No Minister

MORE OBSERVATIONS FROM THE BORROW AND HOPE BUDGET

with 22 comments

I’m not an economist by any stretch of the imagination but I always drill down into the accompanying hard data behind the headline lolly scramble sound bites to gain a more balanced view of the state of our economy as opposed to the talking points, pitched at the lowest common denominator, that are touted as serious analysis by the media.

Five things stand out for me. First, the cost of servicing (not repaying) the government debt is projected to top $5b this financial year. That’s $5b of ‘dead’ money sucked out of the economy. Second, and according to Treasury projections inflation has supposedly peaked dropping back to 6.7% by year end … believe that and I have a bridge to sell you going cheep. Third, the unemployment rate is projected to increase over the next four years peaking at 4.8% in 2025 …. thank you wee Willie Jackson for your legacy. Fourthly, the current account balance (as a % of GDP) is projected to increase from negative 3.3% last year to negative 6.7% this year and negative 6.4% in 2023 (election year) … great legacy Mr Roberston) and finally, real GDP per capita (you and me) is projected to fall from 3.9% in 2021 to just 1.2% in 2022 rising to 3.3% in 2023 before falling to negative 0.3% in 2024.

Taken together they paint a bleak future for many Kiwis and New Zealand. The incoming National/ACT government is clearly on track to inherit a mess just as they did in 2011.

Written by The Veteran

May 20, 2022 at 5:06 pm

Posted in Economics & Economy, New Zealand

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22 Responses

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  1. Well thought out post Vet. Lolly scramble describes it perfectly.

    Old Curmudgeon

    May 20, 2022 at 5:26 pm

  2. I wonder how “Six years of utter incompetence” will resonate. The greater problem (the economy will recover) is Labour’s legacy of racism. Apologists will say that the alternative is civil war but I’m not too sure about that. Sure some terrorism might surface but that’ll be temporary provided the authorities take it seriously. A movement which can’t organise a party in a brewery will not be able to even start a revolution.

    Cassandra

    May 20, 2022 at 5:36 pm

  3. The unemployment rate spouted by this bastard of a government is totally fake.
    There is no difference between job seeker and unemployed.
    How do we fall for this blatant nonsense.
    Then there s the $11,000 fee for “cultural learning” (being fed maori bullshit) before an immigrant qualified nurse can work in New Zealand.
    The bloody crap has to stop.

    leoj

    May 20, 2022 at 6:49 pm

  4. I’d be interested to see what evidence these Treaury wallahs have to support their pie in te sky inflation forecasts. Which models do they use? Climate change or Covid?

    adolffinkensen

    May 20, 2022 at 6:57 pm

  5. Another indicator Labour knows they are on the way out in 2023. They always leave a mess for the next government to clean up. It is the way as a fictional armoured Disney character would say 🙂

    fredonas

    May 20, 2022 at 7:19 pm

  6. My prediction months ago was that inflation would be nudging 10% by the end of the year and in all probability 12% to 15% by election time next year.

    The Budget does not give me any reason reason to change those.

    pdm1946

    May 20, 2022 at 8:55 pm

  7. Steven Joyce does an excellent job on the budget in today’s Herald. Specially that government spending has increased from 35% of GDP to 40%. An enormous structural change that puts us into the category of sclerotic European economies. This increase also explains the massively growing deficit.

    An increase in government spending of this magnitude can’t be covered by borrowing indefinitely. An increase in taxes is inevitable. Hence Parker rabbiting on about wealth taxes.

    Any new taxes will ultimately need to cover 5% of GDP, being the increase in government spending from 35% of GDP to 40% of GDP. This is $15 billion per year, so any new taxes won’t be limited to the seriously rich. A large part of the middle class will be hit.

    If we are talking wealth taxes then anyone with assets above $3 million will be hit. Every farmer, anyone who owns a rental property or a beach house. Probably 25% of families over age 40 when wealth accumulation is building will be hit. Say 400,000 families paying at least 1% wealth tax, the percentage increasing with more assets.

    An Auckland family with a reasonable house and a rental unit will have $3 million in assets. A 1% wealth tax would be $30,000, which will have to be found out of income or borrowing against assets. Such a family will have at least $150,000 income, but in many cases, if they are retired, it will be substantially less. For the family with $150,000 it would be a 50% increase on their current income taxes.

    Now this might seem alarmist. I guess there would be an exemption for a family home up to a certain limit. Still it is clear when an extra $15 billion taxes has to be found each year, then someone has to pay it.

    Wayne

    May 21, 2022 at 9:43 am

    • Funnily enough this was the topic of discussion during the first face-to-face meeting I’ve been able to have with my accountants in two years; all part of trying to plan for the future.

      Discussions mainly focused on the usual sort of re-structuring that would be needed to combat various tax increase / new tax scenarios and they made it clear that most of their clients were having similar talks. It’s regrettable that money will have to be wasted paying lawyers and accountants for this crap instead of being spent on productive things, but then I could say the same about the various regulatory monsters that have come down the road over the last twenty years, with more to come.

      Nobody mentioned voting for a National / ACT party to prevent all this from happening.

