Posts by Matthew Hooton
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Hard News: A storm in any port, in reply to Russell Brown,
Russell - there is no doubt at all that they do, in fact, work together.
Read this document: http://www.waterfrontauckland.co.nz/aucklandwaterfront/media/PDFfiles/waterfrontPlan/05WP_Port.pdf
If you don't have time for the whole thing, here are some highlights:
"This strategy sets out Waterfront Auckland’s support for POAL’s local and international port and logistics activities. Auckland’s Port is a crucial part of regional and national supply chain infrastructure that is required for the foreseeable future. We are therefore committed to working closely with POAL to ensure that it retains the ability to facilitate future trade growth as required to support an efficient Auckland and New Zealand supply chain.”
“Waterfront Auckland believes that it is possible for Auckland to have both waterfront redevelopment and a major and growing port located within its wider CBD waterfront.”
“We will work with POAL to ensure that future development of the Port area on the Auckland Waterfront is aligned with the objectives of the Waterfront Plan, and the key projects and developments proposed in the Waterfront Plan.”
“For the reasons outlined earlier in Section 4.5.1, and recognising the vital role that POAL plays in both the Auckland and national supply chains and economies, Waterfront Auckland supports Scenario 1, i.e. continued growth and development of the Auckland port in its current location on the waterfront.”
“We will continue to work closely with POAL to seek to agree on a Plan that meets the needs and objectives of all stakeholders.”
It is outrageous they wanted to sue me and NBR (and demand costs!) for suggesting they were in collusion and allies. Of course they are. And I am grateful to Barry Colman at the NBR for standing up to them.
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Hard News: The perils of political confidence, in reply to merc,
Also agree that the tea was a fail. The symbolism required Banks to buy Key a triple espresso and force him to consume it.
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Hard News: The perils of political confidence, in reply to Russell Brown,
I agree with Danyl - if it really was a "gamechanger" etc then the editor had a responsibility to publish and be damned.
And, Russell, the editor said it would have shared the front page with the Zac Guildford story, which was a massive story by anyone's news judgment. So, he isn't saying it falls between the cracks but that what is on the tape is of very significant news value. IF that's true, then he made a serious mistake on Saturday night.
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Seems the Goffice agrees with me, just a few days too late and without leveraging it.
See http://yfrog.com/kjpwdyvj -
Hard News: The Politics of Absence, in reply to Russell Brown,
Or it might simply have validated the story and kept it in the headlines for another week.
Perhaps, but it would have been Goff in the media for that week, distancing himself from unpopular careerists in his party, associating himself with working class culture and talking about Labour Party values. Which couldn't be worse than where he is now could it?
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I was surprised Kathryn reacted so vehemently to my raising the Mad Butcher issue. My point was a serious one:
Oppositions don’t (often) get to decide what is news and what is not (and nor always do governments). For better or for worse the media decides what is news. In this case, the combination of the looming NRL final, Sir Peter Leitch’s cancer, over-the-top rhetoric on The Standard, Sir Peter’s recent praise of John Key, the Mallard attack on Bryce Edwards, Clare Curran’s attack on the Greens, and a void caused by both National and Labour having very little if anything to say meant Darien Fenton’s comments attracted media attention.
This gave Goff an opportunity (which there is no doubt a Helen Clark, John Key, Jim Bolger or even Jenny Shipley would have taken up). He could have called Darien into his office, bollocked her and then got his press team to leak the fact this had happened. Next day would be a photo-op where Goff would have met up with Sir Peter to apologise on behalf of his wayward MP, call him a “true Labour hero” or whatever, and then go on to say that Labour stands to fight for the people Sir Peter represents, and that however Sir Peter chooses to vote is his own business but Labour will always consider him one of them. And then Goff could have talked about the battlers and how Labour will help them etc.
This would have been on all the top-rating TV shows and look at the outcome: distancing of Goff from a has-been (or never was) MP; positioning Goff alongside the Mad Butcher, League, the Warriors and the NRP; neutralisation of the Mad Butcher’s endorsement of Key (is there any doubt the Mad Butcher would have gone along with all this if asked by Goff?); and the delivery of Labour messages on prime time.
This isn’t a brilliant insight – it is what a Clark or Key would have done probably without even having to think about it.
The fact Mr Goff and his PR people can’t immediately see such opportunities – and I would have thought he could have, after 30 years in politics – surprises me and is why he will never be PM.
