key’s popularity plummets to lowest level

Fairfax media: Finance Minister Bill English’s brother to advise Reserve Bank on interest rates

Fairfax media: Bill English seeks talks on Reserve Bank governor’s performance ‘from time to time’

National.co.nz: English releases RB Board letter of expectations

NZ Herald: Auckland property: $400k deposit please

Reserve Bank: Housing risks require a broad policy response

Radio NZ: RBNZ wants immigration review to rein in house prices

Radio NZ: Government responds to RBNZ housing speech

Radio NZ: Reserve Bank – Housing risks require a broad policy response

NZ Herald: Fran O’Sullivan – Why won’t Key act on housing?

Fairfax media: Why MPs may want house prices in New Zealand to keep rising

TV3 News: Government gets thumbs down on housing

NZ Herald: Auckland property – $400k deposit please

Statistics NZ: Consumers Price Index: March 2016 quarter

Additional

Radio NZ: Reserve Bank refuses to play housing ball with government

Previous related blogposts

Can we do it? Bloody oath we can!

Budget 2013: State Housing and the War on Poor

National recycles Housing Policy and produces good manure!

Our growing housing problem

National Housing propaganda – McGehan Close Revisited

Housing; broken promises, families in cars, and ideological idiocy (Part Tahi)

Housing; broken promises, families in cars, and ideological idiocy (Part Rua)

Housing; broken promises, families in cars, and ideological idiocy (Part Toru)

Another ‘Claytons’ Solution to our Housing Problem? When will NZers ever learn?

Government Minister sees history repeat – responsible for death

Housing Minister Paula Bennett continues National’s spin on rundown State Houses

Letter to the Editor – How many more children must die, Mr Key?!

National under attack – defaults to Deflection #1

National’s blatant lies on Housing NZ dividends – The truth uncovered!

State house sell-off in Tauranga unravelling?

Upper Hutt residents mobilise to fight State House sell-off

Park-up in Wellington – People speaking against the scourge of homelessness

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reserve bank - rbnz - national government - housing affordability

Cartoon acknowledgement: Tom Scott, Dominion Post

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This blogpost was first published on The Daily Blog on 10 July 2016.

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Letter to the editor – National’s “pennies from heaven”

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Frank Macskasy - letters to the editor - Frankly Speaking

 

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from: Frank Macskasy <fmacskasy@gmail.com>
to: NZ Herald <letters@herald.co.nz>
date: Sun, Jul 3, 2016
subject: Letter to the editor

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The Editor
NZ Herald

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At the recent National Party Conference, Key took a rather childish swipe at other political parties by suggesting that their economic policies were predicated on “pennies from heaven”, referencing Bing Crosbie’s song by the same name.

In the next breath, he advised faithful National party followers that his government would be borrowing $1 billion from overseas lenders, to build houses in a belated attempt to address growing homelessness in this country.

Maybe not “pennies from heaven”, but dollars from overseas banks?

Meanwhile, National is still hinting at more tax cuts to come. This will further increase indebtedness of the government (ie, all New Zealanders) from the current $60 billion (approx) to an estimated $93.9 billion (gross) by next year, according to Treasury.

All of which has to be borrowed and paid back.

There are no “pennies from heaven” – a lesson National has failed to learn.

Who, amongst us, still believe National are “sound, prudent” fiscal managers? Anyone?

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-Frank Macskasy

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[address and phone number supplied]

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References

Radio NZ: $1 billion fund to boost housing build

NZ Treasury: Residual Cash and Net Core Crown Debt (2016)

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Letter to the editor – In response to Orwellian National Supporters

16 February 2016 2 comments

 

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Frank Macskasy - letters to the editor - Frankly Speaking

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I see that National Party apparatchiks are up to their usual disingenuous tricks, trying to suggest that Labour was a worse manager of the New Zealand economy than National;

 

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Roger Mitchell

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As many are already aware, quite the opposite is true. I replied, presenting  a few salient facts to the Tory fan-boi;

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from: Frank Macskasy <fmacskasy@gmail.com>
to: Dominion Post <letters@dompost.co.nz>
date: Thu, Feb 11, 2016
subject: Letter to the editor

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The editor
Dominion Post

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I see that Roger Mitchell of Clive is parroting the right-wing myth that Helen Clark “must have wised up considerably since steering New Zealand on to the rocks, with Labour’s help, of course, and we have been going full astern ever since”. (Letters, 9 Feb)

In fact, during Labour’s administration, from 2000-08, their economic track record was enviable by today’s standards;

* paying down sovereign debt to around $15 billion, in the mid-2000s, to National’s debt-splurge of $54.7 billion as at June last year. (Much of it to pay for tax-cuts in 2009 and 2010)

* Government Debt-to-GDP was 14.5% in 2007, and is now at 38%,

* Labour’s Finance Minister Michael Cullen posted nine surpluses. Bill English has posted one, and even that was achieved by cutting state services.

* unemployment stood at 78,000 (3.5%) in 2007/08, compared to 133,000 (5.3%) today.

* GDP growth reached 5.5% in July 2004 – whilst reaching a temporary peak of 3.5% in January last year.

* According to Statistics NZ, home ownership fell from 54.5% in 2006, to 49.9% in 2013.

* Meanwhile, those renting increased from 33.1% in 2006 to 35.2% in 2013. Housing affordability has worsened in the last few years.

It may suit the agenda of National Party loyalists to indulge in fanciful Orwellian re-writing of recent history, but the facts speak for themselves; Labour was the more effective manager of this country’s economy.

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-Frank Macskasy

[address and phone number supplied]

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References

NZ Productivity Commission: Housing affordability

NZ Herald: Investment data shines spotlight on debt

Statistics NZ: 2013 Census QuickStats about national highlights – Home ownership

Trading Economics: Unemployment Rate

Trading Economics: Unemployed persons

Trading Economics: New Zealand Government Debt to GDP

Previous related blogposts

Labour: the Economic Record 2000 – 2008

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

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This blogpost was first published on The Daily Blog on 11 February 2016.

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Solid Energy and LandCorp – debt and doom, courtesy of a “fiscally responsible” National Govt

28 December 2015 3 comments

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solid-energy-chief-executive-don-elder-and-hon-bill-english-at-mataura-9-sept-2011

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In May 2013, I first reported on National’s gutting of Solid Energy, detailing how Finance Minister Bill English and then-SOE Minister, Simon Power, had used the State Owned Enterprise as a cash-cow, to assist the government to balance it’s books;

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Solid Energy – A solid drama of facts, fibs, and fall-guys

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The story details National’s ministerial interference on Solid’s Energy’s financial affairs; under-mining (pun unintended) it’s bio-fuels programme; and extracting huge dividends, as well as taxes paid, to fill government coffers.

At the end, as Solid Energy teetered on collapse, National ministers did what National ministers do in time of crisis; they blamed others for the crisis;

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Prime Minister criticises Solid Energy

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Solid Energy was in debt. But not to “diversify” as Key claimed. The Prime Minister lied.

The debt was due in large part to Ministerial demands that Solid Energy borrow BIG, and pass those borrowings onto the government. This was a piece of accounting trickery, so National could claim, hand-on-heart, that it was not borrowing billions more. In actuality, the SOEs were doing the borrowing, and then passing the cash on to it’s shareholder, the government. This was borrowing-by-proxy by the government.

That is how desperate National was to claw back as much lost revenue due to the Global Financial Crisis/Recession, and unaffordable two tax cuts (2009, 2010) which they had promised during their 2008 election campaign and which has cost government an estimated $4.5 billion annually.

In 2009, English instructed all SOEs to increase their debt. This Statement of  Corporate Intent is clear in National’s expectations;

I would like all SOEs to increase their gearing from current levels, to a level more consistent with a BBB flat credit rating. In this regard, I have been advised by officials that Solid Energy may have the capacity to sustain a 40% gearing ratio.

I urge the Solid Energy Board to give serious consideration to this proposal, and to release all surplus capital to the shareholder as special dividends. “

Not only was National instructing SOEs (including Solid Energy) to borrow more (and then pass the cash on to the Government’s Consolidated Fund), it was also openly raiding their bank accounts by demanding “all surplus capital to the shareholder as special dividends“.

Furthermore,  not only were English and Power expecting higher profits diverted from SOEs, they  demanded two dividends per year instead of just one;

“I would also like to standardise and simplify the dividend policy for all SOEs, to ensure that a larger and more consistent share of profits is returned to the Crown as shareholder.

In this regard, I propose that the Solid Energy Board give serious consideration to adopting a dividend policy equal to 65% of operating cash flows (including net interest paid) from 1 July 2009.

Related to dividend policy, I wish to outline an expectation that all SOEs pay two dividends per year, an interim and a final dividend.”

On  18 August 2009, Bill English met with Solid Energy’s then-Chairperson, John Palmer. After that meeting, Solid Energy increased its gearing (borrowing/debt) from around 25% to 35%, and changed the way it  accounted for mine rehabilitation costs.

This was a cash-grab on an unprecedented scale, and one that went largely un-noticed by media, Parliamentary Opposition, and the public.

On 13 March 2013, soon after Solid Energy’s massive $389 million debt became public, English was forced to concede that  National has mishandled governance of Solid Energy;

“The decisions about how much debt to incur was made by the board.

In Solid Energy’s case it turned out that a company operating in the world coal market, which is now so volatile, would have been better off with no debt – in retrospect that’s easy to see, at the time it wasn’t.”

However, in claiming that “decisions about how much debt to incur was made by the board“, the Finance Minister lied.

Solid Energy had been directed to increase it’s debt by Ministers English and Power – not by the SOE’s Board. The Treasury document above are a paper-trail evidencing National’s determination to increase it’s revenue at any costs (literally).

Both Key and English have consistently lied on this issue.

More recently, on Radio NZ’s Morning Report, on Friday 14 August, Guyon Espiner interviewed Finance Minister, Bill English, on Solid Energy’s corporate demise.

At one point, under persistent questioning by ‘Checkpoint‘ host, Guyon Espiner, English admitted National’s role in Solid Energy’s financial woes;

Espiner: But I’ll tell you what you also did, and you’ll remember this well in 2009, you looked at the balance sheets of SOEs and you decided that many of them could carry more debt and in fact you presided over a massive expansion in Solid Energy’s debt and in formal letters your government encouraged them to significantly increase their debt. That was a mistake wasn’t it?

English: Well, at the time it was valued, well actually that time, was valued about $3 billion and they took debt up to $300 million. It was a… As it turned out it was the pressure that put on the cash flow, well, the issues it raised, that got the government and, ah, the officials differing with the Board and that’s all on the record.

Espiner: Yes, so why did you, because you took their gearing ratio from about 14% in 09 up to 35% in 2010, 41% in 2012. So you presided, in fact, encouraged Solid Energy to take on the debt that they have eventually drowned in.

English: Well we worked with the Board over , over making sure the Crown was actually getting something out of the business. Um, certainly, in retrospect the debt levels got too high [garbled].

Espiner: So do you take the blame for that? Because, you failed there. You encouraged them to take on more debt and they’ve drowned in it.

English: Ahh, between us and the company, yes, we’re responsible for that.

There we have it. Under Espiner’s persistant questioning and quoting of facts, English had no place to hide; no one else to blame; and no lies he could resort to.

English had admitted that his government had gutted Solid Energy, and used it as a proxy for borrowing.

Then, under further questioning, English made one of the more bizarre assertions ever made by a politician (incest, chem-trails, and  moonlanding hoaxes notwithstanding);

Espiner: What about the dividend programme? You stripped more than $160 million in dividends out of this company over four years. Was that a good thing to do, given the state of the company, and couldn’t if they’d reinvested that money in the company been in some sort of position to keep the thing afloat?

English: Ah, no, precisely the opposite. And this has been the case with SOEs for years. If you leave the cash in there, generally, ah, they waste it. And, ah, in fact, one of the interactions here was we required a dividend because it was a company that was making money –

Espiner: Well hang on. Sorry to interrupt you but that’s an extraordinary statement to make, ‘You leave the cash in there and they waste it’?

