Archive

Posts Tagged ‘NZ Superannuation Fund’

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

2 December 2016 6 comments

.

motivation_incentive_desire_temptation_carrot_thinkstock_478675859-100409952-primary-idge

.

In troubled times, we are community

.

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‘;

.

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.“

.

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.

.

National dangles the “carrot”

.

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.

.

National’s previous election “carrots”

.

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;

.

National government debt - tax cuts

.

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).

.

fs16-12

.

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

.

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“.

.

 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

.

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.”

.

National spends-up large on new prison beds

.

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.”

.

The inevitable cost of tax-cuts

.

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;

.

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

.

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

.

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

.

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

.

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

.

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;

.

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

.

(Yet another) Broken promise by Key

.

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?

.

.

.

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

.

.

.

cheesecolour-tax-cuts

.

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

.

.

= fs =

The Mendacities of Mr Key # 17: The sale of Kiwibank eight years in the planning?

11 April 2016 8 comments

.

we will give you honest government - yeah right

.

National Makes Good on 2008 Threat to Sell Kiwibank

NZ Post’s, announcement on 6 April that it intends to sell-down  45% of it’s subsidiary, Kiwibank, appears to make good on Bill English’s inadvertent threat in August 2008 that Kiwibank would “eventually be sold”.

English was secretly recorded by an un-named person during a 2008 National Party Conference, and encouraged to talk freely on the prospect of selling Kiwibank;

.

English - I didn't choose my words well - NZ Herald - Kiwibank sale

.

English subsequently complained; “I did not choose my words well“.

However, it now appears that English expressed his words honestly,  disclosing a secret agenda to sell Kiwibank to someone he believed was a loyal National Party apparatchik.

Another secret recording, this time from National MP Lockwood Smith, also hinted at a secret agenda held by National;

“There’s some bloody dead fish you have to swallow, to get into government to do the kinds of things you want to do. Once we have gained the confidence of the people, we’ve got more chance of doing more things.

We may be able to do some things we believe we need to do, perhaps go through a discussion document process. You wouldn’t be able to do them straight off.”

With the 2008 General Election only three months away, and with a new, untested Leader of the National Party (John Key) facing a seasoned, popular Prime Minister, the secret recordings forced National’s hierarchy to take rapid steps to “kill” the story.

Both English and Key issued public statements  resiling from any intention to sell Kiwibank;

It’s not my view. It’s not my private view. I simply used loose language – I made a statement I shouldn’t have.” – Bill English

We would never make a change to that decision without a mandate.” – John Key

Again in 2008, Key resiled from any sale of Kiwibank;

“I’m ruling out selling Kiwibank at any point in the future.”

And again in 2010,

“National would not sell Kiwibank at any stage, ever. We have ruled it out.”

Making a Promise

On 25 February 2014, our esteemed Dear Leader, John Key, announced to the nation that National’s asset sales programme was over;

.

“Just as we did before the last election we’re making our position on share sales clear to New Zealanders before we go to the polls later this year. We’ve achieved what we wanted with the share offers in energy companies and Air NZ. We’re now returning to a business-as-usual approach when it comes to [state-owned enterprises]. The truth is there aren’t a lot of other assets that would fit in the category where they would be either appealing to take to the market or of a size that would warrant a further programme, or they sit in the category that they are very large like Transpower but are monopoly assets so aren’t suited.”

Just as we did before the last election we’re making our position on share sales clear to New Zealanders before we go to the polls later this year. We’ve achieved what we wanted with the share offers in energy companies and Air NZ. We’re now returning to a business-as-usual approach when it comes to [state-owned enterprises]. The truth is there aren’t a lot of other assets that would fit in the category where they would be either appealing to take to the market or of a size that would warrant a further programme, or they sit in the category that they are very large like Transpower but are monopoly assets so aren’t suited.”

.

Two years and nearly two months later, and Key’s promise- like so many other committments he has made – appears to have been watered-down to permit a de-facto partial-sale.

The intended purchasers would be two other SOEs,  NZ Superannuation Funds (25%) and ACC Funds (20%);

.

NZ Post to sell 45 per cent of Kiwibank for $495m cash injection

.

Breaking the Promise

Even as NZ Post’s Directors were announcing the partial sale of their subsidiary, Kiwibank,  Finance Minister Bill English was engaged in some well-rehearsed damage-control.

No doubt with considerable prompting by Party strategists and media-minders, English reassured the public that National would not allow the people’s bank to end up in private ownership, as the former Postbank did February 1989 when it was sold to the ANZ Bank.

English promised;

“Kiwibank will remain 100 per cent government-owned – that is a bottom-line. To ensure this occurs, the proposal includes a right of first refusal for the Government over any future sale of shares – which we would exercise.”

To be blunt, National cannot be trusted to keep it’s word.

Key knew in advance!

Despite  Key’s  committment to end asset sales on  25 February 2014, it appears from Michael Cullen’s own statements that our esteemed Dear Leader was already aware at around the same time, that a partial asset-sale was being planned by NZ Post.

During a video-taped press-briefing by Fairfax media, Cullen admitted that he and Key had discussed the partial-sale of Kiwibank that year (2013/14).

@ -14.56

So Brian [Roche] and I after discussion, and [I] think I remember correctly, I had a brief discussion with the Post Board, went to see the Prime Minister, to see whether there would be a kind of visceral reaction from the government, as our ultimate share holder, to that happening. That was not the case. Mr Key indicated he was very comfortable with that prospect and on that basis therefore we began to proceed...”

So when Key made his public promise on 25 February, 2014, that National’s asset sales programme was over – he was making that committment whilst knowing full well that the partial sale of Kiwibank was already underway.

Broken promises and secret agendas – this story has it all.

Who Pays? Loyal Kiwibank customers do!

There is a hidden cost to the partial-sale of  Kiwibank.

As David Hargreaves from Interest.co.nz reported;

The move could see Kiwibank’s credit rating slip by one notch from the current A+ to A as NZ Post will likely not guarantee Kiwibank’s future obligations once the deal proceeds.

When a financial institution’s credit rating is reduced, it means (generally) that they become a greater risk of lending money to them.  According to Investpedia;

“…While a borrower will strive to have the highest possible credit rating since it has a major impact on interest rates charged by lenders, the rating agencies must take a balanced and objective view of the borrower’s financial situation and capacity to service/repay the debt.

A credit rating not only determines whether or not a borrower will be approved for a loan, but also the interest rate at which the loan will need to be repaid.

… and a high interest rate is much more difficult to pay back.”

It is entirely likely that when a credit down-grade occurs (as happened to New Zealand under National in September 2011), the cost of borrowing funds will increase for the bank.

Which is precisely what Hargreaves reported;

Standard & Poor’s has indicated that following the announcement of the proposed transaction, Kiwibank’s long term issuer credit rating (A+) will be placed on credit watch negative pending the proposed termination of the standing guarantee provided by NZ Post. Should the guarantee be terminated, Standard & Poor’s has indicated it will result in a one notch downgrade to Kiwibank’s long term issuer credit rating (from A+ to A). 

