Hard News: John Key(nesian)
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Borrowing money for infrastucture You can trust these guys eh?
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"He indicated that Muldoon created a debt problem (circa 83% of GDP, IIRC) and that now it was approx 17%, with Labour saying their upper limit is 20% and he reckons National will take that up to 22%.'
The problem with debt is not so much the borrowers but the lenders. How they can really screw your economy around when they want it back faster than you anticipated or they'd anticipated.
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NZ does have a growth problem, I think there's little doubt about that, but I'm not at all confident Key's borrow and hope plan will fix it.
This speech does create a contrast between the parties, one that was in mortal danger as National progressively adopted Labour's policies, but it's largely rhetorical; more I'm ambitous for NZ but don't ask me about the details.
There's a few things about the speech that bother me. First, what's this actually mean?
We will do what works. And let me be very clear today, that includes inviting the private sector back to the table. National will dispense with Labour's blind ideology that has locked the private sector out of government services and ideas for so long.
How will they "invite the private sector back"? In what way have they been locked out? If we assume that it includes assets sales in some imagined second-term, don't we already know the limitations of this approach? Is that it but?
And we will require schools to do something about it when kids are below standard. We will do this because, unlike Labour, we refuse to write some children off as hopeless.
Quite simply, this is complete bollocks. NZ's performance by any credible measure is improved, improving and good by OECD standards. This is nothing short of scaremongering.
Then we get roads and broadband and a huge bill.
This will result in National investing close to $5 billion of additional capital investment over the next six years to fund infrastructure over and above that foreshadowed by Labour. This means that at the most National will be running a gross debt-to-GDP ratio around two percentage points higher than Labour is planning.
So, our growth problem will be public debt for new roads, faster broadband and what... oh now I see how the private sector will be invited back...
In 2008, infrastructure is New Zealand's missing asset class. National will turn that around. We believe New Zealanders should have an opportunity to invest in the infrastructure that will help build our country's future.
PPPs. Don't look to the West John, they've been a bit of mixed bag mate.
And finally, for anyone who doubted the Australian influence on Key, how's this for a rip-off:
National will tap into our communities and our private enterprises to rebuild the ladder of opportunity for every single New Zealander.
Meh, skipped Rudd and Beazley and went for Latho.
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"rebuild the ladder of opportunity"
Isn't that a lyric from stairway to heaven?
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Capital gains tax, stamp duty, enforcement of the current tax code on people trading property for income, steps to make shares relatively more attractive
None of which would have stopped the huge influx if cheap finance, essentially created by the US Federal reserve and Japan. Australia has most of the above and still had (has) a crazy arse housing boom.
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Before you record the "Sensing Murder" discussion, you might like to read this....
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PPPs. Don't look to the West John, they've been a bit of mixed bag mate.
They have everywhere, but it's like an article of faith on the centre-right that they will fix things in indefinable ways.
Cullen has also pointed out that the Nats' version of infrastructure bonds will offer a guaranteed return from the projects they fund, which rather conjures the prospect of digging a very big hole for yourself if things don't work out.
And would the guaranteed bonds still qualify as a hoax according to National's Craig Foss?
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They have everywhere, but it's like an article of faith on the centre-right that they will fix things in indefinable ways.
Primarily through depositing great wodges of cash in the pockets of their rich mates. That's what this is really about: redistributing the wealth of society upwards. Again.
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We're at risk of confusing some stuff here I think.
None of which would have stopped the huge influx if cheap finance, essentially created by the US Federal reserve and Japan.
Spot on. Basically a load of criminals overseas invented a machine that printed money, bypassing international controls. We will have a few years of inflation now to mop up all that invented cash (to be fair, there were lots of calls by various bodies for restraint...)
We have a simpler decision to make. What is the right level of gearing for our economy? Debt-to-GDP ratio needs to take into account all debt (Public & Private).
It should be based on our growth aspirations, and expressed perhaps as a view of the Country Risk position we want to take.
NZ is in a great position due to a prolonged period of good fiscal management. A Keynesian approach would suggest we increase national debt levels at the moment to mitigate recession.
Sometime this makes sense. We reduce the tax burden, effectively borrowing to inject money for plasma TV's into peoples pockets. This runs off-shore to China, where they import oil to make the TV's and send them to us, thereby increasing the price of oil, petrol prices go up, food gets more expensive... oh, sorry, doesn't sound too hot does it?
Alternatively you can get people to pay down debt. this is sort of like saving, so maybe a subsidised / compulsory saving scheme? Oh, we've got that, Kiwisaver and NZSuper Fund. Which is another reason our overall debt is looking good.
Maybe we can force investment in productive assets (as opposed to real estate). Maybe tighten up regulation of the local financial sector so people feel confident in buying into the local share-market? Or pay of mortgages (people tend to do that when interest rates are up).
Build roads? I don't know, can you sell the output, preferably overseas?
Tell you what you can sell. People. How about doing what Ireland did - invest massively in education.
And the infrastructure we need to support that is... broadband...
So I'm still looking for differentiation...
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They have everywhere, but it's like an article of faith on the centre-right that they will fix things in indefinable ways.
You mean National will fix things in indefinable ways, or infrastructure bonds will? Or debt?
I think slightly increased debt levels aren't the devil incarnate - certainly if they are used to fund expansionary economic policies that otherwise wouldn't happen then it can "fix" a lot. And enabling infrastructure is the right sort of thing to fund with debt - but roads really aren't enabling infrastructure that will drive significant growth in our current environment...
