OnPoint by Keith Ng

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OnPoint: Budget 2009: “Aww, shit.” (Final Update)

139 Responses

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  • Juha Saarinen,

    Shouldn't it be $88 billion plus the interest accruing on that debt? So there may be even bigger spending cuts ahead?

    Since Nov 2006 • 529 posts Report Reply

  • Rich of Observationz,

    Two things:
    - firstly, that graph assumes no growth forever, right? If we can actually recover from this recession, then we'd expect debt to fall.

    - secondly, 60% debt/GDP would only put us where most developed nations are now. Why should we be the only ones with tiny government debt, how does it help us?

    The answer of course, is that for most people in NZ, it wouldn't really matter if we had 50% or 60% debt/GDP. We'd have to pay a bit more tax and slightly higher interest rates, but that would be more than outweighed by stable and secure jobs.

    It's different for the people who matter to Nationals though. Government borrowing will impact their ability to fund schemes (like building billion dollar hotels in former scenic areas) and higher taxes will get between them and the bach in Hawaii.

    So we've got to suck it up. Vote for change, eh?

    Back in Wellington • Since Nov 2006 • 5550 posts Report Reply

  • Gareth Ward,

    So, how has National managed to reduce future debt? By cutting a fuckload of future government spending.

    Spending growth will in fact be negative in real terms (and going backwards as a percentage of GDP). So someone in fact got more than their "cap spending at inflation" demand.

    Auckland, NZ • Since Mar 2007 • 1727 posts Report Reply

  • Gareth Ward,

    Rich, I believe GDP growth IS factored into that debt curve - but not until 2011.
    We are forecast to go even further backwards next year

    Auckland, NZ • Since Mar 2007 • 1727 posts Report Reply

  • Paul Litterick,

    Vernon Small on Stuff: "But the big surprises are in the extent of delays to tax cuts and future contributions to the Cullen superannuation fund."

    Even I could have predicted those two. Equally surprising are more cops on the street and more prison beds. Laura Norder is the winner on the day.

    Auckland • Since Nov 2006 • 1000 posts Report Reply

  • Steve Barnes,

    We all knew there would be nothing for R&D but there should have been. R&D would lead to more jobs, more productive jobs that is as opposed to the non productive 600 extra cops and more probation officers to control the disenfranchised unemployed.

    Peria • Since Dec 2006 • 5521 posts Report Reply

  • Tom Semmens,

    A typical Tory budget.

    Long on bean counting, short on vision and driven by the Treasury. I don't know why people bother voting for National, all they do is elect a bunch of pin stripes from the Terrace.

    Sevilla, Espana • Since Nov 2006 • 2217 posts Report Reply

  • simon g,

    I hope the media see through the "delay/defer" spin on tax cuts.

    I have delayed producing my great novel, but ... you know, it's all there, it just may have to be written posthumously.

    Auckland • Since Nov 2006 • 1333 posts Report Reply

  • George Darroch,

    They've cut a lot of things, but one thing they're spending large on is roads.

    $10.7 billion of roading projects.

    WLG • Since Nov 2006 • 2264 posts Report Reply

  • Nathaniel Wilson,

    "- secondly, 60% debt/GDP would only put us where most developed nations are now. Why should we be the only ones with tiny government debt, how does it help us?"

    Maybe I've completely missed the point, but I thought the lesson of the worldwide recession was having massive amounts of debt might be a bad thing? That and maybe aiming to be just like Iceland or Ireland isn't so smart either.

    Auckland, New Zealand • Since May 2009 • 35 posts Report Reply

  • Ben McNicoll,

    I hope the media see through the "delay/defer" spin on tax cuts.

    Yep, these were the "fully costed and funded" tax cuts that absolutely could and would happen.

    In the words of a Tui billboard....

    Grey Lynn • Since May 2007 • 115 posts Report Reply

  • Rich of Observationz,

    aiming to be just like Iceland or Ireland isn't so smart either.

    How about Germany, France or Switzerland then? They all have ratios in the over 40% range, and are doing better than we are.

    Back in Wellington • Since Nov 2006 • 5550 posts Report Reply

  • Kyle Matthews,

    Rod Oram suggested that the long-term returns on the NZSF will be actually be greater than the cost of borrowing – i.e. that borrowing to invest in the NZSF *is* profitable.

    On this basis the government should just borrow a trillion dollars, invest it, and keep the one billion profit that it makes after a year.