That cost will either have to be absorbed, reducing their profit margins and making it easier for Key and English to justify full privatisation – or will be passed on to the banks customers.

English will most likely not permit Kiwibank’s profit to fall as that would mean lower dividends paid into government coffers.

Which leaves Kiwibank’s Mum & Dad customers  to foot the bill for the partial-sale.

The Agenda #1

The sale to ACC and NZ Super Fund is a clever ploy. On the face of it, Kiwibank remains in wholly State ownership, albeit shifting it’s shareholders around, from one SOE (NZ Post) to three (NZ Post, ACC, NZ Super Fund).A kind of multi-million dollar Musical Chairs.

At the same time,  this would allow a healthy dividend payment (an amount  yet to be disclosed) to be paid to the government. As Cullen said on 6 April;

“The proceeds would allow New Zealand Post to invest in its core parcels, packages and letters business and pay down debt. It is anticipated that a special dividend would also be paid to the Crown…”

This was confirmed a day later by Bill English speaking with Guyon Espiner, on Radio NZ’s Morning Report;

@ 2.10

Guyon Espiner: “Ok, let’s look at what happens to the $495 million that NZ Post gets from this sale. I understand it doesn’t go to generate any extra capital for Kiwibank, it goes to NZpost to pay down debt and invest in it’s parcel and mail business, right?”

Bill English: “That’s right, and then if there’s, subject to negotiations there may be special dividend passed back to this [inaudible] government.”

English said any dividend payable to the government would “likely be several hundred million“. This would prove a godsend to English who otherwise would be struggling to create another Budget surplus in his May budget.

The Agenda #2

National has not only increased it’s revenue, thereby alleviating a major headache for Bill English, but they have pulled the rug out from under the Greens who, three days earlier, had been calling for increased $100 million investment in Kiwibank. As Greens co-leader James Shaw stated in a recent policy announcement;

“Our plan will help Kiwibank lead a change in New Zealand banking, by giving it a clear public purpose that requires it to drive competition to generate better interest rates for New Zealanders.

We’ll help Kiwibank to grow faster by injecting $100 million of capital into the bank and let it retain more of its profits.

Strengthening Kiwibank so it can create competition in the banking sector is the smartest way to ensure all banks pass on the best interest rates to Kiwis.”

The Agenda #3

A deeply cynical person might suspect that after the defeat of John Key’s pet vanity-project  (the recent flag referendum debacle) that National has decided to exact revenge against the many Labour and Green voters who voted to retain the current flag,  by partial privatisation of a favourite state owned enterprise.

Does such  cynicism border on paranoia? In an era of Dirty Politics; tax-havens with trillions hidden away; and increasingly corruption of state leaders, officials, organisations, and institutions –  the demarcation between healthy scepticism and paranoid fantasies blur, merge, and are tomorrow’s headlines waiting to be made public.

Labour’s Response?

Labour and the Green Party both responded to Cullen’s announcement. As Stacy Kirk wrote for Fairfax Media on 6 April;

The response of opposition parties has been mixed, with the Greens calling it a step down the path of privatisation. 

Labour leader Andrew Little said it was important Kiwibank stayed in public ownership.

“And this does that, there are some good conditions around it,” he said. 

“This provides a way to get extra capital from these sovereign wealth funds, and hopefully for NZ Post to use the funds that they raise from the sale, to put more capital into Kiwibank. 

Meanwhile, Labour Party state-owned enterprise spokesman David Parker said Cullen should be congratulated on the idea. 

“Michael Cullen should be congratulated for securing a route to expand KiwiBank and keep it in public ownership, given the refusal of National to provide more capital for NZ Post or KiwiBank.

“Michael Cullen’s solution only works to ensure the bank will remain in public ownership if National promises that if ACC or the Super Fund sells its shares, then the government of the day would exercise its first right of refusal and buy them back.” 

Labour’s response has not only been weak and naive – but it also appears that David Parker is not “up to speed” with the terms of the sale. It is extraordinary that both Labour’s SOE Spokesperson, David Parker,  and Labour’s Leader, Andrew Little, believe that;

“This provides a way to get extra capital from these sovereign wealth funds… to put more capital into Kiwibank” and that “Michael Cullen should be congratulated for securing a route to expand KiwiBank”.

Nothing of the sort will happen.

Both Cullen and Bill English have been crystal-clear and surprisingly honest in stating that;

  1. “The proceeds would allow New Zealand Post to invest in its core parcels, packages and letters business and pay down debt.” “
  2.  “It is anticipated that a special dividend would also be paid to the Crown.”
  3.  Kiwibank will get nothing.

So where Parker and Little get their cozy ideas about “putting more capital into Kiwibank” is unclear.

Instead,  Green Party co-leader, James Shaw, seemed more cognisant to National’s real agenda;

“The fact is the Government forced Kiwibank’s hand and today’s announcement will make it easier than it was before to move Kiwibank into private ownership.”

Labour needs to get it’s act together on this issue.

The future of the people’s bank depends on it.

As for the mainstream media, it is high time they became aware of the many promises made by both Key and English – and their subsequent breaking. Otherwise, they too are failing the public.

National, in the meantime, has carried out the  perfect bank “heist”.

It only took eight years to accomplish.

 

.

.

.

References

Fairfax Media: NZ Post to sell 45 per cent of Kiwibank for $495m cash injection

NZ Herald: English – I didn’t choose my words well

TV3 News: National hit by more secret recordings

Fairfax Media: Facebook Video – NZ Post to sell 45 per cent of Kiwibank for $495m cash injection

NZ Herald: PM pledges not to sell Kiwibank after all

Faifax Media: Key – Why I should be the PM

Otago Daily Times: Key not ruling out Kiwibank sale in future

NZ Herald: PM – no more SOEs to sell after Genesis

Fairfax Media: Key ‘no GST rise’ video emerges

NZ Treasury: Income from State Asset Sales as at May 2014

Interest.co.nz: NZ Super Fund and ACC proposed as new minority shareholders in Kiwibank

Investopedia: Credit Rating

NZ Herald: S&P cuts NZ credit rating

Radio NZ: Bill English – Kiwibank will stay 100 percent New Zealand-owned

Green Party: Greens will repurpose Kiwibank and save Kiwis hundreds of millions

Additional

Fairfax media: Kiwibank tape catches English

Scoop Media:  Bill English Talks On KiwiBank Being Sold (audio)

Other bloggers

No Right Turn: Plunder

The Daily Blog: KiwiBank another privatisation by stealth – Robbing Fred to bribe Dagg to pay John

The Dim Post: A fascinating precedent

The Standard: Kiwibank sale to NZ Super, ACC privatisation by stealth

Previous related blogposts

Westpac, Peter Dunne, & Edward Snowden

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

.

.

.

the sale of kiwibank - nz herald cartoon - john key

.

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

.

.

= fs =

12 June – Issues of Interest

12 June 2013 4 comments

.

Looking at the pieces

.

Nigel Latta on National Standards

On Facebook, child psychologist and TV host, Nigel Latta, had this to say about the recent National Standards “results”;

‘National Standards’ aren’t.