National, of course, never wastes money. They never waste money on subsidising Rio Tinto; subsidising SkyCity; subsidising Charter Schools; subsidising Hollywood corporations like Warner Bros; subsidising Saudi businessmen to the tune of $11.5 million. Nor does National waste money on two tax cuts which were utterly unaffordable, being funded by  heavy overseas borrowing.

Espiner quite rightly mocked English’s ludicrous justification for government looting of Solid Energy;

Espiner: So it was better for you to take the money out, put it in the Consolidated Fund, let the company take on more debt, and they’ve eventually blown up.

This is the party that many New Zealanders believe is a “fiscally responsible manager of our economy”?!

Unfortunately, National’s mis-management does not end there.

The latest SOE to disclose financial difficulties is Landcorp;

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Landcorp in 'pretty tight situation' – English

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Landcorp’s current liabilities amount to $359 million, whilst it’s assets amount to $1.846 billion, according to the company’s half-yearly statement.

What is not mentioned anywhere is that, according to a document from Treasury’s Crown Company Monitoring Advisory Unit (CCMAU), the National Government sent a letter to Landcorp’s Board  making similar demands for higher dividends that it made to Solid Energy;

Firstly, as the CCMAU chart below shows, National’s expectations were that Landcorp increase its “gearing” (borrowed funds against a company’s equity) from 11% to 20% – a near doubling;

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CCMAU - SOE gearing and dividend expectations - national government

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Note also that National demanded 75% of Landcorp’s net operating profit as a dividend; two dividend payments per year;  and  as much as  100% of operating cash flow.

In a 2009 letter to Landcorp, Ministers Bill English and Simon Power demanded the following from the SOE’s Board;

“I am minded to increase the gearing of all SOEs from current levels, to a level more consistent with a BBB flat credit rating. In this regard, I have been advised by officials that Landcorp may have the capacity to sustain a 20% gearing ratio. I urge the Landcorp Board to give serious consideration to this proposal, and to release all surplus capital to the shareholder as special dividends.

I am also minded to standardise and simplify the dividend policy for all SOEs, to ensure that a larger and more reliable share of profits is returned to the Crown, as shareholder. In this regard, I propose that the Landcorp Board gives serious consideration to adopting a dividend policy equal to 100% of operating cash flows (including net interest paid) from 1 July 2009.

Related to dividend policy, I wish to outline an expectation that all SOEs pay two dividends per year, an interim and a final dividend.”

In the same letter, English and Powers  outlined revising “the land sale moratorium imposed on Landcorp as part of the Protected Land Agreement (PLA)“.

The letter to Solid Energy followed the same pattern;

I would like all SOEs to increase their gearing from current levels, to a level more consistent with a BBB flat credit rating. In this regard, I have been advised by officials that Solid Energy may have the capacity to sustain a 40% gearing ratio. I urge the Solid Energy Board to give serious consideration to this proposal, and to release all surplus capital to the shareholder as special dividends. I note that Solid Energy currently has a gearing target of 35%, including the company’s rehabilitation liability as if it were debt.

Given that the nature of the rehabilitation liability is significantly different from debt, I am sceptical that this is an appropriate treatment. I have asked my officials to engage with you on this issue.

I would also like to standardise and simplify the dividend policy for all SOEs, to ensure that a larger and more consistent share of profits is returned to the Crown as shareholder.

In this regard, I propose that the Solid Energy Board give serious consideration to adopting a dividend policy equal to 65% of operating cash flows (including net interest paid) from 1 July 2009.

Related to dividend policy, I wish to outline an expectation that all SOEs pay two dividends per year, an interim and a final dividend.

Almost identical letters. Except for the 20% gearing ratio, which differed from Solid Energy’s more onerous 40%, the demands placed on Landcorp were the same; high gearing (borrowing); higher dividends; and all surplus cash to be paid over to the Crown.

National was looting every SOE of every spare dollar.

The questions now demanding  answers;

  • How many other SOEs have been left in a similar parlous state to Solid Energy and Landcorp?
  • How much damage has been caused to SOEs due to unreasonable dividend and cash demands made to their Boards?
  • How much longer are New Zealanders willing to maintain the fiction that National is a “prudent fiscal manager of the economy”?

And the last question;

  • Which SOE will be next to disclose a dire financial state?

For Bill English and John Key, a whole bunch of chickens have suddenly come home to roost.

Some very, very expensive chickens.

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References

Radio NZ: Prime Minister criticises Solid Energy

Green Party: Asset sales bring in less than cost of National’s tax cuts to top 10%

Treasury: Solid Energy Information Release March 2013 (Document 1875419)

Treasury: Solid Energy Information Release March 2013 (Document 1732352)

TV3 News: Solid Energy was allowed to increase debt

Radio NZ: Morning Report – English defends Govt’s record over Solid Energy (alt. link)

TV3 News: Landcorp in ‘pretty tight situation’ – English

New Zealand Farming Landcorp Farming Limited: Half year report for the six months ended 31 December 2014

Additional

Radio NZ: When is an asset sale not an asset sale?

Previous related blogposts

The real cause for Solid Energy mass redundancies?

Dirty Dealings with Solid Energy

That was Then, This is Now #18 (Solid Energy)

Dear Leader Key blames everyone else for Solid Energy’s financial crisis

Dear Leader Key blames everyone else for Solid Energy’s financial crisis (Part Rua)

Mediaworks, Solid Energy, and National Standards

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solid energy - english - ryall

 

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Unemployment, Christchurch, dairy prices – Bill English confirms blogger’s analysis

10 November 2015 2 comments

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three-legged-stool

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Leg #1: Treasury reported in 2012, on the Christchurch re-build;

The Canterbury rebuild is expected to be a significant driver of economic growth over the next five to ten years. The timing and speed of the rebuild is uncertain, in part due to ongoing aftershocks, but the New Zealand Treasury expects it to commence around mid-to-late 2012.

Leg #2: The Reserve Bank, in 2014, on our Dairy sector;

The New Zealand dairy industry is experiencing prosperous times, continuing the strong growth in export earnings of the past eight years. Animal numbers and prices have increased and on and off farm productivity growth has been impressive.  And the future looks bright. There seem to be important structural reasons behind the rise in dairy prices that should continue into the medium term.

Leg #3: Steven Joyce, Associate Minister of Finance, this year, on the Auckland housing boom;

“Closer to home, the Reserve Bank … highlights several factors continuing to support growth domestically, including robust tourism, immigration, the large pipeline of construction activity in Auckland, and, importantly, the lower interest rates and the depreciation of the New Zealand dollar.”

There we have it – the three basic “legs” comprising National’s economic development policy. One is predicated on fluctuating international market-prices; another is an unsustainable property boom funded by billions borrowed from off-shore; and the other is the epitomy of ‘disaster’ capitalism.

In debating the fragility and unsustainability of these three sectors of our economy, I (and other bloggers from the Left) have pointed out time and again the transitory nature of the dairy sector boom; the Christchurch re-build boom; and the Auckland property market boom. Acolytes of the so-called free-market – ever dedicated to their quasi-religious right-wing notions – have dismissed our warnings.

On 4 November, the National government’s Finance Minister and sheep farmer, Bill English, made a statement in Parliament that has backed up our dire warnings – albeit somewhat late in the day;

“Of course, if unemployment was a direct choice of the Prime Minister of New Zealand, there would be none of it. You would just decide to have none. But, of course, it is not. It is a product of the world economy and its low growth rates, and of particular circumstances in New Zealand where the rebuild in Christchurch has flattened out and there has been a drop in national income of billions of dollars from the decrease in dairy prices, which was always going to affect the number of jobs in New Zealand, and now it is happening.”

Indeed; “and now it is happening”.

Two of National’s economic stimulators are either belly-up, or in the process of falling flat.

Only the Auckland housing boom remains. When that collapses, it will be much, much worse than the depressed Dairying sector. At that precise moment, international lenders will have noticed that we have been borrowing-up-large for one helluva massive property splurge-party – and they will be wanting their money back.

All $200 billion of it.

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Mortgage debt tops $200 billion

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According to Squirrel mortgage broker, John Bolton;

“People are completely oblivious of what’s going on. If you overlay what’s going on around the rest of the world, all bets are off.”

New Zealanders are about to wake up with the biggest “hang-over” since they first got trolleyed at teenagers.

Is this where I say, “I told you so”?

Will it matter by then?

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References

NZ Treasury: Recent Economic Performance and Outlook (2012)

Reserve Bank: The significance of dairy to the New Zealand economy

Parliament Today: Questions and Answers – Sept 10 2015

Parliament: Hansards – Questions for oral answer – 2. Unemployment—Rate

Fairfax media: Mortgage debt tops $200 billion

Additional

Metro: 10 ideas that could solve the Auckland property crisis

Previous related blogposts

Labour’s collapse in the polls – why?

“The Nation” reveals gobsmacking incompetence by Ministers English and Lotu-Iiga

The Mendacities of Mr Key # 12: No More Asset Sales (Kind of)

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house price boom

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This blogpost was first published on The Daily Blog on 7 November 2011.

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2015 – Ongoing jobless tally

7 November 2015 5 comments

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Unemployment logo

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Continued from: 2014 – Ongoing jobless tally

So by the numbers, for this year;

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Events

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January

February

March

April

May

June

July

August

September

October

November

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Statistics

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unemployment quarter ending September 2015 - new zealand

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Source

*NB: actual rate for Dec 2014/Jan 2015 Quarter should be 5.7%, not 5.8% as depicted in above column. See Stats NZ data here.
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June 2015 quarter – Employment & Unemployment

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statistic nz - june 2015 quarter - unemployment

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Commentary from Statistics New Zealand:

The unemployment rate increased to 5.9 percent in the June 2015 quarter (up from 5.8 percent), Statistics New Zealand said today. At the same time, there were 7,000 more people employed over the quarter (up 0.3 percent).

“Even though employment grew over the quarter, population growth was greater, which resulted in a lower overall employment rate for New Zealand,” labour market and household statistics manager Diane Ramsay said.

“Despite lower quarterly growth, this is still the 11th consecutive quarter of employment growth, making it the second-longest period of growth since the period between 1992 and 1996,” Ms Ramsay said.

Over the year to June 2015, employment growth was still fairly strong (at 3 percent) with 69,000 more people employed. The manufacturing industry showed the strongest annual employment growth.

“This is the first time since the December 2013 quarter that the construction industry has not been the largest contributor to annual growth in employment,” Ms Ramsay said.

The vast majority of growth was in Auckland (29,600 people), where the annual employment growth was driven by retail trade and accommodation, followed by construction. Bay of Plenty had the second-highest employment growth, with 11,000 more people being employed over the year.

Annual wage inflation, as measured by the labour cost index, was 1.6 percent, compared with annual consumer price inflation of 0.3 percent.

Source

September 2015 quarter – Employment & Unemployment

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statistic nz - september 2015 quarter - unemployment

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Labour market at a glance

  • Number employed fell for the first time in three years.
  • Unemployment rate increased to 6.0 percent.
  • Labour force participation rate falls further from record high in March 2015 quarter.
  • Annual wage inflation remained at 1.6 percent.

Source

Additional analysis;

  1. The Employment Rate fell 0.5%
  2. According to the HLFS, Total actual weekly hours worked increased over the last Quarter by  +0.4, and  Annually, by +1.5

Which means few people are working longer hours to sustain economic growth.

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Other Economic Info

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ANZ Economic Outlook

The New Zealand economy has clearly entered a more challenging period. Growth averaged just a 0.3% quarterly pace over the first six months of the year vis-à-vis a 0.9% quarterly pace over the second half of 2014.

Annual growth slowed to 2.4% in Q2 (the slowest since December 2013) and timelier indicators suggest a pace tracking perhaps a tad below 2% at present; not dire – nor a downturn – but certainly sluggish and consistent with deceleration.

