Record high household debt levels are not sustainable, warns a leading bank economist.
At half a trillion dollars, housing and personal debt has hit 162 percent of the average household’s annual disposable income – higher than levels before the global financial crisis.
Westpac Chief Economist Dominick Stephens told Nine to Noon the decline in dairy prices was hurting the regions, but the downturn following the end of the Canterbury rebuild would be more severe than most people were prepared for.
The rebuild played a huge role in the “rock star economy” between 2012 and 2014, with the international reinsurance industry dropping $20 billion on New Zealand and the government pumping in another $10b.
As that money dried up, some business owners could find their businesses were not as robust as they thought, Mr Stephens said. Read more »
The year ended on June 30, and the final accounts will be released around 1pm today.
Finance Minister Bill English said when he presented the Budget there could be a turnaround.
In Parliament yesterday he wasn’t giving anything away.
“A return to surplus was always a stretch target,” he said.
“Regardless of whether the annual accounts show a small surplus or a small deficit, the overall trend is in the right direction.”
Labour’s finance spokesman, Grant Robertson, expects the accounts will show a small surplus.
“It’s almost certain the Government will announce a surplus for the last financial year … that they only just managed to scrape it together is poor financial management,” he said.
Mr Robertson is forecasting deficits for the current financial year and the next, contrary to the May Budget’s projections for modest surpluses.
“National’s financial management will go down in history as one small surplus out of nine budget deficits,” he said.
Apart from the fact that having a surplus is better than a deficit, National are desperate for one to fund their 2017 election
bribes policy initiatives. Expect the purse strings to be finally released somewhat with announcements along the lines of “police will get an extra $500m over years starting in 2018”, and other inspiring stuff.
The budget squeeze has been on everyone, well, mostly everyone. So teachers, nurses, police and the like are somewhat overdue for some relief, if not directly, than at least by the public sector getting a little more money to adjust for inflationary and demand pressures.
And crime, health and education on the back of a strong economy has 4th term written all over it. Chuck in a few tax cuts, ACC reductions and some feel-good stuff, and the Left are going to need something Bigger than Dirty Politics and something even less probable than Kim Dotcom to upset National’s chances.
The reported budget surplus $414M.
While the ACC account is in surplus by $1.6B. It’s another smoke and mirror job.
Talks of bringing tax cuts forward are similarly a joke. But you’ll have them. It’s been part of the 2017 campaign strategy since the beginning.
– Peter Wilson, NZN via 3 News
Mr English, Mr English, a phone call…some guy called Daryl Kerrigan is calling you:
The Government’s lead economic advisor warns a new policy aimed at attracting more migrants to the regions would achieve nothing.
According to documents released under the Official Information Act, Treasury told Finance Minister Bill English on July 16 the new Government measures were unlikely to help regional development.
The measures went to Cabinet for approval on July 20 and the increased bonus points on residency requests was announced on July 26. Under the revised scheme, skilled workers who take jobs in the regions or set up businesses there will have their points to calculate whether residency requests should be approved increased.
However, the July Treasury briefing to Mr English had warned the policy changes were unlikely to have a consequential impact for regional development. Read more »
Grant Robertson has laid a complaint with the Speaker’s Office, alleging that John Key misled parliament.
Prime Minister John Key is facing a breach of privilege complaint over his claim Inland Revenue told him changes to the KiwiSaver scheme “will not make a blind bit of difference” to enrolments.
Labour finance spokesman Grant Robertson said Budget papers released on Thursday showed Key had been told the opposite, and the party would make a complaint to the Speaker.
As part of the Budget, Finance Minister Bill English announced an immediate end to the $1000 payment the Government gives to anyone who signs up to KiwiSaver, known as the “kickstart” payment.
The decision, which will save $500 million over four years, immediately came under fire as cutting the incentive to join the highly popular scheme, particularly for children who are not entitled to other credits.
Questioned about the move in Parliament, a week after the May Budget, the Prime Minister said it would have no impact.
“[T]he removal of the $1,000 kick-start contribution will not make a blind bit of difference to the number of people who join KiwiSaver,” Key said on May 26.