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Mike Graham - no, it is not a user payes system. The Fund would meet only around 10% of the cost so even when contributions are made out of surpluses, it is only user-pays (using a very broad definition of that) to the tune of 10%. But if all the money for the contributions is borrowed, then that is passing the cost to future taxpayers, so in no sense is it a user pays system.
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Sacha - there may be more working-age taxpayers now (relative to the retired) in 2009 and 2030 but none of us would have been making any contributions to the fund - it would all have come from borrowing. Which means that, in fact, it would still be future taxpayers who would be making that contribution.
Gareth - the cost of Super (assuming no policy changes to eligibility which is Labour and National policy) is forecast to rise from 3.5% of GDP to 5.6% in 2030 to 6.6% in 2050 (but I think most people would accept that forecasts out to 2050 are largely measingless given the almost infinite number of unknowns).
Using just the closer 2030 figure, that means the cost will go up by 2.1% of GDP. This may be a lot in dollar terms but, to put it in some context, Labour's Phil Twyford is advocating increasing New Zealand's aid budget by 0.39% of GDP from 0.31% to .7% of GDP (see http://business.scoop.co.nz/2009/06/02/national-gives-up-on-overseas-aid-targets ) - a single initiative which would be worth nearly 20% of what would be needed to meet the Super cost.
Your extreme language of having to "suddenly ramp up funding" doesn't add much. It is just more of the extreme language that has made people believe meeting the cost of impossible, when it clearly is manageable.
And what no one on the "borrow to save" side of the debate seems to achnowledge is that the Super Fund would, in fact, meet just 11% of the cost (with no holiday) or 8% (with the holiday).
That means, the "Cullen Fund" was going to meet a cost equivalent to 0.616% of GDP in 2030 while the "English Fund" will meet an amount equivalent to 0.448% of GDP.
The effect of the Budget decision is to change the economics by just 0.168% of GDP (and this is using all the numbers Labour is relying on).
Why is Labour saying that a change of this magnitude would lead necessarily to changes in the scheme in 2003? It is absolute nonsense. And bridging rhe 0.168% of GDP gap hardly justifies taking the risk of borrowing to invest in the sharemarket - something no govt in the world would ever comtemplate.
And
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Geoff Pritchard - yes, sorry about length of the earlier comment.
Gareth, sorry to say this, but the idea it would be worth setting aside money even if the margin were forecast to be zero is absolutely insane (let alone there "possibly being an argument for indulging a slight loss overtime).
Yes, I know you can't compare govts to households when it comes to the rate at which they can raise money but the following analogy is still fair on the basis of a zero margin:
Imagine you know you face a major cost in 2030 (say you need to paint your house) - let's call it $20,000. You don't have the $20k and you worry you may not earn enough in 2030 to meet the cost. In fact, you predict you'll only have 90% of the money, so you expect to be $2k short.
POSSIBLY, if you were expecting to be able to secure returns above the cost of borrowing it could make sense to borrow a lesser amount now and invest it so you have your full $2k in 2030 (this is Labour's assumption) - but you would have to be pretty confident to do this.
However, on your assumption of a zero margin it is a straight choice of borrow $2k now or borrow it in 2030. Nobody would borrow now and carry the risk (or even the hassle) associated with it. The only rational choice is to wait and borrow in 2030 (because, for all you know, you may be earning more by then so you don't need to borrow at all) and if not you are still no worse off.
On the assumption of a loss - that involves borrowing MORE than the $2k now, losing some of it, but then being able to paint your house. This is truly loopy.
This "debate" seems to be becoming a boring old "Super Fund Good" vs "Super Fund Bad" argument, with the Labour side saying "We are proud of the fund, it was Michael Cullen's legacy and we are going to put money into it come hell or high water just to make a point, even if it doesn't make sense."
And, as I said earlier, that is playing into the hands of the far right who are ideologically opposed to universal super - they can say "look, its unaffordable, even Phil Goff" says so, when the whole issue relates to whether the taxpayer has to meet 89% or 92% if the total cost of Super at the peak, and that is a difference not worth taking any risks for.
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I must be careful not to get obsessed with this issue but I find the stupidity in the arguments to continue with contributions to the Fund while the Crown accounts are so strongly in deficit to be so irritating I'll bash something out ...
It seems to me that this whole debate is based around the rather banal observation that, most probably, a well-diversified portfolio will, over the long-run, outperform the risk-free rate at which the Crown can access capital.
(I say "banal observation" because it is something taught in the first lecture of any corporate finance course. I say "most probably" because no one can know the future. It is also relevant to note that only a handful of people have been able to outperform the market average over the long-term time and they are world famous, and it is highly unlikely that our Super Fund will do better than the market average.)
