OnPoint by Keith Ng

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OnPoint: Budget 2011: A Credible Path to a Point in Time

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  • Joshua Drummond,

    Alright, so that's the detailed and incisive analysis out of the way. Let's get down to hard opinions. What do you rate this budget out of ten?

    Since Nov 2006 • 119 posts Report Reply

  • Sacha,

    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.

    Didn't they change the rules some time since 2008 to enable just that?

    For many, the increase in employer contribution to 3% and the sneaky imposition of tax on that will all end up coming from workers in the form of smaller pay rises.

    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.

    Ak • Since May 2008 • 19745 posts Report Reply

  • Danyl Mclauchlan,

    For many, the increase in employer contribution to 3% and the sneaky imposition of tax on that will all end up coming out of worker's pockets in the form of smaller pay rises.

    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!

    Wellington • Since Nov 2006 • 927 posts Report Reply

  • Che Tibby, in reply to Sacha,

    That's rather than removing the recent personal tax cuts from the wealthiest, or reversing massive ETS subsidies to farmers and truckies.

    it is kind of like an additional 1% tax on anyone who wants to save for their retirement. that's mean higher earners will be paying more than low earners.

    which is a miserly something i suppose.

    the back of an envelope • Since Nov 2006 • 2042 posts Report Reply

  • Keith Ng, in reply to Danyl Mclauchlan,

    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 should probably look this up, but is that a nominal figure? Because inflation is going to go mental, as a result of GST plus the wallop of Christchurch spending.

    Auckland • Since Nov 2006 • 543 posts Report Reply

  • Alastair Thompson,

    Hi Keith,

    Love the visualisation... is a fantastic research tool too. Is it flash or HTML5?

    al

    Wellington • Since Nov 2006 • 220 posts Report Reply

  • Danyl Mclauchlan,

    I should probably look this up, but is that a nominal figure? Because inflation is going to go mental, as a result of GST plus the wallop of Christchurch spending.

    No no no. It is nominal - but inflation stays really low. For some reason. Also unemployment plunges for some reason. And productivity grows steadily, somehow. It's all gravy.

    Wellington • Since Nov 2006 • 927 posts Report Reply

  • Paul Campbell,

    Smller pay rises? I'm a consultant, I own a company with one employee (me) - it's not a tax dodge honest - it's almost a non-profit in the sense that at the end of every month I look at the bank balance, subtract a $4-500 float and throw the resulting number into some spreadsheet formulas that calculate my kiwisaver and paye, and then write cheques ....

    I'm sort of the ultimate bad employer as I pass my higher costs on to my employees every month - take away the kiwisaver tax credit and my employee gets it in the neck at the end of the month - god I hate that boss!

    Since I largely earn US$ I haven't seen a pay increase in years - no 4% wage growth for me more like negative 30% in the past year or so - I'm in it with the farmers and I can't even change the way I count my cows to rort my taxes

    Dunedin • Since Nov 2006 • 2623 posts Report Reply

  • Sacha, in reply to Danyl Mclauchlan,

    For some reason

    Neoliberal magic beans ftw

    Ak • Since May 2008 • 19745 posts Report Reply

  • Russell Brown, in reply to Sacha,

    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.

    When you put it that way, it sounds like a rather poor show.

    Auckland • Since Nov 2006 • 22850 posts Report Reply

  • Steve Barnes,

    @ Sacha

    Ahem - been over here for a lil while.

    Oh, I see now. Still, did you like the song?

    Peria • Since Dec 2006 • 5521 posts Report Reply

  • Keith Ng, in reply to Alastair Thompson,

    @al: It's Javascript + SVG, so it's technically HTML5. But the thing on stuff (http://www.stuff.co.nz/business/budget-2011/budget-multimedia) runs on IE7 & 8 as well, because it uses a library that converts SVG to VML.

    Auckland • Since Nov 2006 • 543 posts Report Reply

  • Sacha, in reply to Russell Brown,

    sounds like a rather poor show

    Really unambitious, even on their own terms. And will come unstuck very quickly when Treasury's heroic predictions turn out to be as accurate as all their previous ones. Still, never mind, that won't be until after the election, eh. Bit of rugby in the meantime.

    Ak • Since May 2008 • 19745 posts Report Reply

  • George Darroch,

    No no no. It is nominal - but inflation stays really low. For some reason. Also unemployment plunges for some reason. And productivity grows steadily, somehow.

    The pull of gravity also weakens as celestial beings enter your body.

    WLG • Since Nov 2006 • 2264 posts Report Reply

  • George Darroch,

    Bit of rugby in the meantime.

    The one thing I don't blame the voters for.

