Organised common sense

April 21, 2014

Thomas J. Sargent delivered a graduation speech at his Alma Mater, University of California at Berkeley:

Economics is organized common sense. Here is a short list of valuable lessons that our beautiful subject teaches.

1. Many things that are desirable are not feasible.

2. Individuals and communities face trade-offs.

3. Other people have more information about their abilities, their efforts, and their preferences than you do.

4. Everyone responds to incentives, including people you want to help. That is why social safety nets don’t always end up working as intended.

5. There are tradeoffs between equality and efficiency.

6. In an equilibrium of a game or an economy, people are satisfied with their choices. That is why it is difficult for well-meaning outsiders to change things for better or worse.

7. In the future, you too will respond to incentives. That is why there are some promises that you’d like to make but can’t. No one will believe those promises because they know that later it will not be in your interest to deliver. The lesson here is this: before you make a promise, think about whether you will want to keep it if and when your circumstances change. This is how you earn a reputation.

8. Governments and voters respond to incentives too. That is why governments sometimes default on loans and other promises that they have made.

9. It is feasible for one generation to shift costs to subsequent ones. That is what national government debts and the U.S. social security system do (but not the social security system of Singapore).

10. When a government spends, its citizens eventually pay, either today or tomorrow, either through explicit taxes or implicit ones like inflation.

11. Most people want other people to pay for public goods and government transfers (especially transfers to themselves).

12. Because market prices aggregate traders’ information, it is difficult to forecast stock prices and interest rates and exchange rates.

Hat Tip: AEIdeas

 


Forecast brighter

April 16, 2014

Finance Minister Bill English delivered good news in a pre-Budget speech yesterday:

The Budget next month will show growing surpluses over the next four years, starting with a small surplus in 2014/15.

At the same time, we’ve set out on a longer-term path to repair the damage to our economy caused by excessive borrowing, consumption and spending under the previous Labour government.

So together with households and businesses, we’re rebuilding the economy’s capacity to deliver more jobs and higher incomes over the next decade.

And we’re starting to see positive results.

Employment is rising across the board, wages on average are increasing ahead of the cost of living and consumer and business confidence has lifted.

So the Government has shifted its focus from managing our way out of recession to managing a growing economy.

In particular, we’re aiming for sustainable growth – the kind of longer-term growth that can deliver consistently more jobs and higher incomes.  

A short, sharp uplift would lead only to disappointment if we did not work on the longer-term economic fundamentals of investment, skills and productivity.

The Government is taking a long-term view, because some of the factors driving the economy today will peak over the next few years.

Export prices are likely to return closer to normal levels, housing supply will eventually catch up and the Christchurch rebuild will peak and eventually slow.

And the New Zealand economy faces ongoing global risks, including uncertainty about the performance of our two largest and linked trading partners, China and Australia.

Against the background of a growing economy, we have the opportunity to lock in the gains New Zealand has earned over the last six years.

That will mean more investment, better skills and a growing export base – all flowing into higher incomes and more jobs.

But that depends on more of the policies which are delivering good results.

This year is likely to see a political debate between a determined Government and complacent opposition parties who already believe today’s good times are permanent.

And they think we can go on an immediate taxpayer-funded spend-up.

We paid the price of complacency in the years up to 2008.

Until the mid-2000s, New Zealand generally enjoyed a period of low inflation and relatively high growth.  

Complacency then led to a rapid pick-up in government spending, policy that undermined competitiveness, soaring house prices and an unprecedented increase in household debt.

By 2008, households faced mortgage rates of almost 11 per cent and business rates exceeded 9 per cent.

Inflation exceeded 5 per cent and, by 2008, the export sector had shrunk significantly since the early 2000s, smothering our earning capacity.

The high cost of capital brought an end to investment and job growth and by early 2008 – well before the global financial crisis – New Zealand was in recession.

We can avoid those problems this time round.