In per-capita terms, activity is treading water and slowing labour demand (but still-strong labour supply growth) has seen the unemployment rate tick up to close to 6% Consumer and business confidence have fallen, and where the expansion was previously relatively broad-based, a more divergent regional performance is now evident.

Full Report here.

CTU Economic Bulletin 173 – Oct 2015

Despite economic growth in production per hour worked which peaked at 4.7 percent in dollar terms in the year to June 2014, wage rises have been subdued. Even the Reserve Bank is commenting on it. What are some of the reasons for wage rises being low?

We have a poorly performing economy. Most of the recent growth has been because more people have been brought into the labour force or people are working longer hours, rather than because people are producing more in each hour they work. Over the supposed “rock star” period of June 2013 to June 2015, the economy’s production per hour worked increased only 0.1 percent. Yet companies’ profit rates are rising quickly – so wages could.

Even the Minister of Finance concedes that current strong net immigration is holding down wages. It could be much better controlled so that, while taking humanitarian concerns into account, it focuses on skills that New Zealand residents genuinely do not have or couldn’t be trained to do, and in numbers that the country can absorb.

The Government has been open about suppressing pay increases for people employed in the state sector. Its tight funding of contractors such as in aged care also holds down wages. By doing this, the Government is reducing pressure on private sector employers for pay increases.

Full Report here.

Building Consents – Statistics NZ

Fonterra

  • 24 September: Fonterra Co-operative Group lifted its forecast total available for payout for the 2015/16 season to $5.00 − $5.10 kgMS due to an increase in the forecast Farmgate Milk Price of 75 cents
  • 14 October: Standard and Poor’s  downgraded Fonterra’s  credit rating from A to A-

Westpac Economic Overview – November 2015

Brewing El Niño conditions are likely to cause dry weather and knock the economy. And there will be further challenges from a global economic slowdown, the levelling off of the Canterbury rebuild, and the possibility of a housing market slowdown in Auckland.

Full Report here.

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Addendum1: Under-employment

The  under-employment stats;

People who are underemployed are those who work part-time, would prefer to work more hours, and are available to do so. In unadjusted terms, the number of underemployed grew by 12 percent over the year. While the number of part-time workers increased over the year, the ratio of people underemployed to employed part-time also rose – from 17.1 percent in June 2013 to 18.7 percent this quarter.

Official under-employment: up

Definitions

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

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

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

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

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

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

Source

Addendum2: Other Sources

Statistics NZ:  Household Labour Force Survey

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[To  be periodically up-dated]

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= fs =

The consequences of tax-cuts – worker exploitation?

31 October 2015 10 comments

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wage-gap-real-estate-gender-inequality

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Fun Fact #1

Since 1986, there have been no less than seven tax cuts in New Zealand;

1 October 1986 – Labour

1 October 1988 – Labour

1 July 1996 – National

1 July 1998 – National

1 October 2008 – Labour

1 April 2009 – National

1 October 2010 – National

Fun Fact #2

John Key says he supports New Zealanders paid higher wages. In fact, he stated  that desire in 2007, and repeated it in  2008, 2009, 2010, 2011, and 2012;

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We think Kiwis deserve higher wages and lower taxes during their working lives, as well as a good retirement.” – John Key, 27 May 2007

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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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We want to make New Zealand an attractive place for our children and grandchildren to live – including those who are currently living in Australia, the UK, or elsewhere. To stem that flow so we must ensure Kiwis can receive competitive after-tax wages in New Zealand.”   – John Key, 6 September 2008

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I don’t want our talented young people leaving permanently for Australia, the US, Europe, or Asia, because they feel they have to go overseas to better themselves.” – John Key, 15 July 2009

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Science and innovation are important. They’re one of the keys to growing our economy, raising wages, and providing the world-class public services that Kiwi families need.” – John Key, 12 March 2010

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We will also continue our work to increase the incomes New Zealanders earn. That is a fundamental objective of our plan to build a stronger economy.” – John Key, 8 February 2011

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The driving goal of my Government is to build a more competitive and internationally-focused economy with less debt, more  jobs and higher incomes.” – John Key, 21 December 2011

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We want to increase the level of earnings and the level of incomes of the average New Zealander and we think we have a quality product with which we can do that.” –  John Key, 19 April 2012

Mr Key has not repeated those statements since April 2012.

Fun Fact #3

The gender pay gap in New Zealand has worsened, from 9.9% last year to 11.8% this year;

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Source

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Timeline

2012

Kristine Bartlett and the Service and Food Workers Union lodge a claim with the Employment Relations Authority, alleging Ms Bartlett’s employer Terranova Homes and Care Ltd was in breach of the Equal Pay Act 1972.

November 2012

Ms Bartlett’s case referred to the Employment Court as it raises an important question of law.

June 2013

A preliminary Employment Court hearing held on questions of law.

23 August 2013

Landmark ruling on equal pay welcomed

Unions are hailing an Employment Court decision which allows a female rest home caregiver to argue she is underpaid because she is in a female-dominated industry.

Hutt Valley woman Kristine Bartlett is arguing her employer Terranova Homes is violating equal pay for equal work legislation, saying she would get more money if she was not working in an industry dominated by female staff.

The Employment Court held a preliminary hearing after Terranova Homes argued the court could only compare staff within its own workplace and not look at other workplaces.

The three court judges say the legislation makes specific provision for work predominantly performed by women.

The law says pay rates must be the same as male employees with the same, or substantially similar, skills, responsibility and service performing the work under substantially similar conditions and with substantially similar effort.

The judges said there was no way gender discrimination in pay could be removed if they could not compare pay rates more widely.

January 2014

Terranova appealed this ruling to the Court of Appeal.

February 2014

A decision on a landmark pay equality case has been reserved by the Court of Appeal.

The Employment Court last year found in favour of Lower Hutt caregiver Kristine Bartlett, who argued her $14.32 hourly pay rate was a result of gender discrimination under the Equal Pay Act.

The ruling – which paves the way for pay equality in the female-dominated aged care sector – has been challenged in the Court of Appeal by Ms Bartlett’s employer, Terranova Homes. The two-day hearing finished yesterday with the decision by Justices Mark O’Regan, Lynton Stevens and Christine French reserved.

October 2014

The Court of Appeal has supported an Employment Court decision which ruled that a Lower Hutt rest home worker should receive pay parity with other equivalent sectors.

Kristine Bartlett won her landmark Employment Court case last year – arguing that being paid less than 15 dollars per hour, despite working in rest homes for over 20 years, was discriminatory. Her employer, Terranova Homes and Care, took the issue to the Court of Appeal. But the Appeal Court has dismissed the appeal, saying the language and purpose of the Equal Pay Act back up the decision by the Employment Court.

November 2014

Today the New Zealand Aged Care Association will appeal to the Supreme Court on behalf of TerraNova Homes and Care Limited in their case with the Service and Food Workers’ Union and Kristine Bartlett.

“This case has vast implications for all New Zealanders and we felt compelled to have the highest court in the land settle the questions around the Equal Pay Act 1972 once and for all,” said Martin Taylor, CEO of the NZACA.

“In handing down its recent judgement, the Court of Appeal said the decision was finely balanced with strong arguments favouring both sides. We believe the issue must be seriously looked at and tested again.

22 December 2014

Supreme Court denies Terranova leave to appeal in landmark pay equity case

The Supreme Court has denied aged care provider Terranova Homes and Care, at the centre of a landmark court case paving the way for gender pay equity, leave to appeal the ruling.In October the Court of Appeal dismissed an appeal by Terranova Homes against an earlier Employment Court ruling backing Lower Hutt rest home worker Kristine Bartlett’s claim that women care workers’ low pay was discriminatory. She took a case against her employer, arguing her $14.32 an hour pay rate was a result of gender discrimination under the Equal Pay Act.

The Service and Food Workers Union also made a claim on behalf of 15 other caregivers employed by the company, asking for a statement of the general principles to be observed for implementing equal pay.

In a Supreme Court decision out this afternoon, the judges said it considered the company’s appeal premature.

20 October 2015

Equal pay on the way for women?

The government has set up a taskforce to look into pay equity issues, which could lead to a change to the current law.

Minister for Workplace Relations and Safety Michael Woodhouse said unions and employers had agreed to a working group to establish principles for dealing with pay equity claims.

It had been prompted by a recent Court of Appeal decision on pay rates in the aged care sector, which found women in predominantly female workforces were paid less.

Early 2016

Case scheduled to go before the Employment Court  to early 2016 (dates to be determined). 

(Acknowledgement: Much of the above Time-line, with  exceptions, is re-published from the New Zealand Aged Care Association.)

 

The Case: exploited labour

The case of Kristine Bartlett  is a relatively simple one. For twentytwo years working-experience in rest-home facilities she earned just barely above minimum wage. Since the 1990s, her wages have risen by $5.

Ms Bartlett’s profession is predominantly female, and like many female-dominated professions, it is paid less than male-equivalent jobs.

As Fairfax media Christie Hall wrote  on 19 January;

On  23 August 2013,  the Employment Court ruled that Ms Bartlett’s was in fact underpaid because she worked  in a female-dominated industry. (The document is well-worth reading and provides sound, rational, and carefully-constructed argument for advancing equal pay for women.)

Subsequent Court decisions have upheld the Employment Court (see Timeline above).

The NZ Aged Care Association (NZACA) has expended large sums of money on legal action to thwart  the cost of raising wages for aged-care workers. NZACA fears the increased cost of a ballooning wages-bill impacting on it’s members, which has traditionally relied on low-paid labour to operate.

In October 2014, in a press release published on nzdoctor.co.nz, NZACA stated;

Unfortunately the Government subsidy for aged care is not enough for providers to make a profit. Over the last decade, 200 aged care facilities have closed primarily for financial reasons. The majority of these facilities relied on the government’s subsidy for their revenue.

[…]

The existing aged care sector cannot afford to increase all aged care worker’s wages at an estimated cost of $120 – $140 million alone – the sector will need increased Government subsidies to prevent further closures of our aged care facilities.

In an undated statement on NZACA’s website, the Association states;

The Government contract undervalues the worth of caregivers working in the private aged care sector. A caregiver working in a District Health Board geriatric hospital receives on average $17.50 an hour compared with an average hourly rate of $15.30 in our sector.

NZCA has been lobbying Government for many years to put more money into this sector which cares for New Zealand’s most vulnerable citizens.

And in November 2014, NZACA’s CEO, Martin Taylor, stated;

“Another reason why we need to appeal is that there are hundreds of rest homes operated by individuals and community trusts from Kaitaia to Bluff who have told us they would close if wages went up significantly and funding stayed the same.

When you understand this reality we have no option but to appeal, despite everyone agreeing caregivers are worth more.”

On 23 December last year Service and Food Workers Union National secretary, John Ryall, said it was about time the Government  took responsibility to achieve gender pay equity;

“The Government is the sector funder and it is really up to it to decide whether it wants a resolution to the long standing pay equity issue,” he said.

Encouraging National to act will be no easy task to achieve.

Bronwen Beechey, writing for Fightback! on 17 April 2015, pointed out National’s apalling track record when it came to implementing equal pay legislation;

The Employment Equity Act was passed in 1990, but repealed within months after the National Party came to government.

In 2009, the current National government abolished the Pay and Employment Equity plan of Action and the Pay and Employment Equity Unit that had been set up in the Department of Labour in 2004.

A cynic would suggest that low wages assist National to reduce the amount it has to pay to subsidise aged-care workers. It is providing a service ‘on-the-cheap’, in a way similar to  fast-food chains employing staff at minimum wage, to produce  high-carb, fat-laden, ‘fast food’.

In fact, it would not be the first time that National has been exposed as supporting low wages – despite Key’s pious utterances otherwise.

