Economy

Earlier I posted a meme regarding bringing government accounts down to the level of the household budget so people can understand.

A reader has emailed:

All sourced from the Treasury Website.

I couldn’t get a true estimate of what the Government’s net assets were – the SOEs are valued at $29 Billion (Down $3 billion due to rail in the last 12 months) and there is $50 billion in assets held by Crown Entities (Think this will be mostly Hospitals, Schools and State Houses) and $29 Billion owned by Core Crown. While some of this would be prime commercial property in various cities, most would be impossible to sell like Highways, National Parks and historical locations, Parliament and Waitangi. While nowhere as dire as the US, we’re probably close to debt being 100% of government assets.

Either way, it’s not looking bright for the next few years until we are back in surplus and from there only disciplined governments will keep us afloat.

So, here is the New Zealand version:

I’ve been catching up on the weekend political shows.

Shearer has repeated Cunliffe’s out of left field policy to give Ministers the right of veto over private business transactions, like the proposed takeover of Fisher & Paykel by Haier.

This is absolutely startling policy.

What sort of signal would this send to the rest of the world?

This is economic policy by opinion poll.

God knows what sort of impact this would have on our Free Trade Agreements, let alone the impact on householders who’ve invested money in Kiwi companies on the sharemarket.  The premium on their investment could be destroyed with the stroke of a Ministerial pen.

Of course Labour’s also promised to subsidise unprofitable jobs like those at KiwiRail and Solid Energy, while the Greens want to keep the jobs at Solid Energy but leave the coal in the ground.

These policies alone demonstrate Labour and their Green buddies are not fit to govern.

Westpac have released their latest quarterly update on regional economic confidence and it shows that Canterbury is by far the most optimistic region in the country.  I guess the unions will say they haven’t been talking to them and sucking up their crap lines.

Canterbury has seen another surge in economic confidence and is now the one unambiguously optimistic region in the country, with a net 36% of households expecting mainly good economic times over the year ahead (57% expect good times, 21% bad). While parts of the regional economy are still struggling, the repair and rebuild effort is now clearly underway, demand for repaired and non-damaged homes has pushed house prices beyond their 2007 peaks, and the unveiling of the new central city plan may have lifted optimism as well.

While the latest education announcement was a big fuck up (is that now two strikes for Hekia?) it seems that most people in Canterbury (perhaps it is the silent majority) actually understand that things are picking up and work is getting done.

Little wonder that people turned up in the hope money was to fall out of the sky

About 100 Aucklanders lured to Albert Park this morning with the promise of $10,000 dropping from the sky were sorely disappointed.

The Twitter profile said after the stunt: ”I’m just showing New Zealand how easy it is to claim a teaser campaign as your own.”

Labour launch a policy a week that promotes such hope.  Almost half the voting population actually believe Labour and Greens will deliver money from the sky.

Submitted via the tipline:

Budget 2012 ought to reflect a commitment to do certain things:

1. Improve the productive potential of competitive enterprise;
2. Transform the learning journey of New Zealand children; and
3. Reduce the size of both central and local government.

To achieve these things the Government needs to deliver a Budget and subsequent legislation that is transformation in its design and impact.  This is also necessary to ensure that New Zealand can compete and win against its major OECD trading partners.

New Zealand’s business community creates jobs.  Supporting business starts with creating a tax environment that is neutral rather than favouring different types of investment categories based on tax advantages and disadvantages.  Secondly the business community needs to trade in an environment where the rights of property owners are sacrosanct.  Finally, businesses need less rules and less regulation so as to enable growth and investment.

It is said that New Zealand’s education system is one of the best in the world.  But any education system that does meet the needs of every child is one that requires work.  Seventy percent is not good enough.  Eighty per cent is not good enough.  The most important person in any classroom is the pupil, and their needs must take precedent over all other needs.

Here is the kind of Budget necessary to inspire transformational growth and improve living standards in New Zealand:

Labour Relations

Workers need the certainty of future employment.  The workplace should be defined by a contractual relationship between employers and employees, with a commitment to boost productivity so as to maintain the viability of firms.  The New Zealand Government should:

I.     Provide for greater freedom to negotiate individual employment conditions, including those provisions that relate to the dismissal of employees.
II.   Extend the enforceable mutually-agreed probationary periods for new employees from a maximum of 90 days to a new maximum of 180 days.
III.  Reintroduce youth minimum wages.