The latest national standards ‘results’ being reported in the media are utter nonsense. Pure and simple. Even if we ignore the large inconsistencies between the way that the ‘standards’ are measured (and we can’t because the inconsistencies make comparisons all but impossible), and the fact that it assumes all children of a given age are maturing at the same rate (which they don’t), and we ignore the impact of little things like child poverty (which some politicians like to do much to their shame), it’s still impossible to say anything at all about a change in the numbers when you only have two data points.

They can’t say that a difference of 1.2-2% on the various measures between last year and this year is an ‘improvement’, because we simply don’t know.

If you had assessed all of those very same children again the day after they were assessed for these numbers, in the exact same conditions with the exact same measures, then you would also get a different number. That’s because in the real world we have this little thing called statistical variation–things never work out exactly the same. To make any meaningful statements about ‘improvements’ you need meaningful measures (which national standards aren’t anyway) over several different data points (i.e. over several years).

I wish the media would get that very simple, but very important point. Politicians will spin it as a gain, but it isn’t. It’s simply meaningless statistical ‘noise’.

The government went with national standards because they thought voters would like it, not because it’s the best thing for making progress on education. If we really wanted to lift our ‘national standards’ then, perhaps as a beginning, we’d take more care of the large numbers of our kids living in poverty.

When they produce their ‘rankings’ of schools I’m pretty sure it’s going to show a trend whereby higher decile schools meet/exceed the ‘standards’ much more than lower decile schools. I wonder why that might be? And who do we blame for that? Teachers?

Don’t be sucked in by all this political positioning. My advice is to ignore the national standards tables because they don’t mean anything. There’s a reason teachers were so opposed to the way these ‘national standards’ are being used… fundamentally because it’s nonsense!

Nigel Latta, Facebook, 12 June 2013

.

100% Pure brand busted!

New Zealand’s distance from it’s major trading partners (except Australia) has always been a major impediment to our trading. Our point-of-difference has  been the quality of our food products, and has made them desirable commodities on that basis.  Branding ourselves as “100% Pure” and  “Clean and Green” were marketing tools that created a multi-billion dollar export industry.

But that is coming to an end.

We are not “100% Pure” and nor are we “Clean and Green”. Anything but.

National has paid lip service to being green.

Pollution has been allowed to increase.

It’s focus on “reforming” the RMA to allow for exploitation mof sensitive environmental areas; more and more chemicals ion our farms; allowing dangerous deep sea drilling of our coastline; mining in Conservation lands; and ditching our committment to the Kyoto Protocol – have not gone unnoticed by our trading partners.

And those trading partners  are starting to react accordingly,

.

Sri Lanka demands DCD testing on NZ milk powder

Acknowledgment: Radio NZ – Sri Lanka demands DCD testing on NZ milk powder

.

An over-reaction?

Not when National has appointed a  board to over-see a resource consent application to allow an increase of nitrogen pollution  in the Tukituki River  by a staggering 250% !

.

Nitrate proposal seen as death knell for river

Acknowledgment: Radio NZ – Nitrate proposal seen as death knell for river

.

This will not doubt be ratchetted back to “only” 50% or 100%, and National will claim that they are “listening” to public concerns. It’s an old political trick when a deeply unpopular policy is put forward. Make a number unfeasibly large; then offer a lower number, and claim that government has listened to the public. In reality it was the lower number all along that was the preferred option.

National has consistently undermined environmental protections in this country, as well as knee-capped DoC by sacking staff and under-funding it’s operations.

We are now starting to pay the price of right-wing policies that pursue business and profit ahead of  preserving our environment.

What National and it’s one-eyed supporters don’t seem to comprehend is that business and profits are dependendent on our clean and green environment. Mess up the environment and expect to lose customers and profits.

Just ask the Sri Lankans.

.

User-pays healthcare?

For those neo-liberals and naive National supporters who advocate replacing our socialised healthcare system with privatised healthcare insurance, I present the reality,

.

NZ private health insurance uptake hits 6-yr low

Acknowledgment: NZ Herald – NZ private health insurance uptake hits 6-yr low

.

Private health-privider,  Wakefield chairman Alan Isaac said,

“The total number of New Zealanders with private health insurance (is) decreasing.”

Acknowledgment: IBID

Well, no wonder!

Even as private healthcare companies like Wakefield are complaining about losing customers, they are hiking premiums and still making a 27% increase in full-year earnings. Twentyseven percent! Compare that to other investments, and you begin to realise that these companies aren’t doing too bad.

That’s 27% that could have been re-invested in healthcare – but is instead going into the pockets of shareholders.

What would happen, I wonder, if New Zealand’s healthcare system was fully privatised and  went totally “free market”, as ACT policy demands?

This OECD chart suggests the result, if we were ever foolish enough to go down that road,

.

OECD - private - public - healthcare expenditure -2007

Source: OECD – Total health expenditure per capita, public and private, 2007

.

At 7,290, the United States spends nearly three times as much on healthcare as we do. Their private/public health costs are vastly greater than the entire public/private expenditure we have here in New Zealand with our “socialised” system.

And ACT wants to emulate our American cuzzies?!

The only thing the USA has demonstrated is that a privatised healthcare system will result in a massive blow-out in costs and rapacious profits for shareholders.

The argument from the neo-liberal Right is that private enterprise is “more efficient” and better for consumers. This is absolute bollocks.

If anything, private health insurance is highly ineffective at delivering  universal healthcare for it’s clients,

.

Ongoing jumps in health insurance costs

Acknowledgment: Fairfax Media – Ongoing jumps in health insurance costs

.

As has been observed by others in the past, private health insurance is relatively cheap when you are young, healthy, and make few demands for medical intervention.

But with old age; increased infirmity; and heightened vulnerabilty comes increased premium payments for policy-holders. Just when they most require increased medical services.

This is the fatal flaw in private medical insurance; those who most require it, will pay the highest premiums. And pay, and pay, and pay…

Just ask the Americans.

See also: NZ Herald – Jack Tame: Sickness is too expensive in the land of the free

Other blogs:  Canadian and U.S. healthcare – a debate

Canadian and U.S. healthcare – a debate
Canadian and U.S. healthcare – a debate
Canadian and U.S. healthcare – a debate

.

Some good news at last…

.

It has been a stain on our reputation that despite our anti-nuclear legislation, our Superannuation Fund was still investing in overseas companies engaged in producing atomic bombs and cluster munitions. This was a problem (I refuse to call it an “issue”)  that I highlighted  in December, last year.

Previous related blogposts:  New Zealand’s OTHER secret shame

Previous related blogposts:  New Zealand’s OTHER secret shame – *Update*

The Superannuation Fund has done the right thing by no longer continuing to invest in Babcock & Wilcox, Fluor Corporation, Huntington Ingalls Industries, Jacobs Engineering Group, Serco Group and URS Corporation;

.

Super Fund sells nuclear investments

Acknowledgment: Fairfax Media – Super Fund sells nuclear investments

.

