Posts Tagged ‘Moody’s’

Questionable assumptions ‘bad for small democracies’


smells like media bullshit


This item in Fairfax’s Dominion Post caught my eye a few days ago;


Labour governments bad for small business



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;


Labour governments ‘bad for small business’


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;




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,


New Zealand New Zealand Government Debt To GDP 2000-2014




New Zealand unemployment rate 2000-2014





New Zealand Building Permits 2000-2014


  • The NZ stock market showed a steady rise, until the 2007/08 Global Financial Crisis;


New Zealand Stock Market (NZX 50) 2000-2014



New Zealand GDP 2000-2014


  • 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?)


New Zealand business - consumer confidence To GDP 2000-2014



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.





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



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.



= fs =

Tui Time!

Sent in by an astute reader,



The irony of this billboard is that it is not a parody.  It’s a real billboard spotted on someone’s front lawn.

Obviously this particular hoarding-facing was designed before news that  government  borrowings have increased from $16.7 billion to June this year, to $18.4 billion to October this year.

Or that interest rates will most likely rise, due to credit downgrades by Fitch and Standard & Poors. And with an imminent announcement Moody’s – also likely to be a down-grade – expect your mortgage repayments to rise soon.

I suspect these particular billboards may come down very shortly. The embarresment factor may be somewhat irritating for the encumbent government.



Thanks to ‘Sandman’  for sharing this image with us.



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

4 October 2011 2 comments

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

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




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

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

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

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

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

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

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

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

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

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

Yet, on Radio NZ today he stated,




Note the Prime Ministers comments,

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

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

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

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

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


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


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

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

Fitch, once, five days ago.

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

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

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

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

This, of course, many of us new already.

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

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

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

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

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

But National Governments are not.

Is that how things work in John Key Land?




Additional Reading

Reserve Bank – Household Debt

Treasury – Private-sector debt and factors affecting it

Moody’s credit rating definitions

Standard & Poors definitions