National forecasts Crown debt going back to '90s' levels

Last week, National/Maori/ACT delivered a billion dollars a year of additional tax cuts for those on higher incomes that will be totally funded from additional borrowing, almost all of that from offshore lenders or buyers of NZ Government Bonds.

 

Today, the National-led government was kind enough to let us, the taxpayers, know the cost of last week's legislative programme.

 

Its an ugly picture.

 

It is credit card economics. These guys are burdening our children with much, much higher debt servicing costs - their programme is funded on a pyramid scheme which, they hope, won't come tumbling down until sometime way off in the future after they have safely left Office.

 

Mr English, the last finance minister to oversee Sovereign credit rating downgrades to New Zealand (in 1998) is taking us right back to the 1990s.

 

Whereas the Labour-Progressive government got Net Core Crown Debt (Exclusive of NZ Superannuation Fund assets) down to ZERO this year (from over 21 per cent in 1999, under English), the re-appointed Finance Minister English now forecasts net Crown debt getting back to 20.7 per cent by June 2013.

 

In four and half years, Mr English will have fully undone the gains of the past nine years.

 

National is in government in 2008 and for at least the next three years. They are responsible for their own projections which come out of their own policies and what they dished out today is a disgrace.

 

http://www.treasury.govt.nz/budget/forecasts/eff2008/eff08.pdf

 

All things being equal, Mr English projects net Crown debt reaching 47% by 2023 - but, of course, well before that happens Standard & Poor's and Moody's will have yet again downgraded New Zealand, so reversing the credit upgrades achieved by Dr Cullen in 2001 and 2002.

 

http://www.nzdmo.govt.nz/sovereigncreditratings

 

National is overseeing higher costs of capital for our small businesses, the drivers of employment and social progress, because it has no vision. There is no way you can improve national productivity performance with rising costs for a key ingredient of business - the cost of working capital.

 

On top of National's gutting of our personal savings drive (KiwiSaver), upping the tax on businesses conducting R&D and the end of Fast Forward, in three years' time we will be able to compare New Zealand's per capita GDP growth compared with our main competitors. NZ's economic performance, under Labour, was stronger than that of the OECD average, stronger than the U.K. and stronger than in Australia - that's the benchmark against which National will be measured.

 

National will of course fail. Everything we get from this National/Maori/ACT coalition is funded on the credit card, it is aimed at a short-term boost to consumption that they hope and think will win them votes in 2011.

 

But they are banking on a majority of New Zealanders being too stupid to understand what is going on - Labour's job is to prove them wrong, in spite of the media's abject failure to actually report what a shocking set of events that has transpired in our Parliament these past two weeks.

 

 

Minister of Maori Affairs, Not

Parliament has passed a law to borrow more money overseas in order to fund bigger tax relief for those already on higher incomes, with National, ACT and Maori Party support.
The interest on the borrowing will be paid for by all New Zealanders, including those on lower incomes.
 
As if going cap in hand to Swiss, east Asian and oil-rich Gulf high-interest earning lenders wasn't bad enough, the details of the personal tax changes include an underhand cancellation to the former Labour-Progressive government's previously legislated cuts to the bottom rate - so those on lower incomes get hundreds of millions of dollars of tax extra to pay to IRD.

Hopefully iwi radio are giving lots of coverage to the Minister of Maori Affairs and MP for Tamaki Makaurau so he can explain his vote and that of his Maori Party colleagues.
Had he been a member of Cabinet he could have advocated for his constituents that overwhelmingly get hit with the higher tax bill. He could have asked his new colleagues how come people in Tamaki Makaurau, for example, are going to be saddled with yet more interest-payable overseas financial liabilities - when we haven't yet paid off the debt built up by the Third National Government headed by Rob Muldoon?
 
No doubt his Tory mates would have said that a fiscal easing is what we need in the global economic slowdown.
 
