OnPoint: Budget 2009: “Aww, shit.” (Final Update)
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Shouldn't it be $88 billion plus the interest accruing on that debt? So there may be even bigger spending cuts ahead?
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Two things:
- firstly, that graph assumes no growth forever, right? If we can actually recover from this recession, then we'd expect debt to fall.- secondly, 60% debt/GDP would only put us where most developed nations are now. Why should we be the only ones with tiny government debt, how does it help us?
The answer of course, is that for most people in NZ, it wouldn't really matter if we had 50% or 60% debt/GDP. We'd have to pay a bit more tax and slightly higher interest rates, but that would be more than outweighed by stable and secure jobs.
It's different for the people who matter to Nationals though. Government borrowing will impact their ability to fund schemes (like building billion dollar hotels in former scenic areas) and higher taxes will get between them and the bach in Hawaii.
So we've got to suck it up. Vote for change, eh?
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So, how has National managed to reduce future debt? By cutting a fuckload of future government spending.
Spending growth will in fact be negative in real terms (and going backwards as a percentage of GDP). So someone in fact got more than their "cap spending at inflation" demand.
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Rich, I believe GDP growth IS factored into that debt curve - but not until 2011.
We are forecast to go even further backwards next year -
Vernon Small on Stuff: "But the big surprises are in the extent of delays to tax cuts and future contributions to the Cullen superannuation fund."
Even I could have predicted those two. Equally surprising are more cops on the street and more prison beds. Laura Norder is the winner on the day.
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We all knew there would be nothing for R&D but there should have been. R&D would lead to more jobs, more productive jobs that is as opposed to the non productive 600 extra cops and more probation officers to control the disenfranchised unemployed.
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A typical Tory budget.
Long on bean counting, short on vision and driven by the Treasury. I don't know why people bother voting for National, all they do is elect a bunch of pin stripes from the Terrace.
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I hope the media see through the "delay/defer" spin on tax cuts.
I have delayed producing my great novel, but ... you know, it's all there, it just may have to be written posthumously.
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They've cut a lot of things, but one thing they're spending large on is roads.
$10.7 billion of roading projects.
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"- secondly, 60% debt/GDP would only put us where most developed nations are now. Why should we be the only ones with tiny government debt, how does it help us?"
Maybe I've completely missed the point, but I thought the lesson of the worldwide recession was having massive amounts of debt might be a bad thing? That and maybe aiming to be just like Iceland or Ireland isn't so smart either.
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I hope the media see through the "delay/defer" spin on tax cuts.
Yep, these were the "fully costed and funded" tax cuts that absolutely could and would happen.
In the words of a Tui billboard....
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aiming to be just like Iceland or Ireland isn't so smart either.
How about Germany, France or Switzerland then? They all have ratios in the over 40% range, and are doing better than we are.
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Rod Oram suggested that the long-term returns on the NZSF will be actually be greater than the cost of borrowing – i.e. that borrowing to invest in the NZSF *is* profitable.
On this basis the government should just borrow a trillion dollars, invest it, and keep the one billion profit that it makes after a year.
Is suspect the truth is that the margin between the cost of borrowing and the income of investing for something as safe as our government is very small. You'd make a small loss. But you're right Keith, it'd be good to see actual figures. They would quickly tell us if National has made a good decision here or not.
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The answer of course, is that for most people in NZ, it wouldn't really matter if we had 50% or 60% debt/GDP. We'd have to pay a bit more tax and slightly higher interest rates, but that would be more than outweighed by stable and secure jobs.
You mean we would be able to get French (8.8%) or British (7.1%) or American (8.9%) levels of unemployment, as opposed to our current 5%.
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Remember when it comes to Super that right now our super cost is 3.5% of GDP and would rise to 5.6% within 20 years. The point is that by spending at total (including Cullen Fund contribution) of, say 4.5% now we bring down that 5.6% later on.
It's less about "borrow vs invest" as it is about "holy shit it will be tough to do either in 20 years if we have to spend THAT much on super, but we can afford to do it now"
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Those over 65 increased by 2.5% in New Zealand last year, according to Stats NZ. That scale of increase is going to continue for a while.
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So, how are DPF, C.Slater, etc spinning this ? Are they wetting their pants with excitement ?
I had a look at the Herald's "Your Views" response to the fudge-it and it was a mixture of "what a meanie" and "a strong response to years of wasteful spending by Labour", etc.
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Oops, I mean Herald ''s
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You mean we would be able to get French (8.8%) or British (7.1%) or American (8.9%) levels of unemployment, as opposed to our current 5%.
It's only a matter of time according to Bill English treasury executive summary (page 13). The next twelve months look really bad. Let's hope the herald and real estate agents will get honest about the housing market having bottomed out.
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So, how are DPF, C.Slater, etc spinning this ? Are they wetting their pants with excitement ?
Last I looked, DPF was being the good soldier, and his crazier correspondents were declaring war.
Excellent analysis, btw, Keith. It puts most of the newspaper commentators to shame.
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It puts most of the newspaper commentators to shame.
No mean feat, seeing as, as far as I can tell, they have no shame.
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Harden up.
Yeah.
Back when I was a kid, we lived in uninsulated houses, ran up huge deficits, spent big on 'essential' infrastructure projects, and made promises about superannuation that locked in future Governments for decades to come.
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You mean we would be able to get French (8.8%) or British (7.1%) or American (8.9%) levels of unemployment, as opposed to our current 5%.
Paradoxically, the bolshie nature of French trade unions has led to high productivity through machines replacing humans. Here in NZ, companies are still content to use people to dig with shovels and rotate road signs.
Am I not the only one to feel that only a major sub-priming of the mortgage and credit card sectors will jolt NZers into genuinely productive investment?
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International credit rating agency Standard and Poor's has given a favourable verdict on the budget, upgrading New Zealand's outlook from negative to stable.
In both political and economic terms, that's a result.
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Back when I was a kid, we lived in uninsulated houses, ran up huge deficits, spent big on 'essential' infrastructure projects, and made promises about superannuation that locked in future Governments for decades to come.
And it never hurt me.
Oh, hang on ...
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