OnPoint: Budget 2011: A Credible Path to a Point in Time
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Sacha, in reply to
if the heroic forecasts turn out to be wrong ... then the cuts ought to be a lot deeper
Some might say that's the plan
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The important thing is that the ratings agencies are buying them and the foreigners are buying our sovereign debt at record low yields
The cynic in me says that the rating agencies determining sovereign debt are as switched on as their colleagues who “rated” all those mortgages in the US. An awful lot of smoke and mirrors and they bought it? Phew.
Not smoke and mirrors- NZ govt is (thanks Michael) still in a relatively good position debt-wise. Plus the ‘record low yields’ (4%ish?) may be low for recent NZ govt debt. But they are quite high by world standards- esp for a govt with an AA rating. US treasury bonds, what are they at? 1%? Not much, anyway (unless the current buffoonery around raising the US ’debt ceiling” has caused a blip).
There is a solution to this but it requires some considerable bottle.
Devaluation? Nah. Or a huge, sudden govt sell-off of the NZ$?
It would make a good movie: the poker-faced currency trader courts disaster but becomes a NZ hero by halving our foreign debt in 6 tumultuous weeks. Co-starring Liz Hurley.
If only one could script the next few years as a Hollywood musical. The reality looks a lot crueler. -
Sacha, in reply to
Really unambitious
Pagani agrees (though I'm not convinced that's a good thing).
There is nothing to grow us out of trouble.
Take out the quick 1.5 per cent stimulus to growth from the Christchurch rebuild, and a one-off 0.3 per cent pulse from the Rugby World Cup, and the underlying rate of growth is just 2.2 per cent.
...
There is nothing here to create faster growth or give businesses the confidence to invest and create jobs.
This is a light-weight budget, promising froth, lacking in ambition. It is a budget of small-minded, aimless blue meringues.
Because the economy isn't growing they are making niggling cuts.
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Steve Barnes, in reply to
Which may give rise to some interesting choices for our former currency trading PM in the relatively near future if it turns out that the above theory has any merit :)
The size of the New Zealand economy is small enough for an astute trader to "slip through" meaningful deals without alarming the rest of the economic world I suspect. Let's hope he doesn't "sell the farm" as it were.
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That’s rather than removing the recent personal tax cuts from the wealthiest, or reversing massive ETS subsidies to farmers and truckies. All choices, no matter what English, Joyce and Key might want voters to believe.
Of course, anyone who says there is no alternatives is just lying 99.9% of the time. But I must admit to being somewhat amused at the way the road to Damascus has turned into an eight lane highway – blithe Keynesians have become rabid deficit hawks, and passed plenty of traffic going the other way. I suspect there’s plenty of sincere changes of heart, as well as a good measure of opportunistic concern trolling with both eyes on the polls and focus groups. Interesting times, indeed.
Pagani agrees (though I’m not convinced that’s a good thing).
A good rule of thumb is that if Pagani thinks you're on the right track, you should go out behind the barn and shoot yourself in the head.
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Idiot Savant, in reply to
Don't worry! Treasury confidently predict 4.0% annual wage growth for six years! Which, as far as I can tell, has not happened in New Zealand in at least the last hundred years!
And at the same time, they're squashing public service salaries by requiring departments to fund superannuation out of their budgets with no increase. Which means no pay rises, which in turn means less pressure on private sector employers to raise theirs.
So where are these wage rises meant to come from? Who is meant to get them? Un-unionised fast-food workers on 90-day contracts?
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Sacha, in reply to
A good rule of thumb is that if Pagani thinks you're on the right track, you should go out behind the barn and shoot yourself in the head.
That was my fear, yes..
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Sacha, in reply to
So where are these wage rises meant to come from? Who is meant to get them?
Magic bean farmers?
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And at the same time, they're squashing public service salaries by requiring departments to fund superannuation out of their budgets with no increase.
Is this same spending cap being applied to MP's (in comparison, extremely generous) superannuation funding ?
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Sacha, in reply to
Is this same spending cap being applied to MP's (in comparison, extremely generous) superannuation funding ?
That would require principled leadership by folk with integrity. So, no.
And apparently Treasury have increased their departmental budget again while helping slash others.
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Kumara Republic, in reply to
But I must admit to being somewhat amused at the way the road to Damascus has turned into an eight lane highway – blithe Keynesians have become rabid deficit hawks, and passed plenty of traffic going the other way.
Drawing on another automotive analogy, one camp wants to cut costs by ditching the air-con and leather seats. The other camp also wants to cut the exact same costs - but by ditching the catalytic converter and side impact beams instead.