But he could have come back to his Cabinet colleagues and asked how come the fiscal stimulus means higher taxes for those families on the lowest incomes?
 
At the Cabinet table, the Minister could have asked how Aotearoa - whose Crown's net debt forecasts are expected to deteriorate significantly in the years ahead although we don't know yet how much because the Treasury has been delayed publishing its latest forecasts until after these laws have been enacted - can afford to give the Prime Minister an $8,660 a year tax cut and the ministers of Maori Affairs and the Associate Minister of Social Development a $3,886 a year tax cut each?
 
This Administration is running a strategic deficit, funded by low income earners, and that deficit will down the track be used as an excuse to further cut into social services such as those needed to continue the last nine years' efforts to reduce childhood poverty.
 
ACT MP Roger Douglas is already talking about what will need to come later.
 
The Minister of Maori Affairs is worse than a failure. His party managed to get half of the party votes that Labour got in Tamaki Makaurau in 2008, while his new, soon-to-be wealthier mates in the National Party managed to get about one eighth of the party vote of Labour in Tamaki Makaurau.
 
2011 will, hopefully, be a good honest contest on practical policies and respective records of actually getting good things done for people in electorates like Tamaki Makaurau. There is no doubt that Louisa Wall would have delivered far more for Tamaki Makaurau constituents than the current intellectually lazy, weak and ineffectual Minister of Maori Affairs. Louisa would have protected the people, not hurt them.

Right wing blogs missing on business tax

Prog Blog doesn't enjoy the soiling experience of reading the National Party blogs, like Kiwiblog and Whale Oil. The latter is a disgusting, bullying and obscene example of the nastiness of the National party. Kiwiblog is not as slimey, but quite capable of Internet bullying, and plainly in close enough contact with National party research unit to be part of the unofficial party publicity machine.

But either of those blogs would have exploded with rage if the previous government had ever increased business tax. It actually cut business tax - because only Labour-led governments have ever cut business tax in New Zealand. You could just imagine the embittered grudging contempt they would spit if business tax had been increased though.

So Prog Blog made an unusual exception and went on a tour of the right wing blogs to see what they had to say about the largest ever increase in New Zealand business tax - being voted into law today by the National govenrment under urgency today. The very first thing National has done has been to vote the largest incrase in the total tax paid by business ever.

And what did they have to say about it over on the right wing blogs? Nothing.

Not a peep. Not a sparrow's song.

If you want a demolition of National's tax on ideas, and its punishment of business and creativity, you will just have to go here.

By the way, this is a good point:

How many times did the speech from the throne use the word "agriculture"?

How many times did it mention "exports"?

How many times did the words "scientific research" get used?

None.

Not even once.

It never mentioned science at all.

It never mentioned the primary sector at all.

It never mentioned agriculture, the backbone of the economy, at all.

Why can’t we bail out poor people in crisis?

Jim’s speech in the Address in Reply debate is up.

It’s a strong exposition of the government’s impossible promises.

But there is another point in there that caught Prog Blog’s eye - a point that has nothing to do with the National Government:

I have watched around the world with fascination at the speed with which governments have been able to act to bail out huge companies and banks when they have been in desperate need.
 
They have shown that with goodwill, action is possible to help in an emergency. That governments can act to help when help is needed.

And it leaves a question for all of us in this parliament - if we can do that for big companies and big banks in times of crisis, why can’t we do it for people in crisis?
 
Why can’t we do it for the hundreds of millions of people who don’t have enough to eat, who don’t have clean water, who can’t hope for basic medicine? Why can’t we bail them out?
 
New Zealand should be a voice for them internationally, and a voice for the compelling new ideas that are emerging internationally to solve these global problems.
 
At a time when global crisis threatens to deepen global poverty and darken even further the skies over the lives of the world’s least privileged, we should be saying that if the world can offer crisis help to the strong, then we must also offer emergency bailout for the weakest and poorest.
 