Three and a half years ago, on  10 April 2011, on TVNZ’s Q+A, English made his now-infamous comments justifying a low-wage economy;

“Well, it’s a way of competing, isn’t it? I mean, if we want to grow this economy, we need the capital – more capital per worker – and we’re competing for people as well…

… we need to get on with competing with Australia. So if you take an area like tourism, we are competing with Australia. We’re trying to get Australians here instead of spending their tourist dollar in Australia.”

Three years later, on 30 July 2014, John Key appeared to ‘forget’ his earlier pronouncements on increasing wages when he responded to a question in Parliament from David Cunliffe;

Hon David Cunliffe: Will the Prime Minister support the pay increase for the quarter of a million workers who would directly benefit from Labour’s minimum wage changes, which will provide a significant boost to the economy through boosting workers’ spending power?

Rt Hon John Key: In a word, no. The reason for that is I am not so irresponsible that I would say to 6,000 New Zealanders that they are losing their jobs because the Labour Party is polling at 25 percent—

No wonder E Tu  union spokesperson, Alistair Duncan, was wary of how National would respond to the Court rulings, as he said on 21 October;

“This is a well-timed and very smart move – if we can deliver genuine equal pay, it will be a very good thing.  But it’s not certain and we now need to work very hard to make sure we get equal pay for equal value.”

Meanwhile, as aged-care workers (and low-paid women workers in other industries) have had their case validated by the Courts, employers are not so happy. A new ‘bogey-man’ was erected by the Employers and Manufacturers Association CEO;

Employers and Manufacturers Association chief executive Kim Campbell said the task force would need to establish clear terms of reference, because comparing the relative value of different jobs was complex.

He said any decision to boost pay rates in some industries would come with a cost.

“The government has the greatest interest in this because they’re paying for most of the aged care and hospital workers and they must be concerned that if you increase their salaries, people’s taxes may go through the roof.”

This argument that, by increasing wages, people’s taxes “may go through the roof” is not just over-the-top scare-mongering – but is instructive of the mentality of individuals like Kim Campbell.

The argument that Campbell is putting forward is that taxpayers are entitled to cheap labour.

Is this the inevitable consequence after seven tax cuts, spanning twentynine years?

Because if reduced tax revenue has resulted in central government being unable to pay fair wages for workers (whether as state sector employees or subsidised workers in the private sector), then we have created a rod for our own backs.

Regardless whether sufficient tax revenue exists or not, Campbell’s suggestion that taxpayers are somehow justified in expecting an exploited workforce is odious. It is attempting to re-create a quasi-modern-day slave work-force.

The Employment Court addressed this very issue in it’s 22 August 2013 Judgment:

History is redolent with examples of strongly voiced concerns about the
implementation of anti-discrimination initiatives on the basis that they will spell
financial and social ruin, but which prove to be misplaced or have been acceptable as
the short term price of the longer term social good. The abolition of slavery is an old
example, and the prohibition on discrimination in employment based on sex is both a
recent and particularly apposite example. [pg 32]

If successive governments were foolish in cutting taxes (usually as election bribes) to such a level that the State can no longer afford to pay for services New Zealanders expect as of right, then the solution is crystal clear: raise taxes.

Or go without.

I doubt many National-voting New Zealanders will happily contemplate a future in their dotage without a workforce of aged-care staff who are remunerated sufficiently to wipe the spittle from their wrinkled chins; change their faeces-and-urine-soaked underwear; and all the other myriad tasks associated with necessary good care.

Just how much do New Zealanders want aged-care in their twilight years?

If we do, we should be prepared to pay for it.

National Prompted to act

The successful court cases supporting Kristin Bartlett’,  equal-pay case has prompted National to finally move on the problem;

The government has set up a taskforce to look into pay equity issues, which could lead to a change to the current law.

Minister for Workplace Relations and Safety Michael Woodhouse said unions and employers had agreed to a working group to establish principles for dealing with pay equity claims.

It had been prompted by a recent Court of Appeal decision on pay rates in the aged care sector, which found women in predominantly female workforces were paid less.

Mr Woodhouse said there were other cases before the courts.

“We believe the most efficient way to deal with that, and to step back and take a look at what the principles for pay equity might look like is to get this working group together, and I’m very pleased we’ve been able to do that.”

Unions had agreed to put legal action on hold until March 2016 to allow the working group to proceed, he said.

This problem could never be resolved without government involvement. By subsidising aged-care workers, it is in effect, a secondary employer, and therefore has responsibilities to make good an untenable and unfair situation.

Otherwise, if National cannot resolve this decades long problem, more radical and direct solutions need to be considered.

Possible solutions

  1. Where aged-care facilities are non-profit, increase subsidies paid directly to workers or change their employment status to State employees, with similar pay rates, benefits, and protections.
  2. Where an aged-care company, are profit-making ventures that return a dividend to shareholders, such Oceania (45 facilities), Ryman (25 facilities), and Radius (19 facilities), they should be made by law to increase the wages of their staff first and foremost.
  3. Nationalise the aged-care industry. Looking after the elderly should not be an “industry” where the profit motive (in many instances) is the guiding principle. This should be no more acceptable than having primary schools or hospices run as businesses.

If private enterprise cannot pay it’s workers a fair wage, as well as operate effectively, then the State has a responsibility to intervene and assume a more direct role.

Neo-liberal activists and fellow-travellers may balk at such a suggestion, but they should consider one important factor they may have forgotten: we all grow old eventually. Including free-marketeers.

Appendix1

Legislation.

Equal Pay Act 1972

Court may state principles for implementation of equal pay
  • The court shall have power from time to time, of its own motion or on the application of any organisation of employers or employees, to state, for the guidance of parties in negotiations, the general principles to be observed for the implementation of equal pay in accordance with the provisions of sections 3 to 8.

Appendix2

Employment Court.

[108]

Reference was also made to the likely high costs of adopting a broader
approach, if it leads to a significant wage increase for the plaintiff members.
The Aged Care Association made the point that it receives funding from the Government,
via the Ministry of Health, on a per bed basis and that it would not be able to absorb
any increase. Although the Ministry was invited to appear as intervener it apparently
declined to do so. Accordingly, we did not have the benefit of hearing from it. In
any event, it is apparent that the Government of the day, in promoting the Bill, was
aware of the potential financial implications of the legislation. The Minister
of Labour made the point that female industries would feel the greatest impact in terms
of cost, a point later echoed by the Hon E S F Holland. [pg 31]

[109]

Further, and more fundamentally, the expressed concerns relating to cost
overlook one important point, namely the unquantifiable cost (including societal
cost) of adopting an approach which may have the effect of perpetuating
discrimination against a significant and vulnerable group in the community simply
because they are women, doing what has been described as undervalued women’s work. [pg 32]

[110]

History is redolent with examples of strongly voiced concerns about the
implementation of anti-discrimination initiatives on the basis that they will spell
financial and social ruin, but which prove to be misplaced or have been acceptable as
the short term price of the longer term social good. The abolition of slavery is an old
example, and the prohibition on discrimination in employment based on sex is both a
recent and particularly apposite example. [pg 32]

Employment Court – Judgment: 22 August 2013

Appendix3

Employment Court.

Never let it be said that the Employment Court is bereft of a sense of humour, as this comment suggests;

[31]
The purpose of the Equal Pay Act is plain, and is reflected in its long title. [p 9]

Appendix4

On 2 April, Aged Care Association’s CEO, Martin Taylor, left his role at NZACA and assumed a new position  as Labour leader, Andrew Little’s,  director of research and policy. The nzdoctor.co.nz press release refers to Taylor’s role in the Kristin Bartlett equal-pay case.

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References

Ministry for Women: Gender pay gap

Radio NZ: Caregivers back equal pay campaign

New Zealand Aged Care Association: Equal Pay Case

TV3 News: Landmark ruling on equal pay welcomed

NZ Herald: Landmark pay equality case decision reserved

Scoop media: Court dismisses appeal by Hutt rest home, supports decision on equal pay

Scoop media: TerraNova Case Appealed To Supreme Court

Scoop media: Supreme Court denies Terranova leave to appeal in pay case

Radio NZ: Equal pay on the way for women?

Radio NZ: Landmark ruling for women

Fairfax media: Where next for equal pay

Nzdoctor.co.nz: Understanding caregiver wages in aged residential care

Fightback!: Fight for Equal Pay continues

TVNZ Q+A: Guyon Espiner interviws Bill English (April 2011)

Parliament: Hansards – Wage Rates – Growth, Inequality, and Minimum Wage

Legislation: Equal Pay Act 1972

Employment Court: Judgment: 22 August 2013

Nzdoctor.co.nz: Andrew Little headhunts Aged Care boss Martin Taylor

Additional

NBR:  National bows to minimum wage myths – ACT

NZ Herald: Battle to close the pay gap

Previous related blogposts

“It’s one of those things we’d love to do if we had the cash”

Roads, grandma, and John Key

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

Aged Care: The Price of Compassion

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This blogpost was first published on The Daily Blog on 26 October 2015.

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Treasury on Rail. Let’s play a little game, shall we?

18 July 2015 3 comments

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NZ Treasury muppets

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Treasury’s latest ‘brain fart’ was this amazing story, which I repost, verbatim, from a Radio NZ report;

Close down rail, advised the Treasury

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Updated at 6:08 pm on 9 July 2015
Brent Edwards, Political Editor – brent.edwards@radionz.co.nz

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The Labour Party has accused the Treasury of being “nuts” for suggesting the country’s rail network should be closed because it costs too much.

In Budget documents released today the Treasury estimated the net social cost of supporting KiwiRail at between $55 million and $170 million a year.

In the paper the Treasury recommended the Government just fund KiwiRail for one more year while undertaking a comprehensive study to look at closing the rail company.

It said the study should be done publicly so that people were informed of the costs of running the rail network compared with any benefits it provided.

The Government rejected the idea.

Labour’s transport spokesperson Phil Twyford criticised the Treasury for even raising the suggestion.

“This proposal by Treasury for the Government to consider actually shutting down the rail network is just nuts and it shows that Treasury doesn’t really understand transport economics and they certainly don’t get rail.

“You know rail should be for decades and decades to come, it should be alongside the road system, the backbone of New Zealand’s transport system … To shut down, even to contemplate shutting down this valuable part of our nation’s infrastructure is barmy,” Mr Twyford said.

While government ministers rejected the idea initially they only intended providing money for KiwiRail for this financial year.

But a later paper reveals it agreed to a two-year funding commitment after the company expressed worries about its long-term planning if it had only one year of funding confirmed.

In its analysis the Treasury said rail had high fixed costs and it faced a challenge trying to reduce them.

It said the options for the business were to make relatively small changes to the existing network or significantly downsize it, including closing it altogether.

Another option was to shut down most of its operations but keep freight business for Auckland to Hamilton to Tauranga only as that part of the network carried most freight and covered most of its costs.

It warned KiwiRail posed considerable risk to the Government and was unlikely to ever be profitable.

“Treasury believes there is a net economic cost of continuing to fund rail at the levels required. The net social cost is estimated at between $55 million and $170 million per annum based on a national cost benefit analysis.

“Whilst some of the assumptions underlying analysis of this nature are subjective and some require further work to validate, Treasury believes that it will not change the conclusion that there is a net social cost of continuing to fund rail.”

It recommended a public study of the implications of shutting KiwiRail down so the Government could make the most informed choice possible.

Phil Twyford said he agreed there should be an in-depth study on the value of rail to the economy.

Mr Twyford said the fallacy in the Treasury thinking was that the rail system, including the rail tracks, should be run as a profit making business. Nowhere in the world did that happen.

He said the rail tracks were simply like the country’s roads and nobody expected the roads to make a profit.

A spokesman for Finance Minister Bill English said the Government had set aside $400 million for KiwiRail over the next two years.

“But before undertaking an investment of this size, it is appropriate that officials look at all options – including options for line closures.

“As we said in May, the Government is committed to a national rail network, but ongoing subsidies of around $200 million per year are unsustainable. The funding provided at the Budget gives the KiwiRail board a two-year window to identify savings and reduce the level of ongoing Crown funding required,” he said.

