What problem is the “Big Tool” trying to solve here?

So, the beguiling message is “stop paying interest to those overseas owned banks, put your money in your savings account instead”.

If it was that simple, why hasn’t anyone done that before?

The real question is, what exact problem is Labour’s David Parker trying to solve here? ?What is actually broken right now that needs fixing?

Bill English explains

Let’s start with a quick stock-take. The economy is growing, employment is increasing, wages are rising, exports are growing, business and consumer confidence are elevated, house-building is increasing and interest rates have just moved off 50-year lows. Looking ahead, the New Zealand economy needs more skilled people, more exports and less household debt, and the trends for each of these is positive. New Zealanders have learned that we can get on top of tough problems and grow our jobs and incomes if we stick to sensible and considered change, year after year.

As we’ve reported ad nauseam, the New Zealand economy is coming right in spite of the strains that the Global Financial Crisis and the Christchurch earthquakes have placed on it. ?There are always problems and challenges to overcome, but on the whole, the economy is in a state of requiring small conservative adjustments over time. ?Not some radical untried overhaul.

Bill English continues ? Read more »

Barry Soper is brutal on Labour’s new ‘big tool’

Barry Soper, a long time socialist and a big fan of Helen Clark, has been brutal this morning on Labour’s new ‘big tool’ policy.

When it comes to monetary policy in this country, it’s always been a ‘robbing Peter to pay Paul’ exercise – Peter being the long suffering home owner with a mortgage and Paul being the foreign-owned banks.

Labour’s come up with a way of changing the mix, a sort-of ‘robbing Peter to pay Peter – providing Peter has a mortgage’. If he doesn’t, then he is simply mugged in the short term and may be able to enjoy his retirement if he recovers.

This is the massive problem for Labour…people don’t like being told what to do with their own money and they hate even more being told they can’t have something until much, much, much later. They certainly won’t buy the line that it is for the good of the nation…especially when there are bludgers within easy reach that they think should do their bit first.

At the moment if we’re all out having too much of a good time spending up large on things that we don’t really need and socially over-indulging, then we’re doing our bit to fuel inflation.

It’s our money, so what. Typical of Labour to want to control everything with their Stalinist, we know best, policies.

It’s that sort of behaviour that makes the Reserve Bank Guv tetchy, and he’s likely to turn on the money market vacuum cleaner, raising the Official Cash Rate. That drives up our mortgages, which means we pay more to the foreign owned banks and have less to spend on enjoying ourselves. ? Read more »

Richard Meadows responds

Earlier today I posted about student loans and why interest free student loans need to go. The author of the source article has emailed a response.

For whatever reason my comments are not being published on the blog – I would be surprise if you censored my mild response so perhaps there’s some glitch. [WO: It was a glitch, comments are now enabled]

Re:student loans. Your post is a bit of a misfire – we seem to hold similar views.

I have written extensively about the student loan scheme and concluded that there has to be some kind of interest rate reintroduced.

I urge you to read this previous article which I linked to in the one you have attacked:

Here’s a sample quote:

“Students have now been sucking on the election lolly for more than six years. One thing’s for sure – it will be a bitter pill to swallow.”

I myself have a reasonable sized student loan and would be perfectly happy to pay interest on it.? Read more »

A possible idea?

? The Telegraph

There are calls in the UK for the Bank of England to drop interest rates to 0%…will there be calls in New Zealand for the same type of action in a bid to kick start?the?economy…or is this just madness?

Economists and business leaders have urged the Bank of England to slash interest rates to nearly 0 per cent in a bid to kick-start Britain?s stalled recovery.

The British Chambers of Commerce and the Ernst & Young Item Club, the only forecasters to use the Treasury?s economic model, have both urged the Bank of England to take bold action to boost growth at Wednesday?s meeting of the Monetary Policy Committee [MPC].

The economy has shrunk for three successive quarters according to figures published by the Office for National Statistics last week, which said the UK?s GDP fell by?0.7 per cent?between April and June.

Andrew Goodwin, senior economic advisor to Item, said: ?We do think there should be a rate cut. The Bank could go down to the rates in the US ? 0.0 to 0.25 per cent. It is not the only answer, but it would help.?

Since March 2009 the Bank base rate has remained at 0.5 per cent – the lowest level in the Bank?s 300 year history.

A further rate cut could reduce mortgage repayments for millions of homeowners and would ease borrowing costs for businesses.

But what about savers?

But another rate reduction would dismay savers, who have seen the annual interest payments on their deposits dwindle to as little as 0.1 per cent during the ongoing financial crisis.

Meanwhile, some economists have suggested that such an ?absolute zero? interest rate could freeze up money markets.

David Kern, chief economist at the British Chambers of Commerce, said: ?A rate cut now could really help businesses. I do not accept the argument that it would cause problems in the money markets.

?I would like to see that more than another round of Quantitative Easing. Higher QE will only have marginal effects on the real economy, and is not risk-free, as it will limit the fall in inflation.

“Lower inflation is critical to underpinning real incomes and sustaining demand in the UK economy.?