      Tom Hunter

      May 21, 2022 at 10:52 am

    • I should also note that National worked very hard to get core govt spending down to 28% of GDP, with total government spending at about 32%. Both these numbers have been increasing under Labour, covid providing cover. The budget documents show the total will hit 40%, it took Steven to show this, no journalist had read deeply enough to find it.
      The point I am making (for the benefit of Tom, Nick and others) is that there is a real difference between National and Labour. The growth from 32 to 40% government share of GDP is 25%. A massive increase in just 5 years. That is why Labour won’t cut taxes, and in fact will need a new tax – Parker’s proposed wealth tax.
      National will have to spend years winding back Labour’s high spending. Some things are easy, since they won’t have actually happened. Three Waters, Light Rail, Unemployment Insurance. Others will take real effort in resting expectations. In health actually setting targets as opposed to just spending money to no effect.

      waynemapp

      May 21, 2022 at 4:28 pm

      • The point I am making (for the benefit of Tom, Nick and others) is that there is a real difference between National and Labour. The growth from 32 to 40% government share of GDP is 25%. A massive increase in just 5 years.

        On this issue of course there is but…

        National will have to spend years winding back Labour’s high spending.

        I’ve no doubt they will, likely between 2023 and 2029 or if they’re lucky 2032.

        Just in time for Labour to do the same thing again, with all the same, massive state institutions hungry to be well fed once more.

        I’m tired of that Merry-Go-Round. It’s just not good enough anymore.

        Tom Hunter

        May 21, 2022 at 6:29 pm

      • Trouble is National has been decimated.

        I doubt it has any great economic financial thinkers in the current crop. That talent went with the loss, thanks Winston, untended consequences of the traitors behaviour

        Its going to take 3 years of governing just to sort an effective team and identify the talent.

        Look at Roger Douglas, he had a cabal of 5-7 thinkers, people with true talent, they had a plan, a philosophy to back it up.

        This current crop of low hanging fruit probably dont even have a plan for the first 100 days, let alone 3 years.

        If we elected a national breed of snails things would probably happen faster.

        Like Tom

        “I’m tired of that Merry-Go-Round. It’s just not good enough anymore.”

        rossco

        May 21, 2022 at 7:08 pm

      • @Wayne… ” Three Waters, Light Rail, Unemployment Insurance. ” ……….

        So how come Health Authority, and local governance voting reform, W.H.O pandemic compliance; are not included in that brief list of things you think a NAtional led government would immediately reverse ?
        Perhaps it seems too soon to release an agenda for the established politicons to effectively counter-tactic; however a lack of clearly defined party agenda and targets also gives potential voters absolutely nothing to base a hope on.
        At least some of the “Far Right” novices have some flags nailed to their masts.
        From my perch, the middle voter will be looking for nailed commitments in the candidates.
        No more “vote us into power and trust us to do what we think is right” with a stealth agenda.

        walnutter

        May 22, 2022 at 12:21 pm

  8. Rossco … if Douglas was the answer then it had to be a stupid question. Douglas and Richardson were ideologues of the ‘let them eat cake variety’. Their vision was to consign any number of Kiwis to the scrapheap as expendable for the ‘greater good’ … cough … Douglas … farmers and Richardson … the vulnerable. All good if you are comfortable urban middle class. Yes, structural reforms were needed after Muldoon’s approach to the economy was revealed as the Emperor without any clothes but those reforms were devoid of the human element. Labour’s legacy will not be undone by a rip, shit or bust approach. New Zealand and New Zealanders deserve better than that.

    The Veteran

    May 21, 2022 at 9:17 pm

    • Fair points that I’ve made myself. As a conservative I don’t approve of revolutions – and I include Rogernomics in that – because they break a lot of things and often don’t achieve their objectives anyway.

      But that’s what worries me about NZ at the moment; if we keep treading water like Labour and National governments in the 1960’s-70’s, then we’re going to get another revolution like Rogernomics.

      Cutting spending to X% of GDP, some basic tax changes like indexing, and better management of the education, health and welfare sectors is increasingly not going to work, anymore than all of Muldoon’s prescriptive fiddling could by 1983-84.

      Tom Hunter

      May 21, 2022 at 9:44 pm

    • One could argue that what Douglas and Co did was absolutely what NZ needed after the complete hash National and Muldoon had made of the country down to regulating the price of milk. 3 months to get a phone connection anyone? Sheep retention scheme anyone?

      “New Zealanders deserve better than that” –do they? We as a country were stupid enough to vote in a Labour government so I guess we deserve what we get.
      I still hear silly old codgers saying ” we need Winston to keep the National honest” and stupid people especially women saying “at least Jacinda kept us safe” madness.
      With that sort of stupidity out there do we really deserve better?

      Old Curmudgeon

      May 22, 2022 at 8:54 am

    • @The Veteran
      Hang on a second…. Does this mean that you voted for National and thus Muldoon … in 1984???

      Tom Hunter

      May 22, 2022 at 9:53 am

      • Of course he did…… hes tribal National.

        Besides Rob Muldoon was a Corporal, and Vet always obeys orders, even if its his wife 🙂

        rossco

        May 22, 2022 at 10:30 am

      • Tom … to answer … 1984 … Bob Jones NZ Party, along with 236,385 others. Muldoon had to go but I was never going to vote Labour.

        Another stupid comment from Rossco exposed. Some muvvers do have im.

        The Veteran

        May 22, 2022 at 1:56 pm

      • 😅

        Tom Hunter

        May 22, 2022 at 2:05 pm

      • Hey Vet don’t be too harsh Rossco is always good for a laugh.

        Old Curmudgeon

        May 22, 2022 at 4:40 pm

  9. Tom Hunter

    May 21, 2022 at 10:12 pm


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