Foreign Direct Investment

New Zealand needs foreign capital to support the development of infrastructure.  Concurrent to a deepening of New Zealand’s capital market, foreign capital remains an important source of revenue when improving the productive potential of firms located in this country.  The New Zealand Government should:

IV.   Reform the Overseas Investment Act 2005 by restricting the arbitrary role of the Minister in determining applications lodged with the Overseas Investment Office.

Planning and resource management

The failure of the Resource Management Act 1991 starts with its ambiguity.  Effects-based law is appropriate.  But who determines those effects and the measures to be enacted to mitigate effects?  Empowering local government has been to the detriment of New Zealand’s ability to develop both public and private infrastructure that in turn could create jobs and livelihoods for young people.  The net effect of New Zealand’s planning laws has been the denial of opportunities to generate wealth and raise living standards.  The New Zealand Government should:

V.  Widen the scope for the Environment Court to determine consent applications, as well as award costs against territorial authorities and other parties that lodge unsuccessful objections deemed by the Court to by vexatious;
VI.  Deny elected councillors the ability to sit on notified resource consent hearings; and
VII.  Enable property owners to sue territorial authorities in lieu of plan changes that are proven to have a detrimental effect on the value of their land.

Accident Insurance

While New Zealand’s social insurance model provides a means for treating those who are subject to an accident, it does not deal with matters such as inequitable treatment costs and a loss of income due to sickness.  ACC is an unsophisticated model for insuring against the impact of an accident.  The New Zealand Government should:

VIII. Implement a schedule of ACC levies prior to the introduction of competition, which are based on a fair price so as to not undercut private insurers entering the new market;
IX. Mandate the competitive private delivery of compulsory accident compensation insurance in New Zealand through the Work, Earners, and Motor Vehicle account; and
X.  Allow for use of experience rating and self-insurance forms, with the requirement for stop-loss cover.

Mineral extraction

New Zealand is blessed with significant mineral resources, which if extracted could earn significant revenue, create new industry and jobs.   A modest amendment to the Crown Minerals Act would enable New Zealand to make significant progress in tapping its resource potential for the purpose of economic development.  The New Zealand Government should:

XI.   Remove up to 0.2 per cent of land from Schedule 4 of the Crown Minerals Act 1991 for the purpose of mineral prospecting.

Working for Families

Working for Families is a scheme that jeopardises the ability of New Zealand families to prosper independent of the State.  The scheme is grown to become very expensive over time.  The New Zealand Government should:

XII.   Lower the abatement threshold for Working for Families to $20,000
XIII.  Introduce a two-tier abatement rate to 35 cents in the dollar between $20,001 and $50,000, and 50 cents in the dollar for $50,001 and above.

General Taxation

New Zealand’s tax system needs to reward hard work, initiative and innovation.  It should also enable New Zealand’s productive sector to reinvest capital so as to grow the economy.  The New Zealand Government should:

XIV. Reintroduce depreciation deductibility for non-residential property classes to bring New Zealand back into line with other OECD countries;
XV.   Introduce tax deductibility for seismic strengthening in lieu of changes to the Building Act 2004 and Building Code following the 2010 and 2011 Canterbury Earthquakes; and
XVI.  Recommit the mutual recognition of imputation credits between New Zealand and Australia to support closer economic relations as well as investment between both countries.

Education

Education ought not to be a debate about the pay and work conditions of teachers.  Education should be about the learning journey of every child and young person.  Education should promote excellence in learning, academic and vocational achievement, and it should enable people to gain skills that will prepare them for life-long learning.  The New Zealand Government should:

XVII.  Adopt charter schools and the introduction of bulk funding;
XVIII. Publish league tables to provide parents with information that enables them to measure the performance of schools in measures of literacy and numeracy;
XIX.  Recapitate primary schools as the first step in a two-stage process of eliminating intermediate schools and reintegrating Year 7 and Year 8 students into a full primary education model;
XX.         Expand the number of fee-free Trades Academies to allow more secondary schools to partnership with tertiary providers to enable 16 and 17 year olds to move to vocational training courses as an alternative to learning courses designed for university entrance; and

XXI. Introduce interest rates on student loans to price the cost of the loan finance raised to pay for tuition fees and related course costs.