But not with a change in government.

Opposition policies show they haven’t learned the hard lessons from their mistaken belief that more taxes and higher spending will deliver a different result than they did in the noughties.

While some increase in interest rates is an inevitable consequence of a growing economy, we need to do everything we can to ensure they don’t rise too sharply in the next few years.

A lower interest rate cycle will mean less pressure on households with debt, more investment in productive businesses and less pressure on the exchange rate for our exporters.

It is in that context that we will present the Budget next month.

Budget 2014 will build on our success so far.

You will see the Government continuing to be careful with its spending. And we will lay out an ongoing programme to lock in the benefits of sustainable growth.

If governments make large cash injections into the economy when house prices are already high and economic growth is building, interest rates will rise sharply.

We won’t make that mistake.

National’s new spending over the last five and a half years has slowed considerably compared with new spending by the previous government – and public services have improved.

Opposition parties’ answer to every problem is more government spending, despite clear evidence that high rates of government spending have little or no impact.

This was noted by the Salvation Army in its State of the Nation report in 2008. They noted that large increases in spending over the previous five years seemed to have contributed very little to New Zealand’s social progress.

We don’t need large lumps of new spending to get better results for our communities.

There’s a significant difference between quality spending and quantity.

The Budget next month will be about thoughtful targeted spending, not a spend-up. It will invest in better healthcare, more effective education, safer communities and less welfare dependency.

This Government has taken time to improve the quality of government spending, rather than just cut costs.

We have invested significantly more in areas where we can make a positive difference.

Where possible, we’ve reprioritised spending out of areas that were not delivering results and we’ve used that money more effectively.

This has resulted in falling crime rates, fewer sole parents, reduced welfare dependency and higher levels of educational achievement.

In welfare alone, we are investing hundreds of millions of dollars up-front to support more people off welfare and into work, training or education.

We’re finding we can improve people’s lives and reduce spending pressure if we really understand who we are dealing with.

For example, there is a group of around 2,000 six- to nine-year olds who had the worst start in life. They will cost taxpayers $750 million if we do nothing to prevent them getting into trouble.

We’ve only recently been able to measure this figure.

The information creates a moral and financial imperative to act more effectively in the interests of these children and the wider community through the Children’s Action Plan.

In another example, the number of young mothers on a main benefit has fallen from more than 4,200 in December 2009 to fewer than 2,600 in December 2013.

The Government has invested in each of them to make sure they have access to a supervising adult who can provide some stability in their lives.

Because of that investment, they have better lives and it’s good for the Government’s books when they succeed.

That’s why we’re confident we can maintain responsible fiscal policy over the next three years and at the same time improve results from public services.

That will include debt repayment, resuming contributions to the New Zealand Super Fund, and replenishing the Crown’s balance sheet.

It will also allow us to invest a little more in priority public services – providing that doesn’t push up interest rates or restrict our ability to get debt down.

A little more is significantly different from a lot more funded by higher taxes which is what the opposition is threatening with us.

We will have more to say about the Government’s future framework for fiscal policy in the Budget.

But, as the Prime Minister confirmed two weeks ago, the Government will stick to its $1 billion Budget allowance for the 2014/15 financial year.

This is the responsible thing to do.

Imagine the effect on interest rates – and the rest of the economy – of a return to the $3 billion-plus annual Budget allowances we saw under the previous government from 2005 to 2008.

By containing government spending, we will help to restrict interest rate increases. This makes a significant and positive contribution to family budgets.

Every one percentage point movement in mortgage interest rates is worth around $40 a week – or $2,000 a year – for a family with a $200,000 mortgage.

So when you hear politicians promising to ramp up spending to pay for expensive election promises, you should remember that this would come at a significant cost to households and businesses.

We know from experience up to 2008 that runaway government spending was one driver of high interest rates.

That cost us twice – first through higher taxes then through higher interest rates.

The other driver was runaway house prices.