The other weapons we are no longer investing in is the manufacture of cluster-munitions. These vile things are the weapons-of-choice for vicious dictators and other repressive regimes which they use against their civilian population.

They have been used in Syria, against unarmed civilians. Children have been killed by these monstrous devices.  (see: Syrian children ‘killed by cluster bombs’)

Cluster munitions have been outlawed by  nearly 100 nations which signed a  treaty to ban cluster bombs.  In 2009, to their credit, the current National-led government  passed legislation banning these obscene weapons from our country. This included the possession, retaining, stockpiling, assistance, encouragement, or even inducement to deal with them.

NZ Parliament: Cluster Munitions Prohibition Act 2009 (17 Dec 2009)

It would take a ruthless person to discount this human suffering and advocate for our continued investment in their manufacture.

The Superannuation Fund was effectively breaking the law with it’s investments in General Dynamics, L-3 Communications, Raytheon, and the Goodrich Corp.

It’s good to see that our fingers are no longer bloodied by such  investments.

As for right-wingers who dismiss investment in atomic bombs or cluster munition – go play with a cluster bomb.  Come back to me after it’s detonated in your hands. Then we’ll talk.

Just ask the Syrians.

.

The bucks stops with me over there, somewhere…

I guess it was inevitable, really…

.

Deputy Secretary resigns over Novopay

Acknowledgment: Radio NZ – Deputy Secretary resigns over Novopay

.

Did we really, really expect any one of the three Ministers who signed off on Novopay to put their hand up and admit responsibility?!

No less than three ministers signed off on Novopay, to allow it to “go live”;

  • Education Minisrer Hekia Parata
  • Associate Education Minister Craig Foss
  • Finance Minister Bill English

Because doesn’t it strike people as  indicative that Minister for Everything, aka, Mr Fixit, Steven Joyce was appointed Minister in charge of Novopay – thereby taking responsibility for this ongoing balls-up away from Parata?! (see: ODT – Joyce to take on handling of Novopay)

Despite the so-call “ministerial inquiry”, Joyce had a very interesting point to make on 31 January;

.

Government sticking with Novopay - for now

Acknowledgement – Radio NZ – Government sticking with Novopay for now

Steven Joyce revealed that Education Minister Hekia Parata, Finance Minister Bill English and former education minister Craig Foss approved the use of Novopay despite being told that it had bugs.”

So… how can  Joyce’s statement be reconciled with his statement, five months later,

Reporting to Ministers was inconsistent, unduly optimistic and sometimes misrepresented the situation.”

Source: Beehive.govt.nz: Ministerial Inquiry report into Novopay released

Either Ministers were “told that it had bugs” or  reporting wasunduly optimistic and sometimes misrepresented the situation“. Which is it?!

By the way, the Ministerial Inquiry was undertaken by Maarten Wevers and Chairman of Deloitte New Zealand Murray Jack.

Mr Weavers was former head of the Department of the Prime Minister (John Key) and Cabinet.

Connect the dots.

.

WhiteWash

.

Other blogposts: Gordon Campbell on the latest Novopay revelations

.

.

= fs =

Regret at dumping compulsory super – only 37 years too late

21 January 2013 22 comments

.

It started with the 1975 election campaign,

.

.

It’s consequences, 37 years later were,

.

private sector debt 1988 - 2009 (% of GDP)

Source: Private-sector debt and factors affecting it

.

Private debt shot up like an unguided missile, into stratospheric heights. There were no limitations on our private borrowings.

By comparison, up until 2008 (Global Financial Crisis), Crown debt has been falling,

.

Treasury - government debt to gdp ration - june years

Source: NZ Economic Chart Pack – April 2012

.

In the 1975 general elections, 763,136 voters decided the course of New Zealand’s social and economic history.

By electing Muldoon, under the manifestly unpredictable and unfair First Past the Post electoral system, Labour’s compulsory superannuation scheme was ditched the following year.

As a young lad in his first job, this blogger vividly recalls receiving a cheque from my then-employer, as a reimbursement of my previous super-contributions. I recall looking at the cheque and the pitifully tiny amount it was made out for.

I recall a feeling of disquiet…

Even as a teenager, barely politically conscious, I was uneasy that the scheme was being canned by Muldoon and wondering how we were going to pay for superannuation in the future. I was also  aware that bank mortgages were extremely hard to come by, as New Zealand had a low savings record. Businesses and industries competed with people seeking home-mortgages from banks.

A year later, I bought my first house and the experience was one I shan’t forget.  By 1978 mortgages were nigh-on impossible to obtain; vendors’ Second Mortgages were a necessity (where the house seller left part of the sale price as a Second Mortgage to the Purchaser); and interest rates were high.

New Zealanders simply weren’t saving enough.

Which is why, when the incoming (secretly right-wing Rogernomics-controlled) Labour government was elected into power, they de-regulated  New Zealand’s exchange rate and allowed overseas investment to flood into the country.

As a temporary, short-term “fix”, home ownership became easier. Second mortgages all but vanished. Interest rates dropped, as availability of finance met local demand.

On a long-term basis, the consequences created a rod for our economic backs.

Private borrowings from overseas skyrocketed, leading to ever spiralling-upward housing prices,

.

total household liabilities 1978 - 2007

3.1 Trends in household liabilities
Total household liabilities have increased in both real and nominal terms. However, until 1990 the growth was moderate (Figure 1). Following the deregulation of financial markets, the growth of liabilities accelerated, and in the past five years has been driven by lower real interest rates and rising house prices.

Source: Debt in the aggregate balance sheet of households

.

With no limit on the amount we could borrow from offshore lenders, there was no natural ‘cap’ on prices. That meant we could demand more for our properties and the banks would happily comply, and borrow more from China, Japan, America, or where-ever. The banks “clipped the ticket along the way, amassing billions in profits in the process (see:  ANZ profits up 17pc to $1.26b).

As the National Business Review reported in August 2010,

Last Wednesday Mr English bemoaned New Zealand’s debt problem, saying that in 2000 the country’s debt to the rest of the world was about $100 billion but now it was close to $180b, and forecast to hit $250b by 2014.

See: Key cautious over compulsory super

Essentially, we’re now chasing our own tails, borrowing more to buy more expensive houses; then on-selling at a “profit”; and borrowing more to buy higher-priced housing.

Gareth Morgan pointed out in May 2012, when he criticised the futility and destructiveness of property speculation,

“ So lubricated with the credit availability we all pile into the asset in unison and drive up its price. Hardly rocket science.”

See: House prices a cancer for the economy

Which led to the inevitable,

.

Home-ownership falls dramatically

Full story

.

And,

.

Frustrated home buyers want investors to be discouraged

Full story

.

It’s interesting to note that the above Herald story had an associated poll that yielded a rather telling result,

.

Do you support a Capital Gains Tax on the sale of residential investment properties

See: IBID

.

The 39% who responded with ‘No’ corresponds roughly with National’s core support.

The 15% who responded with “Yes, as long as it’s not too high” are those who will vote for whichever political Party best meets the needs of their wallets – and the long-term repercussions for the country be damned. They still want to profit from property speculation, so long as said speculation doesn’t push property prices beyond their own reach.