Local Government

Local government has emerged as a major cost driver for the business community.  Ratepayers deserve value for money from local government.  The local government sector is a creature of statute, which means reform of the local government sector requires decisive action by Parliament.  The New Zealand Government should:

XXII.  Amend the Local Government Act 2002 to repeal the power of general competence, and introduce merit-based appeals for development contributions
XXIII. Amend the Local Government Act 2002 to prohibit territorial authorities from appointing elected members to the boards of council controlled organisations and council controlled trading organisations;
XXIV. Amend the Local Government (Rating) Act 2002 to prohibit territorial authorities from setting general rates differentially on the basis that businesses can claim GST and a tax deductible expense; and
XXV. Appoint a commissioner to review the composition of the local government sector with a view to making recommendations on local government amalgamation throughout New Zealand (excluding Auckland).

via Andrew Sullivan:

A very interesting commentary about small businesses and failing economies. Given that the overwhelming number of New Zealand businesses are small, surely we should be mindful of what other economies show us.

The developed countries with the highest percentage of workers employed by small businesses include Greece, Portugal, Spain, and Italy—that is, the four countries whose economic woes are wreaking such havoc on financial markets. Meanwhile, the countries with the lowest percentage of workers employed by small businesses are Germany, Sweden, Denmark, and the U.S.—some of the strongest economies in the world.

This correlation is not a coincidence. It reflects a simple reality: small businesses are, on the whole, less productive than big businesses, and though they do create most jobs, they also destroy most jobs, since, while starting a business is easy, keeping it going is hard. This is true around the world.

From the emails deluging my inbox and from talk in the street I think National have badly mis-judged the public sentiment in bailing out Mr Magoo’s Finance Company for rich farming types.

When you have to get Treasury to start explaining then you know they are losing the argument. the old adage that if you are explaining then you are losing applies.

Let’s hear from Mr Hubbard himself explaining just how SCF didn’t breach their DOG (Deed of Guarantee) by ensuring its business and operations (and the business and operations of its subsidiaries) are conducted in a proper, businesslike, efficient and prudent manner“.

With headlines like:

The rich blamed for SCF’s fall

I think National will take a big hit in the polls over the SCF debacle. We shall see. There are certainly a lot of angry voters out there, and they aren’t in South Canterbury they are in Auckland. Is this the tipping point Labour have hoped and prayed for?

Alan Bollard is right. Given the existing policies and state of the government sector we have zero chance of making in roads to catch Australia let alone trying to catch them. Unless drastic changes it ain’t going to happen.

New Zealand continues to live beyond its means, and “Karori” Bill English continues to read Treasury reports about the Treasury reports about the Treasury reports he asked for.

And why would we expect anything else. If you we keep on doing the same old things over and over we will keep on getting the same old thing over and over. Then of course are the mental patients residing in Labour. They think that raising the minimum wage is the way to catch Australia, well that is such a good idea then lets raise all the way up to Australia right now. Yeah see its dumb isn’t it. Far better to remove the minimum wage altogether.

We need to be bold not timid, we need to be strong to resist spendthrifts and wastrels and most importantly we need to act. Smiling and Waving ain’t going to get us there.

Today the NZIER and Matthew Hooton are in agreement. Hooton has an article in the NBR and once again I have had to start my weekly Friday morning trek to the Howick Stationers for my NBR.

In 1993, Wayne Eagleson, now John Key’s chief of staff, was campaign director for the National Party. Among his responsibilities was authorising Jim Bolger’s vision for the future, Path to 2010, the last government document published with a genuine reformist as Minister of Finance.

Before 1993 was out, Ruth Richardson had been sacked, MMP was in place, Mr Bolger had held power with the acquiescence of Jim Anderton, coalitions were the norm and New Zealand began 17 years of mediocrity, stagnation and decline.

Hooton is right on the money. The bold economic outlook deserted us at the very time that Jim Bolger lost his bottle. here we are in 2010 and not even a step closer to the recommendations of the Path to 2010.The NZIER agrees:

“Anyone who seriously thinks that the TWG’s recommendations are radical needs a reality check,” the leading economic consultancy’s chief executive Jean-Pierre de Raad says in a commentary issued today.

Precisely, what have we achieved in the past 25 years since the last reforms put us on a sound footing to weather even the most heinous of economic storms? The Path to 2010 was full of motherhood and apple-pie statements and with the 20/20 hindsight of the future we can look back and laugh at the platitudes of so many weak-kneed politicians that have been happy with mediocrity and stagnation. Hooton list the platitudinous claptrap.

The writers, including World Cup hero David Kirk, dealt honestly with the barriers to success, including “an understandable attitude of cynicism and negativism after a decade of upheaval”.