The Productivity Commission has noted that the biggest issue is the limited supply of new houses when demand is growing.

House prices doubled between 2001 and 2007, and prices have resumed their upwards march in most areas since the GFC.

There are a number of reasons for this, but there is little doubt that planning processes and rules are important drivers of land and housing costs.

It is now difficult to build some types of affordable housing in our least-affordable cities.

To take a couple of examples, planning rules in Auckland require apartments to be at least 40 square metres.

And balconies are now required to be 8 square metres.

These two rules alone add around $80 per week to the rent.

A range of other rules set minimum subdivision size, ceiling heights, bedroom size and even the width of your front door. All of these push up the cost of housing.

When planners get down to this level of detail they’ve well and truly overstepped the mark.

Local body planners and councillors are not aware of the wider social and economic effects of their complex rules and processes.

I see three major consequences.

First, higher house prices created by excessive planning rules put pressure on interest rates, reducing business investment, lowering productivity and hitting household budgets.

And housing supply that is unresponsive to demand causes price volatility and the risk of a severe correction.

Second, as the cost of housing consumes a greater proportion of income, pressure goes on councils and the Government for greater assistance.

Around 40 per cent of households that are renting receive accommodation support from the Government. This will increase if housing becomes less affordable.

The third consequence is that rising house prices drive inequality.

Inequality in New Zealand has been flat since 2004, but the situation could have been better had housing been more affordable.

That is why we’re working with councils to ensure New Zealanders have access to more affordable housing.

We have signed a Housing Accord with the Auckland Council, and this is already delivering results.

And we’re working to sign more accords with councils in Christchurch, Tauranga, Queenstown and the Wellington region.

We’re reforming the social housing system to bring in community housing groups, increase competition and get social houses where they are needed the most.

We’re reforming the Resource Management and Local Government Acts to cut red tape and reduce costs.

And we’re continuing to invest around $2 billion annually in accommodation support for Kiwi households.

So we’re making steady progress to deliver more affordable housing to more New Zealanders.

It takes time to change the way councils make decisions on housing and for developers to get more projects up and running.

That’s why it’s important that we continue to focus on every measure that can reduce the cost of housing over the next few years.

The biggest pressure on house prices is low supply and councils have a significant impact on that.

Before finishing today, I want to highlight the opportunity we have to lock in the benefits of sustainable and broad-based economic growth.

Despite our good progress, we still have much more to do to improve New Zealand’s economic growth and to support higher incomes across the board.

Containing government expenditure and improving housing supply are steps along the way.

The Budget will also set out the next stage of the Government’s wider programme to continue building on our competitiveness so we can lock in the gains for households and businesses.

As I said earlier, this is not the time to think about putting our feet up.

A third-term National-led Government will build on the momentum we’ve achieved across our programme.

Quarterly GDP or current account statistics are not, in themselves, what matter to families. Jobs, higher incomes and opportunities to get ahead are what really matter.

Everyone’s situation is different and many families are still finding times are challenging.

But the benefits of a sustainably growing economy are tangible and meaningful. Let me give you an example.

Over the past two years, as economic momentum has picked up, the average full-time wage has increased from $51,700 a year to $54,700 – an increase of $3,000.

Looking ahead, in the Budget next month Treasury will forecast annual GDP growth of between 2 per cent and 4 per cent a year out to 2018.

Based on that growth, Treasury’s preliminary Budget forecasts show the average wage will rise further to around $62,200 a year in four years’ time.

This would mean an increase of another $7,500 by 2018.

So, if you take that six-year period as a whole, the average wage will have gone up by $10,500, or around 20 per cent, compared to inflation of just over 12 per cent over the same period.

National’s responsible economic management means wages will keep rising faster than inflation: http://bit.ly/1eCrJl1

The Budget forecasts will also show around 170,000 more people working by 2018. Together with a falling unemployment rate, this will build on the 66,000 jobs created in the past year alone.