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You see slarty if someone from either side of the political divide talked about encouraging investment in productive assets, education and export potential I'd be ticking that little box like a madman.
I think you've perhaps been a little harsh on the effects of cyclical stimulatory policy but any chance you want to front up for a political party? =) -
"How about doing what Ireland did - invest massively in education."
That's the kind of vision I want to hear from our parties. What should our people know that they don't know? How are skills achieved and why is importing skills the only answer offered?
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You mean National will fix things in indefinable ways, or infrastructure bonds will? Or debt?
PPPs. The evidence that they're a better way of funding infrastructure is scant, but they're ideologically appealing.
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Tell you what you can sell. People. How about doing what Ireland did - invest massively in education.
We are doing that already but could do better. When our bright young things go off in search of fortune and experience by getting snapped up by overseas firms we are told, by Key and his ilk, that it's a brain drain but even he came back with $50 mil. Think what people with brains could do. ;-)
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PPPs. The evidence that they're a better way of funding infrastructure is scant, but they're ideologically appealing.
Right, sorry wasn't following the line of thought.
Agree with you - the need for private investment for return seems woolly when as a rock-solid Govt your own rates for borrowing are pretty freakin sharp.
I guess it boils down to a belief that the private profit motive leads to better governance. -
How about doing what Ireland did - invest massively in education.
Just to play devil's advocate: so many of our most educated disappear overseas for want of opportunity or adequate remuneration. If we invest heavily in education, won't we just be funding a brains trust for the taxpayers of other countries (in the same way that we seem to be hoovering up medical graduates from 3rd world countries)?
I mean, did that really work out for Ireland, or was it just the EU subsidies and remittance of funds from the UK?
Educated minds are a productive asset, but they're mobile and fickle - how will we keep them?
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Jeremy and Gareth make a good point. Which brings up a question to the PA crowd - what would you like money spent on? Where do you think a spare billion could be well spent?
For me, an obvious priority would be direct intervention to roll out insulation. By 2015 I'd love it if every house in the country was warm, and no child was going to bed cold. We don't often think of it as infrastructure, but the costs manifest in sickness, life expectancy, energy bills and plain old quality of life. -
Stephen, fair point.
I would argue that some investments in education do the opposite however, and attract graduate students and researchers and other bright minds from around the world, who not only do useful work but often become useful citizens.
I don't know enough about the education sector to know whether we could move the New Zealand institutions into such a category, but it seems feasible. I do know of foreign postgrads who came over for a PhD in which they paid domestic fees and who are now naturalising and considering a New Zealand future.
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Have to agree on vision I'm afraid. All the National Party stuff sounds like the same old shit recycled. Which I suppose it should be if they have any sort of philosophy they cling to. There just doesn't seem to be any sort of acknowledgment of how the country has evolved in the last 10 years and the exciting prospects of what we could achieve in the next 10. I'm not sure I could encapsulate it in a manifesto either but I "feel" it and I want someone in politics land to package that and sell it back to me. Oops, I'm scaring myself now.
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so many of our most educated disappear overseas for want of opportunity or adequate remuneration. If we invest heavily in education, won't we just be funding a brains trust for the taxpayers of other countries
How else do you move to a high-wage economy, though? It ain't going to be roads. We'll always lose some people, and will gain others (yours truly doesn't come from a third world country and is any politician's wet dream - a highly educated exporter!) (thank you, thank you, that's enough applause).
I mean, did that really work out for Ireland, or was it just the EU subsidies and remittance of funds from the UK?
It worked in places like Korea and Vietnam, though, right?
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"I mean, did that really work out for Ireland, or was it just the EU subsidies and remittance of funds from the UK?'
Ireland pops up a lot in discussions of the modern economy yet what can N.Z learn from that economy apart from trying to join the EU.
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what would you like money spent on? Where do you think a spare billion could be well spent?
Efficient/alternative energy systems. Solar, Wind, Geothermal, Hydro. Waste heat recovery systems, Co-Generation and a switch to an electric vehicle fleet. This will lead to a country not dependant on Oil, decrease pollution, increase the value of our Exports, increase our National Security, Increase the overall health of our People, Reduce debt, increase productivity by reducing overheads......and............and.....and
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"For me, an obvious priority would be direct intervention to roll out insulation."
That's a great point.
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"what would you like money spent on? Where do you think a spare billion could be well spent?"
As much as we can create and grow gdp we also need to revisit the delivery of that growth into areas that need it, our personal households.
I would support a complete restructuring of our wage negotiations
and our remuneration's because we are a low wage society for no other reason than we have lost the ability to negotiate for those who don't have the power to. -
Re Ireland - if the winds blow favourably, we could position ourselves as an equivalent into China, India and Asia. There success was based partly on transfer payments - but if we set ourselves up as a low-debt, stable-Govt economy that hugely incentivised business investment (low corporate tax rate etc etc) and had the skilled populace and export infrastructure in place, we could be a very very successful nearshore satelitte for companies looking for access to those markets.
Helen and Phil's FTA with China is a big part of that - if we are on a favourable trading relationship with China in the way Ireland are with the EU, then it really backs up the story.Huge changes required of course and frankly we don't have the balls to do it, even if much more solid research than my guesses suggested it would work.
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