Optimistically, however, these barriers were found to be surmountable, being largely of our own making.  New Zealand had its first opportunity for a generation to genuinely boost its economic performance.

The strategy was not revolutionary.  It stressed being open to the world for trade and investment, maintaining price stability and reducing indebtedness, and argued it was free enterprise and markets which would drive growth, not government.

Food and beverages, forestry and fibre, tourism, high quality manufacturing and services were highlighted as “engines of growth”.

With just 150 companies accounting for 95% of exports, it sought more businesses with the scale to export.  Cute stories about kiwi-battler SMEs did not feature.

Top of the agenda was investment in innovation, research and infrastructure.  Better transport networks were promised, along with the new priority of communications technology.   New Zealand would have “one of the most sophisticated telecommunications environments” in the world.

Education would be better connected with business and built around life-long learning rather than bricks and mortar.

New Zealand would remain the cleanest, greenest place on earth, and greater energy efficiency would be vital.  Back then, ozone was a bigger issue than CO2 – although we were going to cut our CO2 emissions to 1990 levels by 2000.

Delivery was not assured.  Stretch targets were involved.

Unfortunately we have stopped for the longest recorded cup of tea in history with only Kiwisaver being the standout adjustment to our economy. Unfortunately Labour and now National lack the bottle to make it compulsory. The NZIER recommends a bolder approach:

“If New Zealand is to close the income gap with Australia, we need to do much more than matching Australia’s personal income and business tax rates,” the institute says.

“A broad suite of growth-friendly policies – including bolder tax reform – needs to be implemented and a shared economic vision established. We need to accept that the adjustment to a higher long-term growth path might cause some short term pain, and we need political leaders to commit to seeing the reforms through.”

“Given the growth challenge New Zealand faces, our concern is that the proposals of the TWG do not go far enough.”

Unfortunately I don’t our cabinet, save a few have the guts to implement such a programme. Cabinet is dominated by wets like “Smile and Wave” Key and “FIGJAM” Power and we have a do nothing, death by analysis Finance Minister in “Karori” Bill English. Hooton thinks we now have economic death via Focus Groups and polling.

Since 1993, no serious attempt has been made to provide the inspirational leadership, promote the social attitudes and implement the public policy for New Zealand to become a rich country.

A mindset has developed in the political and media class that good policy is necessarily anathema to good politics.  If anything, it is embedded even more deeply in the Key Government than it was in Helen Clark’s.

Labour’s pollsters at UMR and National’s at Curia have become rich but at the expense of everyone else.

I would suggest that Hooton and Farrar have had a massive falling out if Hooton makes statements like that but he isn’t wrong in making such statements. Can we truly break 25 years of indifference and ditch teh motherhood and apple-pie statements that have nobbled our economy. We need action, we need go-forward in Rugby parlance, but is “Smile and Wave” Key up to it. Not even Hooton thinks that is the case.

In Mr Key, New Zealand has a leader who personifies the nation and connects with the public in a way which rivals Ronald Reagan, Pierre Trudeau, Lee Kuan Yew or Tony Blair in their prime.  The odds are low that such a leader might emerge again.

Already, Mr Key is the most popular prime minister in New Zealand’s history, is deeply trusted and has the chance to become the greatest political figure New Zealand has known.

The jury is out on whether he’ll do it.  Within a month, we’ll know whether he plans to do anything with his gifts, whether his strategists have the ability to integrate good PR with good policy – or whether being in office is enough, and the Beehive’s capabilities limited to churning out facile feel-good Woman’s Day exclusives.

In assisting his new boss, Mr Eagleson could do worse than fish out a copy of the Path to 2010 that he signed off all those years ago.

New Zealand took the wrong path in 1993.  There is a once-in-a-century opportunity to rejoin the road, if that’s the decision Mr Key is prepared to take.

Which I guess means that we will become an even worse Pacific backwater. Why teh government is making hay while the sun shines is beyond me. The government may well be asleep at the wheel but so too is the Opposition.

The recession seems to have evaporated, or else people simply don’t care anymore.

EFTPOS provider Paymark says at the peak between midday and 1pm shoppers were ringing up 131 transactions every second.

CEO, Simon Tong, says the resulting 438,000 transactions for the hour is a record. However he says New Zealanders are continuing to spend at an amazing rate with over 100 transactions a second every hour since 10am.

Mr Tong says he expects in excess of $225 million to be spent today through EFTPOS alone, and that too will be a record.

Sounds like the recession is well and truly over.