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Posts Tagged ‘NZ Institute of Economic Research’

National’s $11.7 billion hole is right where they left it

3 November 2017 1 comment

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Remember Steven Joyce’s claim there was a “$11.7 billion hole” in Labour pre-election budget?

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The claim of an $11.7 “fiscal hole” became a dominating irritant throughout the election campaign, even though in large part it failed simply because no one else (except Bill English) agreed that it existed.  TV3’s “Newshub” even created this now-famous, handy, infograph to illustrate the fact that Joyce and English were effectively on  their own;

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The claim has been largely forgotten, except when the Left need a handy reminder of right-wing duplicity to throw at National/ACT trolls – just to wipe any smirk of entitlement  from their silver-spoon-fed faces.

Except, on Thursday, 23 November, there was a curious – and disturbing – juxtaposition of media stories in Fairfax’s Dominion Post;

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Joyce seems curiously very sure of himself on the existence of the “hole”;

“Unfortunately, sadly, I think it looks like over time I will be proven correct. I genuinely don’t take any joy out of that because actually all that says is that the new Government is going to spend more than it said to meet its promises, and that’s because it didn’t allow enough money for other things

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Sadly I think we’ll get to the ($)11(b) over time.”

Where might this “hole” come from, if it exists?

One possible answer lay on the front page of the same edition on the Dompost;

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The report, by Fairfax journalist Rachel Thomas, revealed a massive shortfall in spending on medicines alone;

Cancer patients say they are sick of paying for their own survival after an independent report revealed a $682 million “hole” in government funding for lifesaving medicines.

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The $682m figure in Wednesday’s report from the New Zealand Institution for Economic Research (NZIER) is the amount it says would be needed to restore the community pharmaceuticals budget to 2007 levels.

In real terms, Budget spending for prescription medicines, vaccines, haemophilia treatments, nicotine replacement, and cancer medicines – sometimes administered in hospitals – dropped from 6.2 per cent in 2007 to 3.6 per cent in 2018, according to the report.

Now granted that Medicines New Zealand is a “drug lobby group” – but the NZIER which analysed the problem also revealed their methodology;

The NZIER report was commissioned by Medicines New Zealand, a drug lobby group, and collated from Pharmac annual reports and Official Information Act requests.

When former Health Minister, Jonathan Coleman, was asked to explain the massive $682 million hole in the medicines budget, his reply was;

Since 2007, almost 900,000 Kiwis had received 426 new and widened-access medicines. “It’s important to note that … Medicines NZ [has] a direct interest in increased Pharmac spending.”

Notice that Coleman – whose working relationship with DHBs has been frought over the last three years – deflected from the issue itself. His reference “to note that … Medicines NZ [has] a direct interest in increased Pharmac spending” fails to address the relevant fact that, according to NZIER, spending on medicines has fallen under the previous National government.

He deliberately evaded the question.

Which is hardly surprising given that English’s miraculous budget surpluses appear to have been made at the expense of  under-funding for services such as healthcare – including  mental health – throughout the country.

This poses some serious questions for the new Coalition government…

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from: Frank Macskasy <fmacskasy@gmail.com>
to: Dominion Post <letters@dompost.co.nz>
date: 26 November 2017
subject: Letter to the editor

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The editor
Dominion Post

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Let us recall that on 5 September, National’s then-Finance Minister and “Fix-It Man”, Steven Joyce, made a startling claim that Labour’s alternative budget concealed a $11.7 billion “hole”.

Joyce’s claim was scrutinised by economists, commentators, and even a right-wing think-tank and lobby group – and declared to be unsusubstantiated by any known facts. Only Joyce, supported by his leader Bill English, maintained the existence of a purported “hole”.

On 23 November, Fairfax reported findings by the NZIER that PHARMAC’s medicines budget was underfunded by a whopping $682 million. (“$682m ‘hole’ in medicine budget”). When asked to respond, former National Health Minister Coleman criticised those that commissioned the report – Medicines NZ, a pharmaceutical lobby group – but in no way disputed the figures.

In essence, PHARMAC’s funding budget suffered a savage cut from 6.2% in 2007 to 3.6% in 2018 – the equivalent of $682 million in vital medicines.

No wonder Joyce was so confident that a fiscal “hole” existed where none could see one.

Joyce knew precisely that the $11.7 billion “hole” was of National’s own making; a legacy “gifted” to the incoming Coalition government, and a ticking fiscal time bomb waiting to detonate as incoming Finance Minister, Grant Robertson, uncovered further hidden funding shocks.

What other “legacy gifts” has Joyce left us?

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-Frank Macskasy

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[address and phone number supplied]

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References

National Party:  Labour must explain where the money is

Mediaworks:  Economist consensus – there’s no $11.7b hole in Labour’s budget

Fairfax media:  Steven Joyce sticks to $11.7 billion hole in Government budget

Fairfax media:  Cancer patients renew call for more funded medicines, as report reveals $682m ‘hole’

Radio NZ:  ‘Extraordinary’ conflict between DHBs and health officials

Other Blogs

The Standard:  Health disasters – useless Coleman in all kinds of shit

Previous related blogposts

Weekend Revelations #1 – Dr Jonathan Coleman

Observations on the 2017 Election campaign thus far… (wha)

Dollars and sense – Joyce’s hypocrisy

St. Steven and the Holy Grail of Fiscal Responsibility

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This blogpost was first published on The Daily Blog on 28 November 2017.

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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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