Green Party co-leader Metiria Turei asked Key in response: “What evidence does the Prime Minister have that the sign-up rates for KiwiSaver will not be affected?”
“That is the formal advice from the Inland Revenue Department,” Key said, adding that the scheme was well organised in the workplace and providers were “extremely” well organised.
“We have got about 15,000 to 20,000 people joining in a month. I would be very, very surprised if it changes at all as a result of this.”
The Reserve Bank copped a kicking from treasury for their failed meddling in the mortgage market.
Not only was it unnecessary it also failed.
The Reserve Bank has been told to stick to its knitting by the Treasury, with officials warning that rules on mortgage borrowing need to be within its mandate.
In documents released on Thursday evening, Treasury officials also warned that the original loan to value restrictions put in place by the Reserve Bank may have led to more activity by property investors. It follows numerous claims that the rules have hurt first time buyers.
In a briefing for Secretary to the Treasury Gabriel Makhlouf, officials said they agreed with the Reserve Bank that a pick-up on the Auckland housing market “could potentially pose a threat to financial stability” in the coming years.
“However, Treasury has been engaging with the RBNZ to suggest that although we accept that house price changes can have macroeconomic implications, the RBNZ’s mandate is focused on promoting financial stability, and therefore the policy proposals should be reframed to focus more clearly on reducing systemic risk rather than asset prices.”
The comments appear to suggest the Reserve Bank is being warned that it may be overstepping its role over financial stability, a claim made in recent months by Michael Reddell, a senior adviser to the bank who was made redundant earlier this year. Read more »
A surplus was promised, and by whatever underhanded means possible, a surplus will be delivered.
The Government has been accused of massaging its books to ensure it reaches its goal of a budget surplus this year.
Treasury papers obtained by ONE News show that delaying spending on the Canterbury rebuild and increasing alcohol taxes are ways of boosting the figures, with current forecasts indicating the Government is set to miss the surplus by half a billion dollars due to falling dairy prices.
“To delay expenditure simply for what amounts to a political target is just offensive,” Council of Trade Unions economist Bill Rosenberg said.
Other Treasury suggestions include slowing down $33m in overseas aid spending by a year, increasing charges levelled at overseas visitors, and holding back on $100m in proposed cuts to ACC levies.
You can see why SkyCity and Team New Zealand are up against it. They are looking at squeezing the last few million out of the books just to make sure the bad dairy results can be compensated for. Read more »
The Taxpayers’ Union’s drawn to the Government’s attention a typo in the appropriations in Vote Primary Industries which will no doubt leave some pimple faced treasury analyst with some explaining to do:
We’ve spent most of this week immersed in the budget documents and making notes of potentially questionable spending or unusually large increases.
To our great surprise yesterday we noticed that one of the primary growth partnerships (PGPs) that the Government is funding appeared to have undergone a massive growth in spending. We’ve expressed much concern in the past about PGPs and consider them inappropriate corporate welfare and the Government picking favourites.
According to the budget estimates distributed on Budget Day, the New Zealand Sheep Industry Transformation Project (NZSTX) is to receive 644 times more than in 2013/14. As you can see from the scan below, the budget documents show an increase in spending from $3.3 million to just under $2.4 billion dollars.
It must be election time again, when the usual Maori political suspects need to cheaply raise their public profile.
How, what has worked in the past?
Let’s call people racists!
Iwi are to gain control of Maori Television and millions of taxpayer dollars in an election year lolly-scramble that is alarming officials.
Maori Affairs Minister Pita Sharples says “racist” Treasury and State Services Commission officials are trying to stop his paper going to the Cabinet next week, because they fear iwi will misspend Crown money as they allegedly did with Whanau Ora and Kohanga Reo.
The only reason these “racist” attacks keep working is because the media are happy to buy into the staged bun fight.
No exposure, no need to stoop as low as to label Treasury and State Services Commission officials as racists. Read more »
Last year, Treasury released iPhone and Android apps for those who like to see all the Budget data come alive (after the 2pm embargo, of course). They’ve updated the app for the 2013 budget. Sorry Windows Phone / Surface users, you miss out, but the rest of you can get your fix here:
- 2013 Budget App for iPhone (iTunes)
- 2013 Budget App for Android (Google Play)
Labour are pushing their line about asset sales hard out. By John Armstrong has pointed out the obvious flaw in their plan:
Labour’s private member’s bill has about as much chance of becoming law as Namibia has of lifting the Rugby World Cup. Probably even less.