Those 44% who voted “Yes” indicate a growing maturity and understanding that everything has a consequence – including property speculation. These voters perhaps  understand that,

  1. The money has to come from somewhere – and it is coming from overseas lenders,
  2. High levels of borrowing are ultimately damaging to our sovereign credit rating
  3. Housing speculation is not just a giant legal pyramid scheme – but is harming the future of our own children, who then have to escape to Australia to be able to afford a home of their own

See: IBID

Again, as Gareth Morgan said last year,

This is the legacy of the last 30 years. And it has become so entrenched in our psyche that our ability to build businesses and create wealth and employment has been numbed.

A bit like growing your own veges or preserving the summer harvest, it’s a lost craft. The cost to incomes is high, the consequence being our GDP per capita continues to slip down the OECD charts.

As we contemplate economic recovery some thought at least should be given to the quality of the recovery we’d prefer – do we want it to be a housing-led one again where we all seek riches through a speculative race for property; do we want it to be a business-led type where jobs and incomes take priority; or do we really not care? Is it all too much to think about?

The sense one gets is that politicians at least couldn’t care less, just bring recovery on, any recovery.”

See: House prices a cancer for the economy

A further comparison;  Australia’s  superannuation scheme (also referred to as the Superannuation Guarantee) –  made compulsory in 1992 – has amassed savings of over $1 trillion dollars. In September 2010,

After more than a decade of compulsory contributions, Australian workers have over $1.28 trillion in superannuation assets. Australians now have more money invested in managed funds per capita than any other economy.”-  Source

Two years later, by September 2012,

Total estimated superannuation assets increased to $1.46 trillion in the September 2012 quarter. Over the 12 months to September 2012 there was a 13.0 per cent increase in total estimated superannuation assets.” – Source

No talk of  “nanny statism” here. Our Aussie cuzzies knuckled down; made hard decisions; and did the hard work. In 2006, the Sydney Morning Herald proudly proclaimed,

.

Australia 'tops' in managed funds

Full story

.

The Aussies have  earned the benefits.

By comparison the NZ superannuation Fund – begun in 2003 – made this announcement in October 2012,

New Zealand Super Fund breaks $20 billion mark; releases 2011/12 Annual Report

Posted On: Wednesday, 17 October 2012

The New Zealand Superannuation Fund reached an end-of-month record high of $20.08 billion in September.
The Fund, which commenced investing in 2003, was set up by the New Zealand Government to help pay for the increasing cost of universal superannuation. It is managed by the Guardians of New Zealand Superannuation.

See: New Zealand Super Fund breaks $20 billion mark; releases 2011/12 Annual Report

As for Kiwisaver, in the five years to June 2012, Kiwisaver has amassed  $12.9 billion in contributions.

See: IRD – KiwiSaver Annual Report 5

That’s around NZ$33 billion saved here in New Zealand – compared to A$1.46 trillion saved by our Aussie cuzzies.

By contrast, investment strategist and analyst, Brian Gaynor estimates that had New Zealand kept the Labour superannuation schemem it would be world approximately $240 billion dollars (See:  Brian Gaynor: How Muldoon threw away NZ’s wealth). As Gaynor explain,

Without this decision we would now be called “The Antipodean Tiger” and be the envy of the rest of the world. We would have a current account surplus, one of the lowest interest-rate structures in the world and would probably rank as one of the top five OECD economies.

We would still own ASB Bank, Bank of New Zealand and most of the other major companies now overseas-owned. Our entrepreneurs would have a plentiful supply of risk capital and would probably own a large number of Australian companies.

Most New Zealanders would face a comfortable retirement and would be the envy of their Australian peers. The Government would have a substantial Budget surplus and we would have one of the best educational and healthcare systems in the world.

See: IBID’

Never underestimate the capacity for some people to vote stupidly.

Meanwhile, here in New Zealand, we are only just waking up to the mistakes we made 37 years ago,

.

Strong support for universal KiwiSaver

Full story

.

Oh well, 37 years… rather late than never.

Which rather paints this current ‘government’ as a thing of the past; unwilling to learn from our historic mistakes; unwilling to learn from the Australian experience;  but willing to take the easy road; and playing Muldoon-style politics with our country’s future economic stability,

.

John Key - We cannot afford KiwiSaver

Full story
.

The question now is – have New Zealanders learnt enough history from 1975 to get rid of this inept, inward-looking government? Or will it be John Key – Muldoonism v.2 ?

As always, the choice is ours; a future of debt and under foreign ownership or “Antipodean Tiger” ?

National Party supporters – take note.

.

bromheadhouse

.

*

.

Previous related blogposts

Nanny State, Daddy State, poor state?

References

Horizon Poll: Strong support for universal KiwiSaver

Fairfax: Compulsory Super regret for most Kiwis

NZ Herald: Foreign ownership shortchanging locals

Reserve Bank: Dealing with debt

Treasury: NZ Economic Chart Pack – April 2012

Treasury: Private-sector debt and factors affecting it

Wikipedia: 1975 General Election

NZ Herald: Govt eyes blind to housing crisis

NZ Herald: House prices a cancer for the economy

National Business Review: Key cautious over compulsory super

Bay of Plenty Times: John Key: We cannot afford KiwiSaver

NZ Herald: Brian Gaynor: How Muldoon threw away NZ’s wealth

Update

Radio NZ: NZ housing ‘seriously unaffordable’

.

.

= fs =

Investing in someone elses’ future

5 August 2012 54 comments

.

.

Mandates

.

Firstly, let’s cut to the chase and address John Key’s assumption that he has a ‘mandate’ from the country to pursue many of his Party’s unpopular policies, including state asset sales.

No, he does not.

As Bryce Edwards said on Radio NZ last year,

.

Full Story

.

As reported in the NZ Herald,

Moreover, only an estimated 93.2 per cent of the 3,276,000 people who were eligible to vote were enrolled, so the 2,254,581 people who did cast their votes (including special votes) leaves just over 1 million who stayed at home. “

See: 1 million didn’t bother to vote

So doing a bit of simple arithmetic,

  1. 2,254,581 people voted
  2. 1,058,636 voted National
  3. The population of New Zealand is approximated 4,430,000
  4. 1,058,636 is about 24.5% of the entire population.
  5. John Key’s “mandate” is roughly one quarter of  the country’s population.

The Nats can dress that  up any which way they like, but that’s not a mandate. That is  a minority in drag, masquerading as a “majority”.

But still a minority.

.

National Conference

.

Let’s cut to the next ‘chase’.

The recent National Party Conference in Skycity had nothing to do with conferencing or  the Party’s internal workings. It was purely and simply a public relations exercise  to raise “troop” morale and present National in a positive light to the public.

It was about appearing decisive and on-message. It was about strong leadership and confidence, reminiscent of Rob Muldoon, and Dear Leader played his part perfectly as he gave the rallying cry to his fellow MPs and Ministers.

Key thundered,

Our policy of partial share sales is a win-win and I stand totally behind it.”