That’s what a sustainably growing economy actually means for hard-working New Zealanders.

And that’s why it’s important that we remain focused on our programme of considered and consistent change over time.

Under John Key’s leadership, this Government, alongside households and businesses, has managed New Zealand through some of the most significant challenges we’ve seen in generations.

Providing we stay the course, we will have a faster-growing, more sustainable economy. Wages will continue to increase faster than the cost of living and tens of thousands more jobs will be created every year.

We will provide more elective operations, we will help more New Zealanders off welfare and into work, and the crime rate will continue to fall.

We’re on track to surplus next year and larger surpluses in subsequent years, which will give us choices. And we’ll soon be able to start reducing debt and investing a bit more in priority public services.

The alternative is to put all of this at risk at the election and radically change direction.

We’ve already had a taste of what that change of direction would involve: a combination of high government spending, economic experiments from the 1970s and a lack of focus on what really matters.

That is a backward-looking policy prescription, particularly when New Zealanders’ impressive resilience is starting to pay dividends.

We now have the opportunity to significantly improve New Zealand’s economic fortunes and provide a better future for New Zealand families.

We are making good progress, but there is a lot more to be done.

Providing we stick to our plan, I’m confident that we will build the brighter future New Zealanders deserve.

We’ve got a strong foundation but only a National-led government will deliver policies which build on it sustainably.


Sense not cents

April 13, 2014

Bill English on sense rather than dollars and cents:

. . . the focus of it [the Budget] is certainly to get us to surplus so we can start repaying debt but more importantly looking ahead, it’s about quality government spending. We’ve got some real issues out in the community, kids who don’t achieve enough at school, people who want to feel safer in their community and what we’re learning from a period of restraint is that more thoughtful approach to spending the money and high quality to get results. That it’s not really about the dollars – solving, having a safer community, better educational achievement is about getting alongside people and supporting them in a way that gets results and it’s not just about the headline dollars. . . .

He shows he understand what’s up to people themselves, not governments:

. . . we’re a government who believes that households are capable of making their own decisions without a whole lot of advice from politicians and actually over the last four or five years they’ve made good decisions. They’ve been careful with their spending, they’ve been a bit careful with their debt. In fact even now it’s surprising in an economy growing at 3 percent, retail spending has been relatively flat. And I think from what I hear, people are going to be careful about increasing their debt. . .

He reinforces that solutions aren’t always about the amount of money spent:

. . . cash hand-outs just aren’t possible on a large scale and they’re probably not a good idea if you’ve got other underlying problems like over-priced housing. . .

He also reinforces there’s no money for lolly scrambles:

In this Budget we will have a paper-thin surplus , I mean we’ll just have a surplus but that’s the beginning of a series of surpluses and that means we have choices. And there’s a lot of choices. We’ve got the New Zealand Super Fund to resume contributions, an auto-enrolment for KiwiSaver, paying off debt more quickly, something for households to help them along. Those are choices that New Zealand fortunately will have if we have a growing economy and we stick to being pretty careful about our spending. . .

And he explains what matters:

Yes we’ll get to surplus but it’s ah you know it’ll be good to get that in the bag so we can move on because in a way focusing on that artificial number gives the impression that’s what really matters. Actually what really matters is whether Government is solving problems in our communities so we’ve got better communities and strengthening the economy so that we can get higher wages and more jobs. . .

Whether you’re an individual, a household, a business, other organisation or government, surpluses give you choices.

Sensible choices are to repay debt, address problems and keep on with policies which ensure spending is sustainable and surpluses maintained.

Sensible choices aren’t to increase taxes and spending or any other of the policies which put New Zealand into recession before the global financial crisis hit.