It will need something close to a miracle even to make it onto Parliament’s playing field this side of November’s election.
That is because Labour sees their number priority this election cycle as stopping students from having the same rights as everyone else does in choosing wheter or not they belong to a union, more to the point they wish to use up as much legislative time as possible opposing a private members bill from Heather Roy.
Priorities? Yeah it’s got me stuffed too.
It is here the problems start. First, the bill has to be lucky enough to be drawn in the irregular ballot of private member’s bills. At last count there were 24 other competing bills in the ballot.
As Labour’s opponents point out, the order paper is now clogged with 11 private member’s bills at various stages of debate because Labour has been filibustering an Act bill promoting voluntary membership of student unions.
The killer blow, however, is the provision in the 1995 rewrite of Parliament’s standing orders that any requirement for a 75 per cent majority for altering or removing something must itself get a 75 per cent majority to become entrenched.
To top things off, were the bill to hurdle that obstacle and become law, a future National-led Government could still repeal it with a simple 50 per cent-plus majority.
Labour are just sabre rattling but the problem is the blade fell off a long time ago. All they have is a scabbard, albeit a rusty one and a broken hilt.
But more to the point history shows that when it comes to asset sales and the record of the current Prime Minister vs. the man who would be Prime Minister, head to head only one Party Leader has a track record of selling assets.
His career average is a pretty solid 17 assets that sold for $9,490,000,000.
That party leader is the MP for Mt Roskill, and the most experienced asset seller in the New Zealand parliament, Phil Goff.
State Asset Sales 1988 – 1999
|List of assets sold by Labour government between 1984 and 1990 |
|List of state assets sold by National government from 1990-1999|
|Asset||Year||Value (millions of dollars)||Asset||Year||Value (millions of dollars)|
|Petrocorp||1988||$801||Export Guarantee Office||1993-1996||$19.7|
|Health Computing Service||1988||$4.25||Government Supply Brokerage||1992||$3.2|
|Development Finance Corporation||1988||$111.2||Housing Corp Mortgages||1991-1999||$2384|
|Post Office||1989||$665||Taranaki Petroleum Mining Licences||1992||$118.8|
|Shipping Corp||1989||$33.5||Bank of NZ||1992||$849|
|Air New Zealand||1989||$660||NZ Rail||1993||$328.1|
|LandCorp||1989||$76.9||Government Printing (II)||1993||$18.5|
|Rural Banking Finance||1989||$550||Wrightsons Rights||1993||$3.45|
|Government Printing||1990||$20||Fletcher Challenge shares||1993||$418|
|National Film Unit||1990||$2.5||GCS||1994||$46.9|
|Communicate NZ||1990||$.6||Airports, including Wgtn and Auckland||1996-1998||$559.8|
|State Insurance |
|1990||$735||Maori Development Corp||1996||$20.9|
|Tourist Hotel Corporation||1990||$71.8||Radio Company||1996||$89|
|NZ Liquid Fuels, Maui Gas and Syngas||1990||$257||Forestry Corp||1996||$1,600|
|Telecom||1990||$4250||Works and Development Services||1996||$108|
|Forestry Cutting Rights||1990||$925||Capital Properties||1998||$59.7|
|Contact Energy (sale and float)||1999||$2331|
|Vehicle Testing NZ||1999||$19.2|
These statistics do not show the sell off of Housing NZ state houses. Labour will say that they were surplus to requirement but the fact remains that they were an asset that they flogged off too. The value of those would probably add another billion onto Labour’s total.
Phil Goff was in Cabinet between 1984 and 1990 (Minister of, variously, Housing, Employment, Youth Affairs, Tourism, and Education). Annette King was elected to Cabinet in 1989 and had responsibility for Employment, Immigration, and Youth Affairs.
When Labour talks about asset sales and what National did, then know with certainty that Labour are hands down winners of the asset sales crown and any talk otherwise is more lies from the mouth of Phil Goff.