    WLG • Since Nov 2006 • 2264 posts Report Reply

  • Sacha, in reply to Sacha,

    Treasury's heroic predictions

    Te Standard has insight (humour)

    Ak • Since May 2008 • 19745 posts Report Reply

  • Steve Barnes, in reply to Keith Ng,

    Because inflation is going to go mental, as a result of GST plus the wallop of Christchurch spending.

    As I Said Earlier That 4% wage rise is not adjusted for inflation, it's the reason for it and this lot are relying on that fact to introduce real cuts by stealth.

    Peria • Since Dec 2006 • 5521 posts Report Reply

  • BlairMacca, in reply to Sacha,

    Neoliberal magic beans ftw

    "Homer, tell your child what you bought when I sent you to town to get some insurance.
    Homer: Curse you, magic beans!"

    Its not far from the truth here is it?

    Wellington • Since Apr 2007 • 208 posts Report Reply

  • Alastair Thompson, in reply to Keith Ng,

    Radioactive Donut in Friggin’ Space,

    I just installed I.E.9 and so it works in all my browsers. Firefox, Chrome, Safari and IE 9. Just stuck up a link on our Front Page....

    Interestingly by defailt I.E.9 is not yet flash supported - you have to install some kind of beta version which crashes the browser fairly regularly.

    Wellington • Since Nov 2006 • 220 posts Report Reply

  • Alastair Thompson,

    Regarding the heroic forecasts. The important thing is that the ratings agencies are buying them and the foreigners are buying our sovereign debt at record low yields. So much so that we have borrowed roughly $7 billion this year that we arguably don't need yet.

    Its also worth considering that if the heroic forecasts turn out to be wrong (Note: there is a theory that creditless recoveries - as opposed to consumption driven ones are slower but they still happen and they are more resilient in the long run) then the cuts ought to be a lot deeper than they are to save us from long term penury. Just sayin.

    Wellington • Since Nov 2006 • 220 posts Report Reply

  • Steve Barnes, in reply to Alastair Thompson,

    Interestingly by defailt I.E.9 is not yet flash supported –

    HTML5 kinda makes Flash redundant, if your browser supports HTML5 then you will only use flash for sites that have not updated their content to be compatible with the new standard. As far as I know, not being a user of a computer made of fruit, the iPad and its siblings don't support Flash either.

    Peria • Since Dec 2006 • 5521 posts Report Reply

  • Steve Barnes, in reply to Alastair Thompson,

    The important thing is that the ratings agencies are buying them and the foreigners are buying our sovereign debt at record low yields. So much so that we have borrowed roughly $7 billion this year that we arguably don’t need yet.

    So, I suppose that means having a currency trader as a PM using Treasury as his trading portfolio is a good thing?.

    Peria • Since Dec 2006 • 5521 posts Report Reply

  • Joshua Arbury,

    One thing that's particularly interesting to look through is the estimations of taxation income over the next few years. Page 2 of this gives a good run down of this: http://www.treasury.govt.nz/budget/2011/estimates/est11sumtab.pdf

    In 2007/2008 taxation income was $61b, but this declined to a low of $55b by 2009/2010, recovering to $58b in the 2011/2012 financial year.

    The government estimates that this will start increasing dramatically to $66b by 2012/2013 and - amazingly - to $75b by 2014/2015. That's a $20b increase in tax take in 5 years, or 36%.

    That seems pretty optimistic - and unlikely to cut the mustard with Don Brash in any post-election deal one would guess?

    Auckland • Since May 2009 • 237 posts Report Reply

  • Alastair Thompson,

    Hadn't thought of that. But it is good that we seem to be having no difficulty borrowing money at nice cheap rates while we struggle to work out whats wrong with the economy.

    My view (influenced greatly by Geoff Bertram's recent work) is that the problem is that we have been allowing foreign depositors - dentists and housewives - to invest fast money in our mortgage market for the past two decades.

    The result has been not only to favour housing investment over productive investment - but it has also resulted in an imbalance in favour of the non-tradeable sector business investment vs the tradeable sector. This can be seen in the very high levels of inflation in non-tradeable goods and services - food, professional services, utility prices etc.

    The kicker is that it has also resulted in foreign funding of bank lending (not because its necessary - but because it is very profitable) and this in turn has resulted in NZ (and Australia as they are fundamentally the same as us - hence the recent rating downgrade of their banks) having a banking sector with a massive foreign exchange exposure.

    In NZ's case it is estimated that this position is roughly $86 billion, i.e. the amount of NZD lending which is funded with non NZD wholesale funds.

    And the consequence of this is that our banks have 86 billlion reasons to keep the NZ currency high - which further hurts the tradeable/export sector.

    There is a solution to this but it requires some considerable bottle. 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 :)

    Wellington • Since Nov 2006 • 220 posts Report Reply

  • Terry Baucher,

    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.

    Devonport • Since Nov 2008 • 91 posts Report Reply

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