The craziness of this suggestion can best be illustrated if we make a few changes to the story, and re-post it;

Close down roads, advised the Treasury

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Updated at 6:08 pm on 9 July 2015
Brent Edwards, Political Editor – brent.edwards@radionz.co.nz

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The Labour Party has accused the Treasury of being “nuts” for suggesting the country’s roading network should be closed because it costs too much.

In Budget documents released today the Treasury estimated the net social cost of supporting National Land Transport roading at $3.891 billion a year.

In the paper the Treasury recommended the Government just fund roading for one more year while undertaking a comprehensive study to look at closing the National Land Transport Programme.

It said the study should be done publicly so that people were informed of the costs of running the roading network compared with any benefits it provided.

The Government rejected the idea.

Labour’s transport spokesperson Phil Twyford criticised the Treasury for even raising the suggestion.

“This proposal by Treasury for the Government to consider actually shutting down the road network is just nuts and it shows that Treasury doesn’t really understand transport economics and they certainly don’t get roads.

“You know roads should be for decades and decades to come, it should be alongside the rail system, the backbone of New Zealand’s transport system … To shut down, even to contemplate shutting down this valuable part of our nation’s infrastructure is barmy,” Mr Twyford said.

While government ministers rejected the idea initially they only intended providing money for  for this financial year.

But a later paper reveals it agreed to a two-year funding commitment after the company expressed worries about its long-term planning if it had only one year of funding confirmed.

In its analysis the Treasury said roading had high fixed costs and it faced a challenge trying to reduce them.

It said the options for the business were to make relatively small changes to the existing network or significantly downsize it, including closing it altogether.

Another option was to shut down most of its operations but keep freight business for Auckland to Hamilton to Tauranga only as that part of the highway network carried most freight and covered most of its costs.

It warned National Land Transport posed considerable risk to the Government and was unlikely to ever be profitable.

“Treasury believes there is a net economic cost of continuing to fund road at the levels required. The net social cost is estimated at $3.891 billion a year per annum based on a national cost benefit analysis.

“Whilst some of the assumptions underlying analysis of this nature are subjective and some require further work to validate, Treasury believes that it will not change the conclusion that there is a net social cost of continuing to fund roads.”

It recommended a public study of the implications of shutting National Land Transport down so the Government could make the most informed choice possible.

Phil Twyford said he agreed there should be an in-depth study on the value of roading to the economy.

Mr Twyford said the fallacy in the Treasury thinking was that the roading system, including the highways, should be run as a profit making business. Nowhere in the world did that happen.

He said the highways were simply like the country’s railways and nobody expected Kiwirail to make a profit.

A spokesman for Finance Minister Bill English said the Government had set aside $7.782 billion for roading over the next two years.

“But before undertaking an investment of this size, it is appropriate that officials look at all options – including options for highway closures.

“As we said in May, the Government is committed to a national road network, but ongoing subsidies of around $3.891 billion per year are unsustainable. The funding provided at the Budget gives the National Land Transport board a two-year window to identify savings and reduce the level of ongoing Crown funding required,” he said.

Barmy?

You bet.

The young folk at Treasury need to get out more often and engage in illicit drug use; binge drinking; and  random sex. It would be no more pointless than some of the gormless ideas they come up with.

In case anyone thinks that Treasury’s idea is remotely “clever”, consider the number of passenger trips by rail each year;

Auckland: 13 million

Wellington: 11.9 million

Total: 24.9 million

That is nearly 25 million extra car-trips on the road in both cities.

It does not take a bright young thing employed by Treasury to quickly realise the impact that would have on our city roads. In brief; Auckland and Wellington would grind to a halt. Our economy would collapse within a week.

We should be looking at ways to maximise use of rail, not canning it. Anything that takes cars and trucks of our roads is a major benefit to our economy and environment.

Perhaps I was wrong and there is illicit drug taking amongst some Treasury boffins. Someone has been at the marijuana cookie-jar. What other explanation can there be for this bizarre idea?

Addendum1

Road

The largest element of the Vote is the funding for roading ($3,891 million or 91% of the total Vote). This is primarily the funding for the National Land Transport Programme which is funded from road tax revenue collected by the Crown ($3,014 million or 71% of the Vote).

Vote Transport, Budget 2015

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References

Radio NZ: Close down rail, advised the Treasury

NZ Treasury: Vote Transport Overview

NZ Herald: Auckland rail passenger numbers top 13 million

Dominion Post: Record Wellington train use set to stave off fare increases

Previous related blogposts

Letter to the Editor – User Pays is not a very clever solution

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roads of national significance.

This blogpost was first published on The Daily Blog on 11 July 2015.

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From a story last year, predicting rocky-times for our “Rock Star” economy…

From an article from the US-based Forbes.Com, published April last year…

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forbes.com-logo-vector

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12 Reasons Why New Zealand’s Economic Bubble Will End In Disaster

– Jesse Colombo, 17 April 2014

New Zealand’s economy has been hailed as one of world’s top safe-haven economies in recent years after it emerged from Global Financial Crisis relatively unscathed. Unfortunately, my research has found that many of today’s so-called safe-havens (such as Singapore) are experiencing economic bubbles that are strikingly similar to those that led to the financial crisis in the first place.

Though I will be writing a lengthy report about New Zealand’s economic bubble in the near future, I wanted to use this column to outline key points that are helpful for those who are looking for a concise explanation of this bubble.

Here are the reasons why I believe that New Zealand’s economy is heading for a crisis:

1) Interest rates have been at all-time lows for almost a half-decade

Ultra-low interest rate environments are notorious for fueling credit and housing bubbles, which is how the U.S. housing and credit bubble inflated last decade. New Zealand’s interest rates have been at record lows for nearly five years, which is more than enough time for economic bubbles and related imbalances to form.

Here is the chart of New Zealand’s benchmark interest rate:

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nz interest rates

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Source: TradingEconomics.com

New Zealand’s three-month interbank rate, base lending rate, and 10 year government bond yield are also at or near all-time lows. Like many countries that are experiencing bubbles in recent years, New Zealand’s low interest rates are a byproduct of global “hot money” flows from the United States and Japan, which have both had zero interest rates and quantitative easing programs to boost their economies after the Global Financial Crisis.

Low interest rates in the U.S. and Japan encouraged capital to flow into higher yielding investments in countries such as New Zealand, which led to reduced bond yields and an 85 percent increase in the value of the New Zealand dollar against the U.S. dollar since 2009. To combat the export-harming currency appreciation and bolster the economy during the financial crisis, New Zealand’s central bank reduced its short-term interest rates to all-time lows.

2) Property prices have doubled since 2004

Following the pattern of many nations outside of the hard-hit U.S., peripheral Europe, and Japan, New Zealand’s housing prices have doubled in the past decade, forming a property bubble:

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house price change -  media house price - nz

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Source: Global Property Guide

3) New Zealand has the world’s third most overvalued property market

The doubling of New Zealand’s housing prices in the past decade far surpassed household income and rent growth, making the country’s property market the third most overvalued in the world. New Zealand’s home price-to-rent ratio is 77 percent above its historic average and its home price-to-income ratio is 26 percent above its historic average.

4) New Zealand’s mortgage bubble grew by 165% since 2002

New Zealand’s housing bubble is driven by a mortgage bubble that grew from approximately NZD $70 billion in 2002 to NZD $186 billion in 2013 – a 165 percent increase in a little over a decade. New Zealand’s mortgage debt bubble grew at a faster rate than its economy during this time, causing the country’s total outstanding mortgage debt-to-GDP ratio to rise from approximately 57 percent to 85 percent.

5) Nearly half of mortgages have floating interest rates

New Zealand’s ultra-low interest rate environment has encouraged the country’s home buyers to make many of the same mistakes that the American home buyers did during last decade’s bubble. One of the gravest of these mistakes is using adjustable or floating rate mortgages, which will reset at higher interest rates when the low interest rate environment ultimately ends.

Almost half of New Zealand’s outstanding mortgages currently have floating interest rates, which is up significantly in the past decade:

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composition of outstanding mortgages nz

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Chart source: MacroBusiness

6) Mortgages account for 60% of banks’ loan portfolios

As if the fact that almost half of New Zealand’s mortgages have floating rates isn’t scary enough, mortgages now account for 60 percent of the country’s banks’ loan portfolios, which means that the financial sector is heavily exposed to the eventual popping of the housing bubble.

7) Finance, not agriculture, is New Zealand’s largest industry

Though New Zealand is commonly thought to be an agriculture-based economy, this couldn’t be further from the truth. Agriculture accounts for only 5.1 percent of New Zealand’s GDP, while the finance, insurance and business services sector is the country’s largest sector, contributing 28.8 percent to the GDP. Furthermore, banks account for 80 percent of the total assets of New Zealand’s financial system. Not only is New Zealand’s banking system dangerously exposed to the country’s property and credit bubble, but so is the entire economy.

8) New Zealand’s banks are exposed to Australia’s bubble

New Zealand’s banking system is dominated by four banks that are Australian-owned subsidiaries, which means that New Zealand’s banking system is exposed to the inevitable popping of Australia’s credit and property bubble. Australia’s household debt-to-income ratio recently rose to 177 percent from approximately 110 percent in the year 2000, while housing prices increased 150 percent in nominal terms and 85 percent in real terms. Australia’s housing market is now the world’s fifth most overvalued housing market.

9) Australian and Chinese buyers are inflating the property bubble

An influx of foreign home buyers in recent years has contributed to the inflation of New Zealand’s housing bubble. Australians and Chinese – who both hail from countries that are experiencing bubbles – account for 42 percent of these foreign buyers, which means that the false prosperity booms in Australia and China are spilling over into New Zealand’s housing market.

Here are a few statistics about China economic bubble:

  • China’s total domestic credit more than doubled to $23 trillion from $9 trillion in 2008, which is equivalent to adding the entire U.S. commercial banking sector.
  • Borrowing has risen as a share of China’s national income to more than 200 percent, from 135 percent in 2008.
  • China’s credit growth rate is now faster than Japan’s before its 1990 bust and America’s before 2008, with half of that growth in the shadow-banking sector.

(Note: Both New Zealand and Australia are also exposed to the coming popping of China’s economic bubble because their economies rely heavily on exports to China.)

10) New Zealand has a household debt problem

New Zealand has the fourth worst household debt-to-GDP ratio among advanced economies, surpassing even the United States:

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household debt to GDP in avanced countries 2012

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Source: Reserve Bank of New Zealand

New Zealand’s household debt-to-disposable income ratio soared from 100 percent in the early-2000s to just under 150 percent in recent years thanks in large part to the country’s mortgage bubble. New Zealand’s ultra-low interest rates have prevented its large household debt from becoming an even greater problem, but this situation can change dramatically when interest rates eventually rise again.

11) Government overseas debt has nearly tripled since 2008

New Zealand’s government took advantage of the plunging yields on its bonds (which is courtesy of the global QE and ZIRP-driven bond bubble) after the Global Financial Crisis to nearly triple its overseas borrowing:

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new zealand government overseas debt 1993 to 2012

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Source: Wikipedia; RBNZ

The global bond bubble has provided New Zealand’s government with a low-cost borrowing opportunity that is unlikely to be replicated anytime soon, especially now that the U.S. Federal Reserve is slated to completely taper or end its QE3 bond buying program this year.

12) The New Zealand dollar is overvalued

Hot money inflows (a byproduct of QE and zero interest rate policies) into New Zealand after the financial crisis helped the New Zealand dollar to strengthen by 85 percent against the U.S. dollar:

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new zealand united states dollar

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Source: XE.com

After its strong appreciation against both the U.S. and Australian dollars over the past decade, the New Zealand dollar is now overvalued by as much as 20 percent according to some estimates. New Zealand’s Finance Minister Bill English stated in February that the overvalued dollar is “a concern” because it risks harming the country’s exporters. If the New Zealand dollar’s overvaluation was to abruptly correct and even overshoot to the downside (a possible result of the Fed’s taper), New Zealand’s central bank may be forced to hike its key interest rate to prevent further declines.