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Craig Ranapia, in reply to
This is where you invest in a good pair of sensible shoes and start walking. :)
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Kumara Republic, in reply to
This is where you invest in a good pair of sensible shoes and start walking. :)
That, or just jump on a superbike (John Britten), a jetpack (Glenn Martin) or a Segway (Rod Drury, Sam Morgan, Richard Taylor, Selwyn Pellett). ;)
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OK bear in mind I know nothing about any of this, but when I look at the list of things the govt will be spending money on, that one billion dollars for ultrafast broadband kind of leaps off the page. I know they promised, etc., but that hasn't stopped them cutting WFF or looking at asset sales. Given they say they can't fund families to raise children except in "good times", there must be a really huge benefit NZ will get from the ultrafast broadband, right?
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4% wage rise (predicted)
Inflation 5% (real)net earnings -1%
And that assumes the 4% is real. The result of that is lower spending and reduced tax take. I can't see how the numbers add up and my belief is they don't. National, if they are allowed back into power, has just released a budget that cannot balance unless a miracle occurs.
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Sacha, in reply to
there must be a really huge benefit NZ will get from the ultrafast broadband, right?
That one is the equivalent of deciding whether or not to build roads or a telephone network when you don't have one.
It simply won't be an optional part of any modern economy. High-resolution videoconferencing and suchlike will be a standard part of working with other countries and with one another, across all parts of our economy and society.
If anything, the government is not doing *enough* - hence Joyce's regulatory gymnastics to sweeten the deal for our reluctant private sector co-investors.
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there must be a really huge benefit NZ will get from the ultrafast broadband, right?
My porn downloads will finally stop buffering.
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Sacha, in reply to
but that hasn't stopped them cutting WFF or looking at asset sales.
The more obvious target is the loony 'roads of National party significance' motorway building programme. It's an $11,000,000,000 taxpayer investment in last century's networks that totally ignores even the current price of oil, let alone its future, and which starves funds from public transport, cycling and even basic maintenance of existing roads.
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BenWilson, in reply to
Don't worry! Treasury confidently predict 4.0% annual wage growth for six years! Which, as far as I can tell, has not happened in New Zealand in at least the last hundred years!
I can distinctly remember Mike Moore, when he was the Prime Minister, basing his projections for NZ on the exact same number, and Bolger had a field day with "How you going to do that, by snapping your fingers?", after which he snapped his fingers repeatedly, using the gimmick many times in the debate. It was quite effective, IIRC, made Moore look like a real dick.
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Keith I'd love your take on the asset sale implications. They claim to expect to raise $7billion, which will only lose them $300million in revenue, but save $400million in debt servicing. That seems to mean that the power companies, Solid Energy and AirNZ aren't even covering their cost of capital at the moment?! I find that very hard to believe, but if true then who the hell is going to buy them at that rate?
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In another badly designed poll in te Herald "Has the Budget changed how you'll vote in November's election?" 31% say the budget has changed who they vote for.
Either there are heaps of Labour and Green voters who are so impressed with the fairy tale dreams of this budget or many of those that believed the empty promises of John the Smiler are feeling let down. One thing is for sure, this is certainly an "Ambitious" attempt at doing nothing. -
David Haywood, in reply to
The more obvious target is the loony ‘roads of National party significance’ motorway building programme. It’s an $11,000,000,000 taxpayer investment in last century’s networks that totally ignores even the current price of oil, let alone its future...
Putting on my energy engineer's hat, I'm constantly gobsmacked that a bigger deal isn't made of this. How can the government be selling off strategic infrastructure in energy at the same time as taking full ownership of luxury-length roading that massively adds to the country's energy problems (in the form of liquid fuels imports). If Steven Joyce absolutely insists on building unnecessary motorways then why doesn't he hand them over to the private sector to build them as toll roads?
I suspect that, in future decades, Stephen Joyce will be held up as one of our most disastrous politicians ever.
On the bright side, I now find that I can walk the baby and comment on Public Address at the same time. Thank you Android phone!
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National credit ratings are smoke and mirrors. It's very unlikely that a developed state run according to the capitalist-social-democratic model would ever actually default.
For a nation to repudiate debt, it would need to abandon that model in some sort of economic revolution. That's *more* likely to happen (or likely to happen first) in countries that experience the most pain.
So, in a small way, the last budget, by making the middle classes poorer, has made a default more, not less likely.
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On transport, it is so weird that Joyce's roads of national stupidity aren't being used to ridicule the govt at every opportunity.
Every time the govt says it's being prudent, where is the ridicule of the holiday highway or transmission gully: both of which have business cases that amount to flushing a billion bucks down the toilet.
Or the govt's next great transport priority: a motorway from Cambridge to Taupo. No I am not joking.
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Don't forget, this is the argument National ran against Kiwisaver when it first began, that employer contributions ultimately came out of employee's pockets.
I view it really as private benefit and socialised costs.
All those people who sign up for kiwisaver are having the employer kick in. Those that aren't get no kiwisaver benefit from their employer, but are going to get less pay rise as those employers spread the kiwisaver costs over their whole workforce.
The lesson: sign up to kiwisaver if you're not already.
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