See: Labour, Greens hit out at asset share plans

After months of various scandals, resignations, disastrous flip-flops, and gaffes, the Party pulled out it’s “ace-in-the-hole” – John Key. “The Boss” laid down the law, and as Tracey Watkins from Fairfax said,

No more tip-toeing around. That is the clear message from National’s annual conference, where the Government’s economic programme has been invested with a new sense of urgency.”

See: Damp protest shows heat gone from asset sales fire

Ms Watkins tends to present political issues  from a position favourable to National  and her piece on 23 July was no exception. But she also had a valid point – National was fighting back. They were on a counter-offensive on several fronts.

But as the dust settled, and the “whizz-bang-gosh!” factor faded, the public’s  momentary distraction returned to the issues and problems currently confronting us as a nation.

As much as Dear Leader might wish it, those issues and problems will not go away.

.

State Asset Sales

.

National is desperate to sell this lemon to the public as a going concern. Indeed, the issue was presented as one of several issues on a leaflet/questionnaire that the Parliamentary wing of the Party mailed out,

.

.

The Nats are sensitive to recent public protests and an ‘insider’ advises this blogger that Ministers are tracking correspondence; internal polling; and letters-to-editors on the subject.

In an effort to “sweeten” the deal and to assuage public opposition, National is offering,

  • preference to “mum and dad” investors
  • a three year loyalty share-bonus scheme
  • a minimum of $1,000 dollar share parcels
  • a guarantee of shares to New Zealand investors wanting parcels of up to $2,000
  • Treasury setting up a retail syndicate of share brokers and banks to help first time share investors potential investors.

See: Kiwis encouraged to take up SOE shares

National’s “carrot” is matched by it’s “stick”.  As Bill English threatened in June last year,

We are saying that New Zealanders are at the front of the queue, but if not enough of them show up, it won’t be 49 per cent. I wouldn’t want to exactly guarantee every share but we have got to look at how to make that happen.”

See: ‘Buy state-asset shares or foreigners will’

So the message is crystal-clear; ‘If  we don’t buy these assets (which we already  own),  John Key and Bill English will sell our companies to overseas interests’. It’s like watching a rather bad, cheaply-made, B-grade gangster movie from the 1940s.

But the ‘rort’ doesn’t end there.  Treasury estimates that any loyalty scheme will end up costing taxpayers up to half a billion dollars. That’s because giving away free shares as a “loyalty bonus” still incurs a cost – nothing is for free,

A “loyalty” scheme to sweeten state assets sales for investors could cost the taxpayer $500 million – more than $100 for every man, woman and child in New Zealand – according to Treasury numbers.

[abridged]

In a report to the Cabinet last year, the Treasury said incentives to encourage local investors to buy shares “typically range from 5 to 10 per cent of total value ($250 million to $500 million based on a $5 billion programme)”.

The Government says it expects to raise $5 billion to $7 billion via the sales programme.

Based on the Treasury’s $500 million upper estimate of the cost of a loyalty scheme, the forgone revenue works out to just under $113 for every man, woman and child here.

See: $112 a head for asset loyalty

Labour Leader, David Shearer summed it up thusly,

Effectively, the taxpayer will be paying for a loyalty scheme that a small number of New Zealanders who can afford to buy shares will be able to enjoy. It’s clear there’s some real winners here, and the losers are most New Zealanders. “

Based on the Queensland experience where Queensland Rail was privatised in 2010;  where  a share-bonus loyalty scheme of 1:15 shares was used; the cost to Queensland taxpayers would be $360 million, according to our  Parliamentary Finance & Expenditure committee. To which Key was reported as saying, that the figure was,

“… a possible number. I haven’t seen their workings so I wouldn’t want to agree with that at this point.”

Key’s comments were reported on the NZ Herald website at 5:30am, Tuesday 24 July, 2012.

By mid-day, on the 24th, he had changed his views from ” a possible number  “, to,

These numbers that the Labour Party are coming up with and the Greens are farcical.”

See: PM: Asset loyalty won’t cost hundreds of millions

First point: that report on the Herald’s website was posted at 12:18pm on the same day;  Tuesday 24 July, 2012.  Not quite seven hours had passed before National’s spin-doctors had noticed Key’s blunder, and Dear Leader changed his stance.

Second point: the figures were not from the Labour Party, nor The Greens. They were Treasury’s figures.

Was this a deliberate attempt to undermine the credibility of those figures by shifting it’s provenance from Treasury to opposition parties?

Key then made this extraordinary comment,

If you think about the entire float that could be in the order of $5 billion to $7 billion. Let’s argue that it’s $5 billion for a moment if you then turned around and said about 20 per cent of that could be for mum and dad, it could be more it could be less – but just for the purposes of maths that’s a billion. If you apply the Australian Queensland model that’s one in fifteen shares – that’s 6 per cent. Six per cent of a billion is $60 million for the entire programme.”

20 per cent “?!?!

What happened to the 49% that Key and English have allocated to “mum and dad” investors,

Counting the Government’s controlling shareholding, we’re confident 85-90 per cent of these companies will be owned by New Zealanders, who will be at the front of the queue for shares.”

See: Running up $5-$7b more debt not the answer

Was this an unintended slip from Key that National is counting on only 20% of shares going to New Zealanders?

And did he think that no one would notice?

Acknowledgement:  Cheer up Mr Key – Fairfax still love you

This is disengenuous of Dear Leader. On the one hand, National is claiming that 49% of shares will be allocated to local “mum and dad” investors – and on the other, they are calculating a bonus-share loyalty scheme on a figure of 20%. Key is shuffling figures around and quoting them to suit daily events.

This is not the first time Key and English have done this.

In January last year, when John Key announced National’s policy to part-privatise five state assets, he stated,

If we could do that with those five entities … if we can make some savings in terms of what were looking at in the budget and maybe a little on the upside you’re talking about somewhere in the order of $7 to $10 billion less borrowing that the Government could undertake.”

See: John Key reveals plan for asset sales

The figure of $7 billion to $10 billion proceeds from a partial asset-sale then shrank,

First, the Government gets to free up $5 billion to $7 billion – less than 3 per cent of its total assets – to invest in other public assets like modern schools and hospitals, without having to borrow in volatile overseas markets.”

See: Running up $5-$7b more debt not the answer

And finally, English confessed all,

If we did get $6 billion, that would be a gain of sale [of $800 million] which is just a product of the accounting. I just want to emphasise that it is not our best guess; it’s just a guess. It’s just to put some numbers in that look like they might be roughly right for forecasting purposes...”

See: English admits his SOE figures just a guess

Key did precisely the same thing over the Skycity-convention centre-pokie machine contra-deal.

He advised the country that building a new convention centre (in return for changing the law to allow up to 500 additional pokie machines for Skycity), would result in up to 1,900 new jobs in Auckland,

It produces 1000 jobs to build a convention centre, about 900 jobs to run it, and overall the number of pokie machines will be falling although at a slightly lower rate.