How New Zealand’s Economic Bubble Will Pop

New Zealand’s economic bubble will likely pop as a result of rising interest rates across the yield curve, which would put pressure on the country’s property and credit bubbles. New Zealand’s key interest rate is expected to continue rising after its March hike due to rising domestic inflationary pressures, while longer-term bond yields are likely to rise as a side-effect of the Fed’s taper and eventual Fed Funds rate increase. The popping of Australia and China’s bubbles are two other external factors that have a high probability of contributing to the popping of New Zealand’s bubble.

Here is what to expect when New Zealand’s economic bubble truly pops:

  • The property bubble will pop
  • Banks will experience losses on their mortgage portfolios
  • The country’s credit boom will turn into a bust
  • Over-leveraged consumers will default on their debts
  • Stock and bond prices will fall; the New Zealand dollar may weaken
  • Economic growth will go into reverse
  • Unemployment will rise

I will be publishing a full comprehensive report about New Zealand’s economic bubble in the near future, so please follow the directions below to receive my updates.

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Mr Colombo seems to have a better insight into our economy than our own ex-Investment Banker and current  Prime Minister, and current Finance Minister.

Perhaps Mr Colombo might like a new job?

 

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= fs =

National Tinkers while Auckland Property Prices Burn

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snail politics - national government tinkers

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When it comes to tax cuts for the rich;  state asset sales; slashing public services; and corporate welfare – National can move at relativistic velocities that Einstein concluded were beyond the realms of physical  laws in our Universe.

When it comes to social problems like child poverty; increasing greenhouse emissions from agriculture; and a housing crisis in Auckland (denied again, recently, by our esteemed Prime Minister)  – the National government can tinker and prevaricate in ways that would do a two year old, at an early childhood centre, proud.

It has opposed, resisted, condemned, criticised, and generally done everything within it’s power not to implement any form of capital gains tax in this country. Suggesting to National that a CGT could be one tool (of many) to quell housing speculation in Auckland has been like inviting a Vegan to a spit-roast barbecue.

Belatedly, as is usual for this  government, after considerable pressure from multiple political, community, business, and state sectors, Key has decided to move – albeit at a glacial pace, and with a tentative single step – to introduce a limited Capital Gains Tax.

The limited CGT will apply;

Introducing a new bright line test to tax gains from residential property sold within two years of purchase, unless it’s the sellers main home, inherited or transferred in a relationship property settlement.

As Key explained;

“It’s not unreasonable to expect that if you buy an investment property and sell it for a gain within two years, then you should be taxed on that gain.”

Fair enough to. It is not unreasonable, especially when the rest of us have no choice but to pay tax on all our other earnings, whether it be as a wage-slave; self-employed; retailer; contractor, etc, etc, etc, etc, etc…

Even property investors admit it is fair, as NZ Property Investors’ Federation CEO, Andrew King, pointed out;

“As we have been saying for years, people trading property have always had to pay tax on their profits and this move will help to clarify this. This should finally put to rest all the unfounded comments from people who say that property has a tax advantage.”

But – two years is the “bright line”?!

So, property speculators/investors who sell their assets in, oh, say, two years and one day are safe?

I’m sure this has escaped the attention of every property speculator/investor in the country. Plus their accountants. Plus tax specialists. Plus the chap who mows the lawns.

Shhhh! Be vewy, vewy quiet! Don’t tell anyone.

As long as no one knows of the two year “bright line”,  the law is “perfectly workable”…

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flying money pig

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Tinkering – best left to a National government. They are expert at it.

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References

Fairfax media:  No housing crisis in Auckland – John Key

NZCity: Capital gains tax on property announced

NZCity: Capital gains tax – what’s been said

Other blogs

Bowalley Road: The Least They Could Do

Gordon Campbell on the government’s belated moves on property speculation

No Right Turn: Winning the argument on taxing capital gains

Polity: At the end of the day what most New Zealanders ackshully accept is… (Housing edition)

Polity: More-tax-on-capital-gains-but-not-at-all-a-capital-gains-tax

The Dim Post:  Progress

The Standard: CGT – the focus groups made Key do it

The Standard: Capital gains tax to be introduced

The Standard: Herald praises Cunliffe for CGT policy

Previous related blogposts

A Capital Gains Tax?

Our growing housing problem

National spins BS to undermine Labour’s Capital Gains Tax

Why should tradies be prosecuted for doing “cashies” and not paying tax?

Letter to the Editor – A Claytons Capital Gains Tax?

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capital-gains-tax-first-world-problem

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This blogpost was first published on The Daily Blog on 21 May 2015.

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The closure of three prisons and loss of 262 jobs – five issues for the National govt

18 April 2015 10 comments

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justice-for-sale-600x337

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The closure of three prisons and loss of 262 jobs

The closure of units in Waikeria, Tongariro-Rangipo, and Rimutaka Prisons, and the subsequent estimated loss of 262 jobs has been openly conceded as a re-distribution of inmates to the new, privately run prison at Wiri.  Corrections chief executive, Ray Smith, stated on 9 April;

I am also proposing to close units at three prisons – Rimutaka, Waikeria and Tongariro/Rangipo…

… With the opening of Auckland South Corrections Facility (at Wiri), and the subsequent reduction in pressure on prison capacity, we can now look at closing these end of life facilities.

The Wiri facility will be managed by multi-national corporation, Serco, as a profit-making venture, paid by the tax-payer.

Smith has blamed the closures and redundancies on the Waikeria, Tongariro-Rangipo, and Rimutaka Prisons being  “50 years old, surrounded by facilities that are 100 years old“. He claims “it would be uneconomic to bring them up to scratch“.

The closure of units at Waikeria, Tongariro-Rangipo, and Rimutaka is estimated to save the National government $165 million. This will be a godsend to Finance Minister Bill English, who admitted on 10 April that National’s much heralded promise of a budget surplus was looking more and more unlikely;

We’re (the Government) is continuing to manage the books carefully but lower inflation, while good for consumers, is making it less likely that the final accounts in October will show a surplus for the whole year.

With the  planned sale of state houses to the  Salvation Army, and other social services, having collapsed, English’s expectation of reaping big cash dividends from the housing sell-of has evaporated.

As I wrote in October 2014;

Meanwhile, Bill English was outlining National’s true agenda, whilst Key was putting on his benign face to the New Zealand public.  As TV3’s Brook Sabin reported,

A big state-house sell-off is on the way, and up to $5 billion-worth of homes could be put on the block.

The shake-up of the Government’s housing stock will be a key focus for the next three years, with Finance Minister Bill English to lead it.

On the block is everything from a tiny 75 square metre two-bedroom state house in Auckland’s Remuera, on the market for $740,000, to a three-bedroom home in Taumarunui for just $38,000. Thousands more properties will soon hit the market.

The reason for putting up to  $5 billion-worth of homes  on the block?

Crashing dairy prices had left a gaping hole in the National Government’s books, and their much-vaunted Budget surplus next year was under threat. Remember that  Key was candid in the implications for the economy and the  government’s tax-take; when he stated – also on 6 October;

It can have some impact because if that’s the final payout, the impact would be as large as NZ$5 billion for the economy overall, and you would expect that to flow through to the tax revenue, both for the 14/15 year and the 15/16 year. My understanding is Treasury is working on those numbers for the incoming Minister of Finance, which fortunately is the same as the outgoing Minister of Finance as well.”

Faced with the imminent sinking of one of National’s cornerstone election promises – a return to surplus by 2014/15 – $165 million saved by the closure of prison units will be  a relief to an increasingly frustrated Bill English.

Key and English couldn’t flog of $5 billion of state housing to social services. So now they are looking at what is effectively privatisation-by-stealth with our prison services.

And bugger the inevitable consequences…

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Justice not for sale logo

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Five issues for the National govt

The closure of units at Waikeria, Tongariro-Rangipo, and Rimutaka Prisons will not be without dire consequences that impact on nearly every aspect of New Zealand society, regions, and the economy.  Even the political landscape may be altered if this ill-considered plan goes ahead.

1. Sending “clients” to a private facility

There is something decidely immoral about up-rooting hundreds of prisoners whose freedom of movement and freedom of choice has been curtailed by State sanctions, and handed over into the hands of a private corporation – Serco – where the prime motivator is making a profit for shareholders. (Overseas shareholders, to be precise.)

In no way can this dystopian scenario be considered part of the “free market”, as all forms of choice have been removed from the prison “clients”.

Serco have been handed “clients” into their “care” whether wanted or not by the prisoners. Not since the slave trade from the 16th to 19th centuries have human being been treated as commodities by Western nations.

Make no mistake; private prisons turn human beings into “things”, to be used by business as investment commodities.

How long before prisoners are sold, bought, and traded by competing corporatised prisons? How long before their labour is sold to other businesses, for profit?

2. Regional economies and job losses

The loss of 262 jobs in Upper Hutt (Rimutaka),  Waikeria, and Tongariro-Rangipo will impact considerably on those regional economies already badly hit by loss of industries, closed businesses, population moving away, and continuing down-turn in the dairy industry.

It is this sort of regional neglect that resulted in Northland voters abandoning the National Party and electing NZ First leader, Winston Peters, as their electorate MP.

Waipa District mayor, Jim Mylchreest, was frustrated and angry at National’s further under-mining of what remained of regional economies;

Here they are with a major change and not even bothering to let us know plans are afoot.

I assume that they’ve done their sums and it’s more efficient for them but they’re not looking at New Zealand in terms of what are the benefits to try and keep employment in the regions.”

Mayor Mylchreest has every right to be angry – closure of a high-security wing at Waikeria Prison will  result in the loss of 148 jobs – creating considerable impact on nearby Te Awamutu (pop: 10,305), only sixteen kilometers away.

Is this how the National Party “supports” the regions?!

It seems that National has not learned a single thing from the Northland by-election.

Rimutaka may well be a safe Labour seat. But it also delivered 15,352 Party Votes for National – now at risk as Upper Hutt will be hard hit by job losses at Rimutaka Prison.

National may have mis-calculated the political fall-out from this move.

3. NZ First/Country Party

A loss of 262 jobs. Millions lost from regional economies. Small towns losing more people. Businesses closing, through lack of turn-over. Which, in a vicious circle leads to more job losses…

A recipe to increase NZ First’s re-positioning on the politicalk spectrum as a de facto “Country-Regional Party”?

It certainly sounds like it.

National may have handed Peters an early Christmas gift to campaign on. Disaffected voters seeing hundreds of jobs lost in their communities – with  subsequent closures of down-stream businesses in their town Main Streets – may wonder why on Earth they should keep voting for National? What’s in it for them?

Not much it would seem.

“Vote National – Lose Your Job” would appear to be the new slogan for National for the 2017 elections.

I have no doubt that even as I write this, and you the reader are reading my words, that Winston Peters and his NZ First strategists are already working on how to maximise these events for their own political gain.

I have no doubt whatsoever; the “Northland Experience” will be repeated throughout the country – much to Winston Peters’ delight.

4. Prisoner’s families

National’s Corrections Minister Peseta Sam Lotu-Iiga has stated;

I understand that this proposal may be unsettling for affected staff but Corrections will have extensive support and assistance in place should the proposal go ahead. I also believe that the proposal reflects our commitment to providing safe and secure working conditions for staff and a safe and productive environment for prisoners.

Prisoners have a much better chance of successful rehabilitation in modern facilities where they have access to education, training and employment opportunities.

Being close to their families is an important factor in rehabilitation for some prisoners.”

However, transferring several hundred prisoners from as far afield as Rimutaka, to Auckland – a distance of some 650kms – is hardly “being close to their families”  and one can only imagine how increasing isolation from family and community will give  “prisoners […] a much better chance of successful rehabilitation”.