    Is suspect the truth is that the margin between the cost of borrowing and the income of investing for something as safe as our government is very small. You'd make a small loss. But you're right Keith, it'd be good to see actual figures. They would quickly tell us if National has made a good decision here or not.

    Since Nov 2006 • 6243 posts Report Reply

  • Angus Robertson,

    The answer of course, is that for most people in NZ, it wouldn't really matter if we had 50% or 60% debt/GDP. We'd have to pay a bit more tax and slightly higher interest rates, but that would be more than outweighed by stable and secure jobs.

    You mean we would be able to get French (8.8%) or British (7.1%) or American (8.9%) levels of unemployment, as opposed to our current 5%.

    Auckland • Since May 2007 • 984 posts Report Reply

  • Gareth Ward,

    Remember when it comes to Super that right now our super cost is 3.5% of GDP and would rise to 5.6% within 20 years. The point is that by spending at total (including Cullen Fund contribution) of, say 4.5% now we bring down that 5.6% later on.

    It's less about "borrow vs invest" as it is about "holy shit it will be tough to do either in 20 years if we have to spend THAT much on super, but we can afford to do it now"

    Auckland, NZ • Since Mar 2007 • 1727 posts Report Reply

  • George Darroch,

    Those over 65 increased by 2.5% in New Zealand last year, according to Stats NZ. That scale of increase is going to continue for a while.

    WLG • Since Nov 2006 • 2264 posts Report Reply

  • Grant McDougall,

    So, how are DPF, C.Slater, etc spinning this ? Are they wetting their pants with excitement ?

    I had a look at the Herald's "Your Views" response to the fudge-it and it was a mixture of "what a meanie" and "a strong response to years of wasteful spending by Labour", etc.

    Dunedin • Since Dec 2006 • 760 posts Report Reply

  • Grant McDougall,

    Oops, I mean Herald ''s

    Dunedin • Since Dec 2006 • 760 posts Report Reply

  • Blake Monkley,

    You mean we would be able to get French (8.8%) or British (7.1%) or American (8.9%) levels of unemployment, as opposed to our current 5%.

    It's only a matter of time according to Bill English treasury executive summary (page 13). The next twelve months look really bad. Let's hope the herald and real estate agents will get honest about the housing market having bottomed out.

    Auckland • Since Jul 2008 • 215 posts Report Reply

  • Russell Brown,

    So, how are DPF, C.Slater, etc spinning this ? Are they wetting their pants with excitement ?

    Last I looked, DPF was being the good soldier, and his crazier correspondents were declaring war.

    Excellent analysis, btw, Keith. It puts most of the newspaper commentators to shame.

    Auckland • Since Nov 2006 • 22850 posts Report Reply

  • Jake Pollock,

    It puts most of the newspaper commentators to shame.

    No mean feat, seeing as, as far as I can tell, they have no shame.

    Raumati South • Since Nov 2006 • 489 posts Report Reply

  • George Darroch,

    Harden up.

    Yeah.

    Back when I was a kid, we lived in uninsulated houses, ran up huge deficits, spent big on 'essential' infrastructure projects, and made promises about superannuation that locked in future Governments for decades to come.

    WLG • Since Nov 2006 • 2264 posts Report Reply

  • Kumara Republic,

    You mean we would be able to get French (8.8%) or British (7.1%) or American (8.9%) levels of unemployment, as opposed to our current 5%.

    Paradoxically, the bolshie nature of French trade unions has led to high productivity through machines replacing humans. Here in NZ, companies are still content to use people to dig with shovels and rotate road signs.

    Am I not the only one to feel that only a major sub-priming of the mortgage and credit card sectors will jolt NZers into genuinely productive investment?

    The southernmost capital … • Since Nov 2006 • 5446 posts Report Reply

  • Russell Brown,

    Just in:

    International credit rating agency Standard and Poor's has given a favourable verdict on the budget, upgrading New Zealand's outlook from negative to stable.

    In both political and economic terms, that's a result.

    Auckland • Since Nov 2006 • 22850 posts Report Reply

  • Russell Brown,

    Back when I was a kid, we lived in uninsulated houses, ran up huge deficits, spent big on 'essential' infrastructure projects, and made promises about superannuation that locked in future Governments for decades to come.

    And it never hurt me.

    Oh, hang on ...

    Auckland • Since Nov 2006 • 22850 posts Report Reply

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