New Zealanders, in their households and their businesses, have adapted very well to what were quite difficult circumstances and the Government’s been there to support them doing it. The real issue is now whether we can sustain that growth so that people can see consistent wage increases year after year for instance  which they haven’t had for the last five or six years. So you know, we’ll be campaigning as much on delivering a sustainable economy in the future as on a record, which I think most people agree is reasonably good. The opposition doesn’t but this is, you know, we’re looking ahead on the basis of a record that is pretty good. . .

The opposition has fought every policy which has contributed to better financial management and their policies show they’re prepared to undo what’s working for purely ideological reasons.

The debt arises from the fact we had a recession and a major earthquake and we’ve said for the last three or four years the key issue here is to start paying it down when times get better and that’s pretty logical, people understand that and with interest rates, look, interest rates going up from the lowest in 50 years was inevitable. It’s our job to make sure they don’t go up any further than they need to. . .

High government spending was one of the pressures which gave us interest rates of around 11% by 2008.

Continued restraint is necessary to ensure any increases from the historic low stay below those double figures.


Remember the wreckage

April 11, 2014

The latest IMF report on New Zealand is by and large a positive one.

Finance Minister Bill English reminds us that it wasn’t nearly as positive a few years ago:

Louise Upston: What comments has the International Monetary Fund made previously about the New Zealand economy?

Hon BILL ENGLISH: In the light of recent discussion about the history of the New Zealand economy, I looked for the IMF reports from 1975. That seems to have been the focus of economic debate in the House, but actually I could not find any. Instead, I went to the 2008 IMF report, where the IMF talked about a number of issues facing New Zealand, including what it described in careful bureaucratic language as “rapidly appreciating house prices”. It noted that in response to rising inflation the official cash rate reached 8.25 percent and homeowners faced floating mortgage rates of 11 percent. The current account deficit was 8 percent. All of those numbers are about double what they are now, and they are measures of the wreckage that the previous Labour Government did to the New Zealand economy.

It’s important to remember that wreckage because anything Labour is threatening us with should it return to government in September is more of what caused the problems in the last term – higher taxes and higher spending.

That’s what put New Zealand into recession before the global financial crisis.

It’s careful management by National which has turned round the forecast decade of deficits and has got the economy growing again.

One result of that is more jobs:

. . . Nationwide job numbers have been rising for the last 18 months with more people seeking work and successfully finding jobs across the country.

 According to the recruiter’s latest Hays Quarterly Hotspots list of skills in demand for the April to June quarter, the jobs growth is being led by professional, technical and administration workers.

 Significantly, it’s not only the rebuild in Christchurch that is generating new employment opportunities in New Zealand; jobs growth is gathering pace across all regions of the country. . .

Employment has lagged other positive indicators but that too is changing for the better.


The right recipe for better times

April 10, 2014

Getting through the recession required careful management and disciplined spending.

Both those are needed when we get back into surplus:

Paul Goldsmith: Why will it remain important for the Government to maintain fiscal discipline, even after the Crown’s accounts return to surplus?

Hon BILL ENGLISH: The first reason is that we should not, of course, be wasting taxpayers’ money, and, given that this Government has developed much more thoughtful ways of spending Government money, we should stick to that. Secondly, we want to make sure we do not put extra pressure on interest rates. The Reserve Bank has already started to raise interest rates from 50-year lows towards more neutral levels. Keeping Government spending under control means that over the course of the interest rate cycle, interest rates will be lower than they would otherwise be. The Government wants to avoid the mistakes of the previous cycle, when a 50 percent jump in

Government spending under the previous Labour Government led to first mortgage rates of close to 11 percent. Households and businesses simply could not carry that burden this time.

Paul Goldsmith: What will be the Government’s approach to allocating new spending in the Budget next month and in future years?

Hon BILL ENGLISH: The Government’s approach is to examine critically each of its interventions and to ensure that any new spending shows a clear pay-off. A good example would be the fairly significant commitment to increasing the quality of teaching, with a view that we will gain a clear pay-off of more children reaching national standards and higher levels of achievement in our secondary schools. We have found that if we take that robust approach, many propositions that people have simply do not add up to a good use of taxpayers’ money.