See: Key defends casino pokie machine deal

Key’s figures turned out to be rubbish.  The true numbers were disclosed last month by Horwath Ltd director,  Stephen Hamilton,

Horwath director Stephen Hamilton said he was concerned over reports the convention centre would employ 800 staff – a fulltime-equivalent total of 500.

He said the feasibility study put the number of people who would be hired at between 318 and 479. “

See: Puzzle of Key’s extra casino jobs

Key  had either made them them up out of thin air, or else he has some very poor advisors.

.

Frustrated – Where to from here?

.

And lastly, the sheer economics of the partial asset-sales cannot be  commercially sustained, as  BERL reported in May of this year,

The interim loss of earnings resulting from reduced dividends and the period of time before the new assets reap benefits is never recouped.

”Subsequently, the option of asset sales can only significantly improve the Government’s accounts if a set of assumptions are adopted that are at the extreme ends of plausibility.”

‘While the initial offering may be directed towards domestic purchasers, future private share transactions could increase the portion of shares [and earnings] in overseas investors hands.

”Such an outcome would lead to a further deterioration in the external deficit and external debt position.”

See: Asset sales will leave Govt worse off

Unbelievable.

Unbelievable that a number of New Zealanders still believe that National is a sound manager of the economy. These muppets couldn’t run a corner Dairy – they simply wouldn’t have a clue how much to charge for a packet of chippies.

No wonder Labour Leader David Shearer expressed his frustration at Dodgy John’s slippery numbers, when he said,

We absolutely have no idea how much this loyalty scheme is going to cost New Zealanders. He was happy to go out and announce the loyalty scheme at the National Party conference but he’s not prepared to come out with the numbers now.”

See: PM: Asset loyalty won’t cost hundreds of millions

Either way, National is keeping information on asset sales secret – or they have no idea what’s going on. Conspiracy or cock-up – neither option is particularly reassuring.

The ground keeps shifting, and this blogger believes it is a deliberate ploy to deny information to sales-critics and the public. Without solid information, it becomes harder to mount a sound critique of National’s plans – though BERL has done a fairly reasonable job of it.

Accordingly,  this blogger invites “mum and dad” investors to exercise caution as shares are made available to the public,

.

Full story

.

A Possible Solution?

.

As BERL stated in their report, selling state assets will eventually impact on the government’s balance sheet. Quite simply, any short-term gain through sales proceeds will  eventually be whittled away by reduced dividends from half of these state assets sold into private ownership,

The interim loss of earnings resulting from reduced dividends and the period of time before the new assets reap benefits is never recouped. “

Plain english: we will  lose money on the deal.

Selling any of these State assets defies understanding.

As Treasury stated last year, the revenue stream is quite significant according to their own SOE Economic Analysis  that, “…on average, the SOEs have performed favourably when compared to the averages for the quartiles computed for the benchmark companies“.

See: Treasury SOE Economic Profit Analysis 25 November 2011

On average, Treasury show a 14.5% average shareholder (Government) return. Compare that to other investments, and it’s a fairly remarkable achievement for state enterprises which – according to free marketeers – are not supposed to operate more effectively than private enterprise.

See: Assets returning record dividends – Greens

In a further,  surprising turn of events, in February 2001, Finance Minister Bill English agreed, stating,

Generally the SOE model has been quite successful in that respect.”

And even  went so far as to complain that they were making excessive profits! (There’s no satisfying the National Party!? They sell under-performing state assets, explaining that the “market will improve their performance” – and then complain when state assets are making too much money! Then the Nats will flog them off to reduce returns and make them more “competitive”.)

See: State-owned power returns excessive, says English

By contrast, Contact Energy – an electricity corporation privatised in 1999, and now mostly Australian-owned – retails it’s electricity at a higher price than it’s competing, state-owned rivals.

See: 226,000 shop for power savings

National has stated several reason for wanting to sell 49% of Meridian, Genesis, Might River Power, Solid Energy, and further down-sell Air New Zealand – but their   main, carefully-worded, rationale has been to “reduce debt/invest in new assets/infrastructure”,  according to Bill English,

We are firmly focused on keeping the Government’s overall debt as low as possible and that is the most important consideration over the next few years.”

See: Govt says asset sales will cut debt

If  National is planning on extracting $6 to $7 billion from most New Zealanders’ pockets, then they are dreaming. A small minority (the 1%, as usual) might have the resources – but even they, I suspect would have to off-load their own assets to buy into the five offered SOEs.

It is more than likely that, like Contact Energy, the majority of new shareholders will be corporate and/or offshore  investors.  New Zealanders simply don’t have the savings to buy their own energy comnpanies and airline.

If National wants to realise $6 to $7 billion  from partial-privatisation and is serious in not wanting major foreign ownership, then it has only one other option: the NZ Superannuation Fund.

Selling half of five state assets to the NZ Super Fund would achieve several desired goals,

  1. Keep state assets in New Zealand ownership
  2. Prevent an outflow of profits to offshore investors, which would worsen our current account deficit
  3. Satisfy Maori that water resources were not about to be privatised, and therefore any claims before the Waitangi Tribunal could be set aside
  4. Fulfill a government-ordered directive that the NZ Super Fund invest more heavily in New Zealand

In May 2009, Finance Minister Bill English wrote to the NZ Super Fund, instructing that,

The Government believes that is is in the national interest for the Fund to have significant interests in New Zealand. Consequently, persuant to section 64 of the New Zealand Superannuation and Retirement Income Act 2004 (the Act), I direct the Guardians to note that it is  the Government’s expectation, in relation to the Fund’s performance, that opportunities  that would enable the Guardians to increase  the allocation of New Zealand assets in the Fund should be appropriately identified and considered by the Guardians. “

See: Letter from Minister of Finance Regarding NZ Directive and Funding May 14 2009

How much does the NZ Super Fund have invested in overseas businesses?

Answer: NZ$6,459,938,145 – Nearly $6.5 billion. Possibly more  by now.

See: NZ Superannuation Fund: Full Final Equity List – 30 June 2011

How much was National expecting to gain from it’s privatisation programme? Between $6 and $7 billion dollars.

$6.5 billion happens to lie smack in-between $6 and $7 billion!

Considering that the NZ Super Fund is actually a state owned entity, selling five SOEs, whether partially or the whole damned lot, would not matter one iota. They would still be state-owned.

National has an opportunity here; they literally can have their SOE Cake, and eat it.

  • The state assets would remain state assets.
  • National would gain a guaranteed NZ$6.5 billion – no mucking around with messy share floats.
  • The revenue from the state assets would remain in New Zealand.
  • The Super Fund would have even more profitable investments in their portfolio.
  • The Super Fund will be investing in our future – not someone elses’, in another country.
  • Maori may well be satisfied that their taonga, water, was not being privatised.
  • Our current account would not be blown further into the red.
  • New Zealanders would be happy chappies, as the great majority oppose losing ownership of state assets.
  • Opposition from the Left would most likely evaporate – heck, we might even vote for you in 2014, Mr Key!!

Where is the down-side in this compromise?! Damned if I can see any.

And the strangest part in all this proposal? I may just  have saved John Key’s arse from being thrown out at the next election.

.

.