The distances involved are considerable, as this Corrections Department map illustrates;

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[6] Waikeria Prison [8] Tongariro/Rangipo Prison [13] Rimutaka Prison

[6] Waikeria Prison
[8] Tongariro/Rangipo Prison
[13] Rimutaka Prison

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Minister Lotu-Iiga needs to explain why he thinks that isolating prisoners in this manner, can possibly assist in their rehabilitation and reintergration back into their communities?

It seems that transferring prisoners out of their communities flies in the face of the Minister’s assertions.

It may also prove more expensive, as prisoner’s families make increased calls upon the Child Travel Fund;

The Child Travel Fund provides financial support to eligible children traveling to visit a parent in prison. The fund also supports parents traveling to visit a child who is under 18 years of age and in prison.

Does National even care?

They should. Increasing prisoner’s alienation from family and communities undermines every effort made by the judicial/corrections system to rehabilitate prisoners.

It should definitely be cause for concern for  the corporate managers of Wiri, for whom rehabilitation and reduced re-offending is part of their contract, according to Corrections chief executive, Ray Smith;

They can earn up to $1.5 million in incentive payments if they can reduce the rate of reoffending by up to 10 percent more than the department can do.”

According to Derek Cheng at the Herald, writing three years ago;

For Wiri, Serco will face stiff financial penalties if it does not meet rehabilitation targets – which will be set at 10 per cent lower than public prisons.

The Corrections Department has a target to reduce re-offending by 10 per cent. If that is achieved, Wiri would have to achieve a rate 20 below the current rates or face fines, which have yet to be set.

Though Finance Minister Bill English – quoted in Scoop at around the same time – was more cautious;

It will also face financial penalties if it fails to meet short-term rehabilitation and reintegration measures including prisoner health and employment targets, and safe, secure and humane custodial standards.”

However, speaking to Paul Henry on Radio Live, Corrections chief executive, Ray Smith, was more circumspect when asked directly what penalties were involved in prisoners re-offended after release;

(@ 7:35)

Henry: “If rehabitation rates, if recidivism rates deteriorate, is there a penalty?”

Smith: “Well they just can’t earn the incentive payment if they can’t [meet the targets(muffled)].”

Henry: “So there isn’t actually a penalty?”

Smith: “[Stuttered words]...the penalties are associated with failure on security. The incentives are geared towards having to actually achieve better outcomes than the Department.”

So unlike penalties associated with prisoner escapes, where Serco actually has to pay the government, the only “penalty” associated with not meeting rehabilitation targets is foregoing $1.5 million in incentive payments?

Under Serco’s contract to manage Mt Eden Remand Prison, it is fined $150,000 each and every time a prisoner escapes, as happened in 2011 and 2012.

Under the contract to manage Wiri, it appears that the “penalty” is foregoing incentive payments.

The two “penalties” are not exactly the same and Minister English was being less than clear when he referred to Serco facing “financial penalties“.

Repeating the question – does National care? Not in the least, one may rightly guess. After all, chances are that National will no longer be in government when the ‘chickens come home to roost’ on this little social time bomb, and John Key will be writing his memoirs somewhere on an idyllic Hawaiian beach.

5. Relocating staff?

There seems to be confusion as to what will happen to the 262 staff who will lose their jobs from  Waikeria, Tongariro-Rangipo, and Rimutaka Prisons.

In his interview with Paul Henry on Radio Live on 10 April, Corrections CEO Ray Smith offered to do his best to find replacement jobs at other facilities for 262 redundant staff.

Suggestions that staff would be relocated to Auckland, with a “$20,000 relocation assistance-payment” appears to be farcical for two reason;

1. $20,000 payment to a Corrections staffmember living in a small town, where properties are worth considerably less than the over-heated Auckland housing market, is unhelpful. There is a worsening housing shortage in Auckland, and it seems to be verging on incompetence for this government to be adding to the housing problem by encouraging more workers and their families to move to the the city, thereby adding to congestion.

2. According to various media reports, the new Wiri facility is already fully staffed;

And unfortunately for staff who will be laid off, the opening of a large new prison in South Auckland next month is no consolation as all jobs are already filled. – TV1 News

A new prison in south Auckland will pick up the relocated inmates, but it is already fully staffed.TV3 News

So where are the jobs? Certainly not at Wiri.

Which makes this statement from Corrections Minister Lotu-Iiga unconvincing;

It should also be noted that the number of prisoner places is not reducing and will in fact increase with the opening of [Wiri]. We will have a net increase of 433 beds.”

The closure of three facilities; 262 redundancies; and contracting out to a private provider all reeks of National’s mania for cost-cutting.

As with many other cost-cutting exercises, it is New Zealanders; their families; and economically-fragile regions and small towns, that are having to pay the price. Treating prisoners as commercial commodities adds a particularly nasty aspect to this exercise.

Meanwhile, foreign-owned Serco stands to gain $30 million of tax-payer’s money, per year, from managing the new Wiri prison.

Someone is benefitting, and it is not us.

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Justice not for sale logo

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Prison facts and statistics – December 2014

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Number of prisoners in each prison - nz prisons

Source

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Justice not for sale logo
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References

Fairfax media: Up to 262 prison jobs may be cut in major Corrections restructure

TV3 News: Union – Prison staff can’t afford to move to Auckland

TV1 News: Budget surplus looking increasingly unlikely this year, Bill English admits

TV3 News: State housing sell-off worth $5B

Hive News: Treasury re-crunching Budget numbers for low Fonterra payout

National Party: Remaining on track to Budget surplus in 2014/15

Wikipedia: Serco

TV1 News: Town’s fury at being left in dark over prison closure

Wikipedia: Te Awamutu

Election Results 2014: Official Count Results — Rimutaka

Department of Corrections:  Sustainable Development Framework

Department of Corrections:  Travel assistance for visits

TV3 News: Union – Prison staff can’t afford to move to Auckland

NZ Herald: New private prison at Wiri given green light

Auckland Scoop media: Amazing promises for new Wiri prison: less offending, better safety, superior service

RadioLive: Around 260 staff face redundancy at Waikeria, Rangipo and Rimutaka prisons (audio)

Auckland Scoop media: Private operator of Mt Eden fined $150,000 for prison escape; security improvements made

Radio NZ: Serco fined after another prisoner escape

TV3 News: Govt criticised over prison job cuts

Radio NZ: Serco expects $30m revenue from Wiri prison

Department of Corrections:  Prison facts and statistics – December 2014

Previous related blogposts

The lunatics are running the Asylum

Housing; broken promises, families in cars, and ideological idiocy (Part Rua)

 


 

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140105 Housing in prisons

 

 

This blogpost was first published on The Daily Blog on 13 April 2015.

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Capitalism and the price of chocolate

1 March 2015 2 comments

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From a previous blogpost published on 4 July 2013, in The Daily Blog

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The Price of Cocoa (2013)

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Three cans of cocoa tell an interesting story.

Can A is the oldest, with an expiry date of April 2011. The can measures 110mm (H) x 75mm (D). It contained 200g net dry cocoa powder.

We purchased Can B sometime  in 2011 (?). The expiry date was March 2012, so it’s the second oldest can.

Interestingly, it also contained 200g net dry cocoa powder. However,   whilst the contents remained the same as Can A – the dimensions of the can inexplicably increased; 130mm (H) x 75mm (D). Same diameter as Can A – but 20mm taller. Contents remain the same net weight.

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KONICA MINOLTA DIGITAL CAMERA

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A month ago we purchased Can C (expiry date, March 2015). The dimensions of this can is the same as Can B: 130mm (H) x 75mm (D). But this time, the contents decreased from 200 to 190g net dry cocoa powder. Ten grams less.

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KONICA MINOLTA DIGITAL CAMERA

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So the up-shot? The can-sizes have gotten bigger – whilst the contents has reduced by 5%.

On 9 June, I emailed Nestle to find out what was going on,

Kia ora,

It has recently come to my attention that two cans of Nestle Baking Cocoa measure 110mm X 75mm, whilst the other measures 130mm x 75mm.

Both contain 200g net  cocoa powder.

The smaller can measuring 110 x 75 has a “best before” date April 2011.

The larger can, 130×75 has a “best before” date March 2012.

It appears that you have increased the SIZE of the can, whilst the contents remain the same.

Is there a reason why the size of the cans  was increased, by 20mm in height?

And can you confirm that the price stayed the same; increased; or reduced; when the change was made from a 110mm height to 130mm height?

(The email was sent prior to purchasing Can C.)

Perhaps not surprisingly, I received no reply from Nestle. [Blogger’s note: I never received any reply from Nestle.]

Unfortunately, I never retained the receipts for Cans A and B, otherwise I could compare prices. But what’s the bet that the retail price probably increased?

And thus it came to pass…

“As short a time ago as February, the Ministry of Plenty had issued a promise (a “categorical pledge” were the official words) that there would be no reduction of the chocolate ration during 1984. Actually, as Winston was aware, the chocolate ration was to be reduced from thirty grams to twenty at the end of the present week. All that was needed was to substitute for the original promise a warning that it would probably be necessary to reduce the ration at some time in April.” – George Orwell,  ‘1984’

Doubleplusgood!

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The Price of Chocolate (2015)

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A recent story in the media caught my attention;

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Cadbury blocks get the chop

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The unattributed Fairfax article further stated,

Amanda Banfield, managing director of Australasia for Mondelez International, the parent company that owns Cadbury, said she expected a backlash.

[…]

She pointed to rising packaging costs and a lift in the price of raw materials.

The main ingredients are cocoa, sugar and milk.

So let’s have a look at the prices of raw ingredients.

Sugar.

This commodity dropped in price from NZ$0.22  per pound, in July 2014, to NZ$0.20 per pound, by January of this year, according to IndexMundi.com;

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price of sugar - 7 months

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Over the last year, the price of sugar increased, peaking in July last year, before falling back;

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price of sugar - 12 months

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But taken over a five year period, look at how the price of sugar has dropped dramatically;

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price of sugar - 5 years

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So the rationale for Cadbury’s decision to de facto increase their prices cannot be blamed on sugar, which is cheaper now than it was, five years ago.

Let’s have a look at cocoa (beans) – and a similar story unfolds;

Six months – a 3.95% increase;

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price of cocoa beans - 6 months

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Twelve months – a 12.26% increase;

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price of cocoa beans - 12 months

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However – over 5 years – a 21.06% drop in price;

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price of cocoa beans - 5 years

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It would be interesting to note if when the price of cocoa beans collapsed to NZ$2,601.96 per metric ton, in March 2013, did the price of a Cadbury’s bar of chocolate increase in size? Or fall in price?

As for the price of packaging, this would be based on a local commodity (paper and ink) and if  New Zealand’s low inflation is anything to go by (an average of 2.7% pa since 2000), would not be much of a factor in pricing. With the exception of four Quarters around late 2010 to mid-2011, inflation has remained at or below 2%, a fallout from the 2008 Global Financial Crisis and ongoing recessionary/low-growth influences;

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trading economics - inflation 2010 - 2014 nz

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So with commodity prices for sugar and cocoa beans lower now than five years ago, and with low inflation, what other cause  could there be for the de facto price price of Cadbury’s chocolate bars?

Perhaps the answer lies with Kraft’s acquisition of Cadburys  for  £11.5 billion (US$18.9 billion) in 2010. Kraft financed the take-over deal by  borrowing a massive  £7 billion (US$11.5 billion) to finance the deal.

However, the New Zealand branch of Cadbury’s did not return a profit to it’s parent company (Mondelez International) until three years later, when it paid a dividend of NZ$40 million to its parent company, Mondelez.

According to  statements, Cadbury NZ’s profit  tripled to $11.6 million, from $3.5 million a year earlier, even as costs fell by  2.3%.

So despite falling costs, and increased profits, Cadbury NZ was struggling to make dividend payments to it’s parent company, and meanwhile Kraft was committed to servicing a £7 billion (US$11.5 billion) loan which had financed the acquisition in 2010.