Hon David Parker: Did he say in 2008 “This is the rainy day that Government has been saving up for.”, after Labour ran nine Budget surpluses and reduced net Government debt to zero, and can he confirm his Government has since borrowed over $50 billion?

Hon BILL ENGLISH: Yes, I did say that. What the member left out of his little story is that in the last Labour Budget of 2008 they forecast a surplus of $1.3 billion. What actually happened was a deficit of over $3 billion, plus forecasts of a decade of deficits and a blowout in Government debt. We are very pleased this Government has been able to get that financial wreckage under control.

Paul Goldsmith: As part of its wider economic programme, what progress has the Government made in reducing previous increases in Government spending?

Hon BILL ENGLISH: If I could use just one measure of progress, following the previous Government’s final Budget in 2008, since that seems to be where Labour members prefer to fight their political battles, core Crown expenses jumped $7 billion, just in that Budget—just in that Budget. This left a deficit of $3.9 billion in Labour’s last year. Since then, under the discipline of the current National-led Government, spending has increased by only 13 percent over five Budgets, compared with a 12 percent increase in just the one Budget in 2008. We are very pleased to be off that track.

The country faced a decade of deficits because Labour squandered the good times, doing far more taxing and spending than was good the economy and implementing too few policies that promote growth.

National rejected the temptation to slash and burn, protecting the most vulnerable through the recession.

It had to borrow to do that.

Now surpluses are in sight, we need a government that continues careful management and discipline to reduce debt and keep the economy growing sustainably.

Labour’s failed policies of the past combined with new tax and spend measures won’t do that.

 


Investment intentions highest since 1975

April 9, 2014

The NZIER has more good news on the economic front:

Recovery surges ahead as firms remain the most confident in 20 years

Economic activity strengthened in early 2014, according to the NZIER’s March 2014 quarter Quarterly Survey of Business Opinion (QSBO). Trading activity, which closely mirrors GDP growth, accelerated to the fastest pace since December 2003 – when annual GDP growth was near 4.5%.

“While we do not expect economic growth to hit such heady rates in the current business cycle, as credit conditions are very different now, our latest survey paints a clear picture: the recovery is strengthening”, said Shamubeel Eaqub, Principal Economist at NZIER.

Firms are translating optimism into jobs and investment

Business confidence held steady in the March quarter, and remains at the highest level since mid-1994. Optimism and activity is being realised into hiring, investment, increasing margins and profits. Intentions to invest in building, in particular, are soaring and are at the highest level since records began in 1975. . . 

In 1975 New Zealand was highly regulated, protected and subsidised.

Thanks to what the left still deride as the failed policies of the 80s and 90s businesses now stand or fall on their own merits rather than political patronage.

Soaring confidence is based on the strong foundation of performance and not the shaky one of political whim as it was in those bad old days.


No room for spend-up

April 8, 2014

The need for continued spending restraint has been confirmed by another month of revenue running below forecast which has again pushed up the deficit, Finance Minister Bill English says.

“We remain committed to reaching surplus next year and Budget forecasts next month will confirm we are on track,” he says. “But today’s figures confirm what we have said repeatedly: It is a challenging task that will be achieved only if we remain disciplined.”

The Government’s financial statements for the eight months to 28 February  show the operating deficit before gains and losses at $1.4 billion, or $884 million more than expected, due mainly to lower than-forecast core Crown tax revenue.

Consistent with a growing economy, tax revenue was $1.9 billion (or 5 per cent) higher than at the same time last year – reflecting increases in source deductions, other persons’ tax and GST. However, tax revenue was $1.1 billion less than forecast in the Half-Year Update in December.

“While some of the variance is due to timing issues and is therefore likely to dissipate over coming months, corporate tax, GST, other individuals’ tax, source deductions and customs and excise duties were all below forecast,” Mr English says.