This is a very good point. It’s right to use the power of government to save large parts of the economy globally from wreckage. But for exactly the same reason -avoiding wreckage - we should be using the power of governments around the world to help the billion or so people whose lives are in crisis because they live in extreme poverty.

Good on Jim Anderton for raising the issue.

This is actually an issue on which there could be cross-party consensus in a country like New Zealand. But you wouldn't expect to see the bitter, angry and bullying right wing blogs find themselves able to say anything decent about it.

The National Party governs and is responsible for our economic well-being as a nation, now and in the future.
 
The National government is this week and into next to rush through a  swag of legislation without public input at select committee - legislation that will have far-reaching, long-term implications for both the health of the Crown's accounts and, more importantly, the size of people's nest eggs at retirement.
 
On law and order issues that may be fair enough. National has a clear mandate to make the laws against criminals tougher.
 
But National and its allies have no mandate to significantly increase the Crown's overseas financial liabilities. Yet that is what these laws do.
 
When Labour got elected in 1999, it inherited a vulnerable Crown position of net debt equal to over 20 per cent of GDP - by 2008, the Labour-Progressive government had got that down to below zero - a net positive financial asset position. 
 
National is now going to blow it all again, take us back to the fantasy world of the free lunch brigade - but the disgrace is that they won't tell us by how much as they do it.
 
That is because the Treasury is not due to report its current set of forecasts for Crown debt until after the urgency laws have been passed - in other words, we won't know the financial costs until after the National government has already passed the legislation under secrecy and without public input under urgency.
 
National has the power and the responsibility to avoid this erosion of New Zealand's wealth and New Zealanders' future wellbeing, but as is traditionally the way under National governments, it is refusing to accept its responsibilities in the here and now and instead kicking for touch - passing the burden to someone in the future to fix up.
 
And it isn't as if National's rushed laws to increase overseas borrowings are for anything like investment in higher education standards, more Research & Development, the promotion of our exports as a ratio of GDP - or regional job creation.
 
No, the increased borrowing is to fund additional personal tax cuts that will overwhelmingly benefit those already on higher incomes - http://norightturn.blogspot.com/2008/10/who-benefits-from-nationals-tax-cuts.html  - additional tax cuts that the Treasury projections will clearly indicate cannot be afforded, but that will be covered in a new news cycle after the damage is done - or perhaps due to the closeness to Christmas, won't be covered in any news cycle.
 
National's urgency will also cut by half the size of middle class Kiwis' retirement nest eggs (cutting KiwiSaver employer matching contributions to 2 per cent, from 4 per cent, reduces by many tens of thousands of dollars that middle and low income people will have as a nest egg at age 65), two measures that will contribute less than zero to improving our household savings' performance - the tax cuts will overwhelmingly flow into greater consumption, including greater imported consumption - that which is "invested" will overwhelmingly into propery - that is empirical evidence of the 1980s and 1990s.
 
It is a disgrace. That Sensible Dunne, the "pro small government" Hide & Co and the "pro Maori" Sharples and Turia are party to this is a genuine shame on them.
 
The Treasury is doing its job to promote macroeconomic stability when it recommends strengthening our patchy capital gains tax laws  - but National has no courage to act on this despite having, with its allies, a very big Parliamentary majority and it being a perfect time to act in the economic cycle.
 
But National will no doubt adopt some of Treasury's silly ideas - such as cuts to every government department other than itself. If National had style, it would instruct the Treasury to lead by example - increase its own productivity by doing its job with ten per cent less staff.
 
The National Party was elected to govern this country and to be responsible for our economic well-being as a nation, now and in the future. But in the crucial period when it has the greatest flexibility and authority to show leadership and take the public with it, it is failing abysmally to show anything other than its natural colours of Holyoakism and Muldoonism - weakening both the Crown's position and middle and low income families' future well-being, while boosting the short-term consumption of those already on higher incomes.
 
They are, sadly for New Zealand, a dull, disappointing lot - the Tories.