Given all that, if you make a forecast of what the risk-free rate might be and what the market average might be you get a small margin and you can then "forecast" the difference between them and come up with a number.
In this case the Treasury has come up with $8 billion, which sounds reasonable but is not a very large amount in the context of the issue - it is less than the negative turnaround in the Crown finances over the last year, and it has to be put into the context of the Fund being worth over $100 billion in nominal terms by the mid-2030s even with an 11 year contribution holiday. Change your assumptions even a tiny amount and the $8 billion can become $16 billion or can disappear altogether.
The Opposition is quite right to highlight this $8 billion as being what the Treasury forecasts suggest might be "lost" as a result of the decision to have a contribution holiday - and the $8 billion figure is the only relevant one with the wild $31 billion by 2022/23 and $58 billion by 2050 figures completely ignoring that the debt on the other side of the Crown balance sheet would be larger.
This is the logic that supports the Opposition's slogan that a match has been put to $8 billion. But it is a very fragile number - it can change dramatically one way or the other.
So, to me, the issue comes down to a very simple question: Is having higher gross debt of some $20 billion by the end of next decade worth seeking this $8 billion at some point beyond that?
If the answer to that is yes, then it raises the questions:
1) Why stop at $20 billion to get $8 billion - why not inflate these numbers?
2) Why wouldnt' we have thought this was a good idea even if there wasn't a Super Fund?
3) Why don't all Government's use this logic as a substitute for some or all of the taxation they collect?That is, those who really believe that the $20 billion for $8 billion is a good idea - either an absolute one-way bet or at least worth taking the risk - need them to give a reason for these particular numbers.
It is not good enough to say, well because those are the numbers Cullen was intended to put into the Fund if we have remained in surplus.
Nor is it good enough to say, well that's the amount we need to pay for future Superannuation needs because the Fund was only ever going to meet 11% of the need.
And how come no other Government in the world is seeing things this way? Why did Gordon Brown raise taxes when he could have said, look, I'm just going to borrow to invest in equities and that will reduce our net debt position in a few years, so you don't need to pay higher taxes now.
If the borrow-to-save crowd is correct, you would have thought that taxation would never have even developed historically because all government services could be funded through reliance on the banal observation above.
The other point that needs to be made is that the contribution holiday will not have any material impact on the ability to fund Super payments at current entitlement levels beyond 2030.
The leaked Treasury paper suggests that the amount the holiday will cost is to reduce prefunding from 11% to 8%. That is, the amount the taxpayer will have to pay for Super will rise from around 89% to 92%.
That is roungly a 3.37% increase in the amount taxpayers 2030-2050 would have to pay for Super to maintain the 65 year retirement age and the 66% rule. It seems to me it is such a small margin that to launch a globally unprecedented "borrow-to-save" strategy - with the risks it involves - cannot be justified. The results of the investments in shares etc are likely to swing more widely than this 3.37% increase.
What's more, when people say, well, we either borrow now or borrow later they are not necessarily correct. Our government accounts may be strongly in surplus in 2030. To meet the 3.37% increase, it may be necessary only to reduce the prevailing surplus at that time (or marginally increase the deficit.) Again, this doesn't seem worth the Crown carrying the $20 billion risk over the next decade.
There seems to be an emotional attachment by some to the Super Fund. But imagine if it did not exist and Bill English had got up in Parliament and said "I have decided to increase borrowing by $20 billion over the next decade to invest in a diversified portfolio of shares and other financial instruments over the next decade, and this is guaranteed to deliver us a one-off profit of $8 billion in the future." I think most people would think that would be barking mad.
Further imagine he said it today. Imagine if he said that he had been convinced by the arguments and had decided not to borrow $20 billion to get $8 billion but $40 billion to get $16 billion. Would anyone support that?
The Labour Party's carry on about this whole issue has led the media and others to make a direct and false link between the Fund and future Super entitlements. A debate has begun that says because of this decision the age of eligibility will have to increase. That is false as outlined above but it is gaining currency and may become self-fulfilling. Gareth Morgan and others are making the link. In other words, Labour's antics are making reductions in entitlements post 2030 more likely because a (false) public consensus may build that cuts are now necessary.
I really struggle to believe that had Cullen and Goff been in Government they would not have taken exactly the same decision Key and English did on this issue. I doubt Cullen will feel he can comment in his new role, because that would be to criticise either his political colleage Goff or his new master English, but it is interesting he had an amusing letter to the editor in today's Dom-Post that did not oppose the Government's decision.