“These figures will be factored into next month’s Budget and reinforce the need for restraint in government spending. They also confirm that there will be no capacity for reckless spending promises ahead of the election later this year.”

Continuing strength in equity markets saw gains of $3.5 billion on financial instruments, which was $1.9 billion ahead of forecast. As a result, the Government’s operating surplus at $3.7 billion was $891 million higher than forecast.

National inherited a forecast decade of deficits before the global Financial Crisis and earthquakes.

That it’s on track to surplus next year in spite of those natural and financial disasters is a credit to careful management and restraint.

That’s the recipe which has got us through the recession without the slash and burn policies that would hurt the vulnerable.

It’s the recipe we must continue to follow to ensure the good times aren’t squandered and we’re well equipped to deal with the next challenges.


No lolly scramble from National

April 3, 2014

If you’d been through several tough years in your household or business, were getting your head back above the water and had a little extra money, what would you do?

Pay down debt and put away something for the next crisis, or splash out?

If you were sensible you’d take the first option and that’s what National will do if it’s returned to government this year.

Prime Minister John Key said that in a speech which told us there will be no election year lolly scramble.

. . . Budget forecasts will show that in the coming financial year the Government is going to post a surplus, albeit a small one.

Once that has been achieved, we can start getting our debt down.

The Budget will show that we remain on track to reduce net government debt to below 20 per cent of GDP by 2020.

At the same time – over successive budgets – we have set out on a longer-term path to repair the damage to our economy from the excessive borrowing, consumption and government spending of the mid-2000s.

That path has involved reforms like the tax switch of 2010, that significantly reduced personal income tax rates across the board, and encouraged savings and work.

As I’ve said, the worst times are now behind us and the risks of another global crisis have lessened considerably.

So the Government’s focus has moved from managing our way through a recession, with persistent budget deficits, to managing a growing economy.

Initially, growth in the economy has been driven by low interest rates, high prices for our exports, a catch-up in housing supply and the rebuilding of Christchurch.

But this momentum has now turned into a much broader recovery where consumer and business confidence has lifted, employment is rising and wages on average are increasing faster than the cost of living.

Our focus is on sustaining economic growth over the medium term, so the economy doesn’t just burn brightly for a couple of years and then run out of oxygen.

Because when we talk about the economy – about things like GDP and the balance of payments – we’re ultimately talking about people’s jobs, their wages, and the costs they face in going about their daily lives and raising their families.

Therefore, it’s hugely important to continue the progress we’ve recently been making.

Over the past year, for example, 66,000 more people have got a job.

Average weekly wages have gone up 2.8 per cent, compared to inflation of only 1.6 per cent.

And the economy as a whole has grown 3.1 per cent – one of the faster growth rates in the developed world.

The Budget will show that this employment growth is forecast to continue and the unemployment rate is expected to fall.

Wages are forecast to continue rising faster than inflation.

And economic growth is forecast to continue.

So we are setting out to manage the growing economy with a five- to 10-year view in mind.

Our task is to take the opportunity of a reasonable growth outlook to deepen investment, upgrade skills, intensify and diversify our export base and become more competitive.

Firstly, on the Government’s fiscal strategy:

We have had an on-going commitment to discipline around government spending and that will continue this year, next year and for as long as we lead the Government.

One way to illustrate our approach is this – in the last five years of the previous Labour government, new operating spending each budget averaged $2.7 billion a year.

But in the five budgets of our government, new operating spending has averaged only $250 million a year.

So that’s less than a tenth of the rate of new spending under Labour.

In the last five years of Labour, government spending in total went up 50 per cent.

Bill English often describes that period as a kind of experiment to determine if indiscriminately spending large amounts of money would solve social problems.

Turns out it didn’t.

Spending more doesn’t necessarily get better results.

