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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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Full Story

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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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Source

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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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