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Posts Tagged ‘Eurozone’

From 2011 back to 1991?

1 December 2011 23 comments

Even without a Tardis, John Key’s National government is set to return New Zealand to 1991, as it plans to cut spending and make more state sector workers redundant,

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Yet, the NZIER is warning of dire consequences  should National proceed with more cuts to state sector spending,

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Many will recall that it was precisely brecause of severe cuts to state spending in 1991 that made New Zealand’s recession so much worse at the time. Ruth Richardson even boasted that her budget was the “Mother of All Budgets”.

Economic data is presented here, in graph form, and shows the immediate conseqences that impacted on New Zealand soon after Richardson’s Budgetary cuts were implemented. Unemployment skyrocketed to approximately 11% – the highest since Depression days in the 1930s.

It is generally considered that Richardson’s harsh cuts unnecessarily deepened New Zealand’s recessionary effects. It caused considerable misery throughout the country as businesses collapsed; GDP fell; the prison population increased; and credit ratings agencies downgraded the country.

As John Key’s government lays plans for implementing more state sector cuts, it is clearly apparent that New Zealand’s economy is still struggling,

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And just to really drive home the fact that matters are becoming dire,  ratings agency Standard & Poor’s today downgraded the credit ratings of our major banks;  ANZ New Zealand, ASB, BNZ, and Westpac New Zealand,along with their Australian parents.

Things are not looking terribly flash,

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Whilst it is abundantly obvious that we cannot influence events on the other side of the globe, and that the slow disintergration of the Eurozone; the economic downturn in China; and America’s mind-numbingly huge deficit – that our government can still play a role in what happens locally.

First and foremost, now is not the time to be cutting back on state sector spending and government workers. Adding to unemployment will not help matters and will simply,

  • reduce overall consumption spending by unemployed civil servants
  • make it harder for 154,000 currently unemployed to find jobs
  • reduce overall economic activity

John Key needs to read up on our recent history and learn from the mistakes of his predecessors, Jim Bolger and Ruth Richardson.

He needs to understand that government cutbacks during a recession will not help – and will actually make matters much worse.

Instead, the incoming government should be considering the following;

  • Shelve all plans for further cutbacks
  • Abandon further cutbacks of state sector employees
  • Implement a crash training programme for those currently unemployed, removing barriers such as fees
  • Raise the minimum wage to $15 an hour
  • Compensate the increase in  minimum wage with a correlating tax write-off/reduction, for companies affected for one year
  • Increase the top tax rate for income earners over $100,000
  • Review Working for Famlies for those earning over $100,000

Some high income earners, businesspeople, and free marketeers may squeal at the above suggestions – but we either pay to keep our economy afloat and maintain high employment – or we’ll pay for  welfare, increased crime, social dislocation and other problems, as well more skilled Kiwis fleeing to Australia.

Why not pay to achieve positive outcomes instead of the proverbial ambulance at the bottom of the cliff?

Because either way, we will pay.

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Additional

Wellington hit with leap in mortgagee sales

Wellington furniture company in liquidation

Fourth National Government of New Zealand

The 1991 Budget and Tertiary Education: Promises, Promises…

Reserve Bank – Employment-Unemployment

Dept of Corrections: Prison sentenced snapshot trend since 1980

Annual figures for Bankruptcies and Liquidations since 1988

Chris Ford: National/ACT Coalition aiming to complete New Right revolution

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And the Band played on…

27 September 2011 2 comments

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Greece is close to defaulting; the Eurozone faces collapse; the United States owes over $14.3tn  (tn = trillion)  in debt; and now China is facing economic problems.

Despite a new crisis confronting the world economy,  John Key is still showing his vacant optimism? Either he knows something that the rest of the world doesn’t – or he’s grinning and hoping the election will be over before the next global economic “crunch” hits us.

Either way – we’re in trouble. Because National has no economic strategy and no job-creation policies – none. Instead, they have been cutting government workers, despite promises not to do so in 2008, and adding to our high numbers of  jobless,

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Despite Finance Minister Bill English returning from the United States today and briefing  Mr Key on the weekend’s IMF meeting – all of which was bad news – the Prime Minister maintained an unfeasibly optimistic attitude. This, despite Key admitting,

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“He characterised the mood as very dark. There is genuine fear that both the US and Europe could be in for a tough time in the next 12 to 24 months.” Source

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Despite obvious indications that things are about to turn to custard, John Key is still publicly optimistic,

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This vacant optimism extends to cutting 170 teaching positions from quake ravaged Christchurch, as well as throwing over two thousand government workers onto the unemployment scrapheap. These are the people who make government “tick”, including those at DoC who are charged with protecting our environment – so we can market ourselves as “Clean & Green” to overseas visitors.

As for job creation, National has done very little in this area except for it’s much-vaunted cycle-way – which has created 215 new jobs – not the 4,000 estimated by John Key in May, 2010. The Job Summit, held in February 2009 (remember that?) produced nothing of worth.

All of which amounts to increasing New Zealand’s vulnerability to the next, looming global economic crisis. If you still hold doubts, listen to this gentleman, market trader Alessio Rastani, interviewed by the BBC. If this doesn’t scare you, then – as Bill Shakespeare once said, you are made of sterner stuff,

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[click on image to view Youtube upload]

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It is staggering to realise that since November 2008, when National was elected to power, they have done almost nothing to promote job creation policies. Quite the contrary, in nearly three years, this John Key-led National government has;

  1. Cut the Training Incentive Allowance for solo-parents  to pay for further education and career-training. This is the same benefit that Paula Bennet received when she was a solo-mother, and which funded her University course.
  2. Permitted youth unemployment to reach nearly 20%. – despite promising a “Youth Guarantee” to allow full training for young New Zealanders. This never happened.
  3. Suggested that our low-wages, in comparison to Australia, was a competitive advantage.
  4. Cut $146 million from skills training.
  5. Plans to cut 170 teaching positions from Christchurch.
  6. Cut taxes twice, in April 2009, and October 2010.
  7. Borrowed in excess of $380 million a week, till we are $16.7 billion in debt.
  8. Permitted jobs to go to overseas companies, instead of local manufacturers, resulting in yet more job losses.
  9. Sacked over 2,000 government employees, despite promising not to do so in 2008. (Instead, John Key promised to cap the number of of government workers.)
  10. Initiated no new job creation policies.

With no job creation policies;  National making government workers redundant; borrowing vast amounts from overseas whilst cutting cutting, John Key has left New Zealand vulnerable to the next economic shock.

To illustrate: prior to the 2008 economic recession, our unemployment rate was 3.8%. Post-2008, unemployment more than doubled to 7%, since reducing slightly to 6.8%.

With the next crisis looming, if we start the “ledger” at 6.8% unemployment rate; $16.7 billion in debt; and no policies to fund job creation – then matters will only get worse. We simplyhave very  little room remaining to manouver when the next crisis impacts on us.

National has relied on “market forces” to create jobs – the very same market forces that have crippled the Eurozone and United States, and are now starting to affect China.

Which is why Alessio Rastani’s comments in the Youtube clip above, are so frightening – frightening because we have squandered three years to plan and prepare for this eventuality.

Meanwhile, the Prime Minister, John Key, has more amusing things to focus his mind on,

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+++ Updates +++

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