= fs =

ACC. Skycity. NZ Superannuation. What is the connection?

5 April 2012 3 comments

|

ACC. NZ Super. Skycity.

|

|

= 1 =

|

News tonight that Skycity donated $15,000 to Len Brown’s mayoral electoral fund in 2010, has rightly shocked many people.  John Banks, MP for Epsom, has reportedly received a similar amount  as a donation for his campaign.

See: Banks accused of undeclared donation

Whilst there is no suggestion, implication, or slightest hint at impropriety on either men’s part, it raises questions as to how far Sky City’s ‘tendrils’ reach.

A $15,000 donation to the Mayor of Auckland and to an Auckland MP raises eyebrows and is cause for concern.

This is important as Skycity is negotiating with National to build a new $350 million convention centre – in return for up to 350 to 500 addition gaming tables and pokie machines in Auckland’s casino. We’re talking serious coin here.

See: SkyCity would need at least 350 extra gambling machines for NZ$350 mln convention centre investment to be worth it, Goldman Sachs analyst says

This would require an amendment to existing legislation. It appears that National is seriously considering selling legislative change in return for a convention centre. Comments by Economic Development Minister Steven Joyce and Prime Minister John “Dear Leader” Key confirm suspicions that a deal in in the making,

When we were out announcing that we were doing a deal with Len Brown in Auckland…Len Brown knew as well that it will create 1,000 jobs in its construction, 900 jobs ongoing.” – John Key, 4 April 2012

Of course, no one is really sure what the terms of any “deal”  will involve. The negotiations are all being done in secret. The public is excluded from any possible debate – because we don’t know what is being negotiated by Key & Co.

See: As clear as mud

|

= 2 =

|

Sky City’s involvement in the 2010 mayoral race is not the sole extent of their involvement in New Zealand society and economy.

According to the Companies Office, two government bodies have extensive share-holdings in Sky City,

|

Source

|

Which raises questions regarding why ACC and NZ Super Fund are investing in a company that, essentially, makes it’s profits from vice and causes considerable social problems and human misery with gambling addiction,

  • ACC works with people who have suffered physical and mental injuries, sexual assaults, and other highly stressful events in their lives. ACC legislation contains an ethical investment clause; Section 272/2/i, that “the Corporation’s investment statement, being a statement of policies, standards, and procedures that must include a statement relating to ethical investment for avoiding prejudice to New Zealand’s reputation as a responsible member of the world community“.
  • NZ Super Fund is also bound by legislation (New Zealand Superannuation and Retirement Income Act 2001, Section 61/D) to undertake “ethical investment, including policies, standards, or procedures for avoiding prejudice to New Zealand’s reputation as a responsible member of the world community“.

As well,  ACC is bound by legislation not to engage in activities that might cause injury to people in the community,

Part 7 Accident Compensation Corporation
263 Prevention of personal injury
  • (1) A primary function of the Corporation is to promote measures to reduce the incidence and severity of personal injury, including measures that—

    • (a) create supportive environments that reduce the incidence and severity of personal injury; and
    • (b) strengthen community action to prevent personal injury; and
    • (c) encourage the development of personal skills that prevent personal injury. “

Arguably, gambling addiction  is a considerable social problem in this country. For ACC to be investing in a casino would appear to conflict with both sections 272/2/i and 263/1 of the Act.

There is nothing remotely ethical about investment in gambling. Just as it would be unethical to invest in arms manufacturing, tobacco and alcohol production, or prostitution. Whilst nominally legal, such commercial activities regularly result in death, injury, sickness, abuse, violence, and exploitation.

It seems that New Zealand’s ethical and moral compass is severely skewed when the State – representing ordinary New Zealanders – invests in vice.

The law is being broken, and government is doing nothing about it.

|

* * *

|

Acknowledgement for “tip off” on ACC and NZ Super Fund investments in Sky City

‘Spacemonkey’

Previous Blogposts

John Key has another un-named source???

NZ’s 21st Century Growth Industries – Drugs, Gambling, & Prostitution

Drugs & Gambling – NZ’s 21st Century Growth Industries?

References

Accident Compensation Act 2001

New Zealand Superannuation and Retirement Income Act 2001

|

|

= fs =

David Parker has nailed it 100%

14 March 2012 1 comment

|

|

This media report is worth reprinting in it’s entirety. Because, quite simply, David Parker is 100% on the nail on this issue,

|

National’s neglectful attitude to lifting our savings rate is something New Zealand can ill afford, Labour’s Finance spokesperson David Parker says.

“Bill English might believe Kiwis have been ‘scared’ into saving by the global recession and won’t return to borrowing as the economy grows, but he’s obviously got blinkers on.

“The economic settings that led to excessive borrowing are still in place – speculation in housing and farmland for capital gain still attracts a tax advantage and National’s policies have made Kiwisaver less attractive,” David Parker said.

“Unless real policy changes are made New Zealand will just go back to borrowing too much and saving too little when the economy eventually recovers.

“The Australians, who already have a universal workplace savings scheme, are increasing the savings rate to 12 per cent, up from nine per cen. The government there knows that once the recession is over behaviour will return to type unless it makes the changes that are needed.

“Treasury forecasts show Mr English’s blind faith is misguided. It projects that every year, under National’s policies, the country will run a current account deficit and increase its international debt.

“By 2016, New Zealand will owe nearly $200 billion in net overseas debt, up $50 billion from today.

“And the main driver of that debt spiral is a lack of domestic savings, with banks and businesses borrowing from offshore or selling assets to foreign investors.

“This leads to some $10 billion a year flowing offshore in profits, the main contributor to our current account deficit, which is then funded by further borrowing and asset sales.

“The government needs to break the cycle with policies that ensure New Zealand permanently lifts its savings level. By not doing so it shows once again its unwillingness to deal with the structural problems in the economy,” David Parker said.

|

Our Aussie cuzzies have approximately A$1.31 trillion saved in their compulsory super fund.,

Industry Overview

Total estimated superannuation assets increased to $1.31 trillion in the December 2011 quarter. Over the 12 months to December 2011 there was a 1.2 per cent increase in total estimated superannuation assets.” – Source

The clever buggers realised back in 1992 that a nation cannot be sovereign and self-sufficient if it has no savings, and has to rely on overseas borrowings.

We had our opportunity for a compulsory super fund in the 1970s, with a programme that was introduced by the Norman Kirk-led Labour government.

Unfortunately, Rob Muldoon promised to can the Fund and return the money to each contributor – if we voted for National in 1975. Well, we took the bait; voted National; Muldoon fulfilled his “promise”; and now New Zealand’s  “private-sector debt at 30 June 2010 was $315 billion and 166% of GDP“.

New Zealand First and Labour’s policy of a compulsory super fund makes good economic and social common-sense.

Unfortunately,  New Zealanders aren’t terribly good at making good economic and social common-sense decisions.

|

* * *

|

Additional

Key: Private sector debt NZ’s biggest concern

Government debt rises to $71.6 billion

Treasury:  Private-sector debt and factors affecting it

Who says the Govt doesn’t have a plan?

|

|

= fs =