The reduction in Cadbury’s chocolate bars can therefore be attributed to Kraft’s indebtedness rather than the official company line of increased costs. Unless Cadbury is lying in it’s financial statements, their costs have actually fallen, not increased.

As with many corporate takeovers, the benefits do not necessarily accrue to the public. The number one beneficiary is almost always shareholders, and consumers come a poor second (or third, or fourth…).

In this case, reducing the size of Cadbury chocolate bars by 20% is equivalent to a price increase, and Kraft’s shareholders will reap the rewards of increased profits.

Not exactly a sweet deal for New Zealand consumers.

Postscript

On 15 February, I contacted Statistics NZ, to enquire how SNZ views reduction in product sizes, whilst retail prices remain the same, in it’s calculation of the Consumer Price Index (CPI).

Dave Lum, from Statistics NZ replied;

The CPI measures price change in a “fixed” basket of goods and services, which means that we aim to measure price change based on quality being constant. In an instance where the quality (in your example, the weight/size) of an item changes, we show a price adjustment to account for the fact that the quality of the item has changed.

 As an example, if the size of a can of beans goes from 300g to 330g for the same price, this is shown as a price decrease for that item in the CPI. Likewise, if the can of beans went from 300g to 250g for the same price, it would be represented as a price increase.

So according to Mr Lum, Cadbury’s “switcheroo” with product sizes, will not materially distort CPI price measures.

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References

Fairfax media:  Cadbury blocks get the chop

IndexMundi.com: Sugar Futures End of Day Settlement Price (6 months)

IndexMundi.com: Sugar Futures End of Day Settlement Price (12 months)

IndexMundi.com: Sugar Futures End of Day Settlement Price (5 years)

IndexMundi.com: Cocoa beans Monthly Price – New Zealand Dollar per Metric Ton (6 months)

IndexMundi.com: Cocoa beans Monthly Price – New Zealand Dollar per Metric Ton (12 months)

IndexMundi.com: Cocoa beans Monthly Price – New Zealand Dollar per Metric Ton (5 years)

Reserve Bank: Inflation 1990-2014

Trading Economics: Inflation 2010 – 2015

NBR: Kraft Foods (NZ) pays $40m dividend to parent Mondelez

Wikipedia: Acquisition by Kraft Foods

This blogpost was first published on The Daily Blog on 24 February 2015.

 

 

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2014 – Ongoing jobless tally

25 December 2014 16 comments

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Unemployment logo

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Continued from: 2013 – Ongoing jobless tally

So by the numbers, for this year,

January

February

March

April

May

June

July

August

September

October

November

December

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*

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See also

Reported Job Losses

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*

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Current unemployment statistics

 

March 2014 Quarter

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

 

All figures are seasonally adjusted. Source: Statistics New Zealand

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

June 2014 quarter

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June 2014 quarter Quarterly change Annual change
(000) (Percent)
Employed 2,328 +0.4 +3.7
Unemployed    137  -6.3 -10.9
Not in the labour force 1,114  +1.7  -0.9
Working-age population 3,579 +0.6 +1.6
(Percent) (Percentage points)
Employment rate  65.0 -0.1  +1.3
Unemployment rate    5.6 -0.3   -0.8
Labour force participation rate  68.9 -0.3  +0.8

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All figures are seasonally adjusted. Source: Statistics New Zealand

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

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Additional statistics

Officially unemployed stats;

In the June 2014 quarter compared with the March 2014 quarter:

  • The number of people employed increased by 10,000 people.
  • The employment rate fell 0.1 percentage points, to 65.0 percent.
  • The number of people unemployed decreased by 9,000 people.
  • The unemployment rate fell 0.3 percentage points to 5.6 percent.
  • The labour force participation rate decreased 0.3 percentage points, to 68.9 percent.

Official unemployment: down

The  under-employment stats;

People who are underemployed are those who work part-time, would prefer to work more hours, and are available to do so. In unadjusted terms, the number of underemployed grew by 12 percent over the year. While the number of part-time workers increased over the year, the ratio of people underemployed to employed part-time also rose – from 17.1 percent in June 2013 to 18.7 percent this quarter.

Official under-employment: up

 

The Household Labour Force Survey for the  September 2014 quarter will be released on 5 November 2014.

Source

Definitions

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

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

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

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

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

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

Source

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[To  be periodically up-dated]

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Questionable assumptions ‘bad for small democracies’

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smells like media bullshit

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

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Labour governments bad for small business

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

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

[…]

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

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

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

Yet the heading of the article is utterly misleading;

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Labour governments ‘bad for small business’

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

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

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

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

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

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

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

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

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

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

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

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

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

Eight years, four credit upgrades.

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

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

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

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New Zealand New Zealand Government Debt To GDP 2000-2014

Graph

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New Zealand unemployment rate 2000-2014

Graph

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New Zealand Building Permits 2000-2014

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

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New Zealand Stock Market (NZX 50) 2000-2014

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New Zealand GDP 2000-2014

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

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New Zealand business - consumer confidence To GDP 2000-2014

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

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

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

 

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References

Fairfax media: Labour governments ‘bad for small business’

New Zealand Debt Management Office: New Zealand Sovereign Credit Ratings

New Zealand Debt Management Office: Summary of Direct Public Debt

Trading Economics: New Zealand Government Debt To GDP

National Party: What about the workers?

Statistics NZ: Unemployment Rate Falls to 3.4 Percent

Trading Economics: New Zealand Unemployment Rate

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

Trading Economics: New Zealand Stock Market (NZX 50)

Trading Economics: New Zealand Building Permits

Trading Economics: New Zealand GDP

NZ Treasury: Recent Economic Performance and Outlook

Trading Economics: New Zealand Consumer Confidence

Trading Economics: New Zealand Business Confidence

Kiwiblog: Labour bad for small business


 

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National dance to corporate interests

Above image acknowledgment: Francis Owen/Lurch Left Memes

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

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National spins BS to undermine Labour’s Capital Gains Tax

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bull shit

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

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

On Sunday 25 May, McClay was quoted as stating,

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

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

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

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

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

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

plus 
Academics,  tax experts, economists, and Treasury.

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

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

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

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

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

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

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

The answer is, ‘Yes’. And ‘No’.

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

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Residential property Whare nohoanga

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Mistaking property dealing for property investment

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

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

Factors to consider when determining your status

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

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

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

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

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

If you buy a property intending to:

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

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

What is an investor, a speculator and a dealer?

Investor

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

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

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

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

Note

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

Find out about special tax rules for associated persons.

Speculator

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

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

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

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

Dealer

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

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

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

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

Read our guide Buying and selling residential property (IR313)

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

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

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

Example

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

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

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

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

Find out more about what tax you should be paying

 

Date published: 30 Jul 2010

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Note the difference between Investor, Speculator, and Dealer;

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

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

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

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Selling property

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

What happens when you sell your family home

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

What happens when you sell your investment property

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

What happens when you sell your rental property

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

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

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

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

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

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

Right?

That’s making it “fit for purpose”.

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References

Radio NZ:  Parties at odds over capital gains tax

MSN News: IRD targets `high end’ tax dodgers

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

IRD: Residential Property – Mistaking property dealing for property investment

IRD: Residential Property – Selling property

National Party: Draft intelligence community legislation released

 

Previous related blogpost

A Capital Gains Tax?  (14 July 2011)

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

 


 

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Skipping voting is not rebellion its surrender

Above image acknowledgment: Francis Owen/Lurch Left Memes

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

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

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NZ Government overseas debt 1993 to 2012

Graphic courtesy of The Daily Blog

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A few reasons why our debt skyrocketed from 2008 onwards…

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

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

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

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

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

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

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

A. Maintained higher employment,

B. Paid out less in welfare,

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

D. Addressed the current housing crisis we now have.

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

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References

NZ Herald: Govt borrowing $380m a week

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

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

NZ Herald: Cycleway jobs fall short

Statistics NZ: Employment and Unemployment – March 2008 Quarter

Statistics NZ: Household Labour Force Survey: September 2012 quarter

Fairfax NZ: Jobs summit ‘fails to deliver’

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

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

Additional

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

Fairfax media: Budget 2014: The essential guide

Previous related blogposts

Can we do it? Bloody oath we can!

 

 


 

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The Cost of Living

Above image acknowledgment: Francis Owen/Lurch Left Memes

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

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2014 election

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

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

Really?!

Don’t you believe it, sunshine.

National’s sixth budget contained spending on;

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

(Source: Treasury)

 

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

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

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

Which conveniently also happens to be election year.

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

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

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

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

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

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

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

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Key admits underclass still growing

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

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Hungry kids scavenge pig slops

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

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

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

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

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

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

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

The same editorial went on,

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

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

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

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

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

The key-word here is “recognised“.

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

As the above editorial went on to state,

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

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

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

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

Quite the contrary, David.

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

It’s only just begun.

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Postscript #1

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

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Revenue and expenses 2014 budget new zealand government

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

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

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

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

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

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

Postscript#2

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

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Past budgets 2009 - Dominion Post - 16 May 2014

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

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IRD technical tax area 2009 

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

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

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

Postscript #3

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

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Treasury New Zealand debt

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

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

Indeed.

 

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References

Dominion Post: English spreads the lolly far and wide

NZ Treasury:  Key Facts for Taxpayers (Part 1)

NZ Herald: Budget 2014 – Building products tariffs lifted temporarily

Manawatu Standard: Boost for rape crisis services welcomed

Fairfax media:  Rape crisis line forced to cut staff

Dominion Post: Wellington rape centre forced to cut hours

NZ Treasury: Government Revenue

Fairfax media: MPs’ travel costs rise

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

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

NZ Herald:  Key admits underclass still growing

Fairfax media: Hungry kids scavenge pig slops

Radio NZ: Child lobby sceptical of budget moves

Dominion Post: Editorial – The crowd goes mild at Budget

Parliament: Inequality—Assets and Income

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

Dominion Post: Child poverty still not being corrected

IRD: [2009] Tax cuts for individuals

Otago Daily Times: Key says donate tax cuts to charity

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

National.co.nz: Mixed Ownership

Previous related blogposts

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

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

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

 

 

 


 

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Skipping voting is not rebellion its surrender

Above image acknowledgment: Francis Owen/Lurch Left Memes

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

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

23 March 2014 2 comments

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The Nationalmobile

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

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

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

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

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

This will inevitably dampen consumer spending and reduce economic activity.

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

Confirmed, as the NZ Herald reported;

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

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

And in another Herald story,

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

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

On that day, the public will blame politicians.

Politicians will blame each other.

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

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

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

On-going…

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

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

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

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

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

[…]

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

[…]

Mortgage rates are rocketing upwards…

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

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

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

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

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

This will be good for exporters.

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

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

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

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Wages

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NZ average hourly wages 2012 - 2014

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GDP

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NZ GDP Growth Rate 2012 - 2014

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

On-going…

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

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

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

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

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

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

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

[…]

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

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

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

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

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

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

[…]

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

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

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

Not much of a Christmas present for New Zealanders.

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

National remains utterly vulnerable during this year’s election.

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References

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

Radio NZ: Reserve Bank warns of more interest rate rises

Interest.co.nz: Mortgages

NZ Herald: Dollar jumps on OCR hike + video

NZ Herald: New Zealand raises interest rate to 2.75 percent

Reserve Bank: Reserve Bank raises OCR to 2.75 percent

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

Interest.co.nz: Oil and Petrol

tradingeconomics.com: Wages

tradingeconomics.com: GDP

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

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

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

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

NZ Treasury: Tax Outturn Data

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

Previous related blogposts

TV3 Polling and some crystal-ball gazing

National, The Economy, and coming Speed Wobbles

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https://fmacskasy.files.wordpress.com/2014/02/the-cost-of-living1.jpg

Above image acknowledgment: Francis Owen

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

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