In contrast, we’ve had a different approach, which is to focus on what is really driving social outcomes like crime, welfare dependency and underachievement at school, and address those underlying causes.

That approach is delivering real results, without breaking the bank. In fact, over the longer term it saves money.

In prisons, for example, we have focused very strongly on literacy and numeracy, skills training, treatment for drug and alcohol addiction, working prisons and reintegration of ex-prisoners into the community.

That is giving offenders the opportunity to turn their lives around and stay away from crime.

Already this approach has reduced reoffending by 12.6 per cent, which is halfway to the target we’ve set ourselves of a 25 per cent drop.

So far, it has meant around 2,300 fewer offenders and 9,300 fewer victims of crime each year.

In welfare, we have focused on getting people off benefits and into work, because that is the best way to lift people and their families out of poverty.

This has involved an upfront investment in case management and support, but it’s expected to have a considerable pay-off as people leave life on a benefit to get established in full-time work.

Addressing these and other issues hasn’t meant big increases in spending.

In fact, we’ve found that the possibility of more spending can be a distraction from a growing focus in the public sector on solving complex problems rather than throwing money at them.

Government spending has actually been declining as a proportion of the economy, at the same time as we have been achieving these results.

In 2008/09, government spending came to 34.5 per cent of GDP. In the coming year it’s forecast to be 30.6 per cent before going under 30 per cent and staying there.

That is hugely important when the economy is on an upswing because – as the Reserve Bank regularly points out – on-going spending restraint from the Government helps to dampen the interest rate cycle.

The Reserve Bank has already begun to raise interest rates from the historically low levels they’ve been at, towards more neutral levels that aren’t going to over-stimulate the economy.

But keeping government spending under control means that, over the course of the cycle, interest rates will be lower than they otherwise would have to be, and for longer.

In turn, that helps to keep the exchange rate lower than it would be, which is important for the overall competitiveness of the economy.

If you want a real live example of the relationship between government spending and interest rates, think about what happened in the mid-2000s, when the Labour government was putting large cash injections into the economy.

Government spending overheated the economy so much that the Reserve Bank was forced to keep putting up rates, higher and higher, to get on top of it.

By 2008, households faced mortgage rates of almost 11 per cent. Business lending rates were also very high.

In the end, the country went into recession in 2008, well before the global financial crisis.

The National-led Government will avoid repeating the glaring mistakes made in the previous economic cycle.

While some increase in interest rates is an inevitable consequence of a healthy and growing economy, we need to do everything we can to help keep rate rises to a minimum.

And we believe we have the support of New Zealanders who can remember the dashed hopes of debt-fuelled growth and floating mortgage rates above 10 per cent.

So there is not going to be a lolly scramble in this year’s Budget. And we also won’t be doing that in the election campaign later this year.

In this year’s Budget we will be sticking to our new spending allowance of $1 billion.

Together with some sensible savings, this allows us to focus new spending mainly on health and education – which are always at the heart of our budgets – and on families and children.

And sticking to the allowance will enable us to post a small budget surplus in 2014/15, which we have long promised.

In future budgets, we will be posting consistent and larger surpluses. Those surpluses will allow us to begin reducing debt as a proportion of GDP.

This is what sensible and responsible fiscal policy is all about.

In difficult times, governments run deficits and built up debt, to support the economy and jobs. In good times, they run surpluses and pay down that debt. . .

Labour did use some of the tax windfall of the noughties to reduce debt but it also increased spending unsustainably.

Policies it’s announced so far show it hasn’t learned from that mistake.

This gives voters a very real choice in the election – fiscal prudence and responsibility from National or higher taxes and higher spending from Labour and its fellow travellers on the left.


IMF backs govt, warns against change

April 2, 2014

The International Monetary Fund is backing the government’s economic prescription.

Confirmation from the International Monetary Fund that New Zealand’s growth prospects have improved and that its macro-economic framework remains sound is a welcome further endorsement of the Government’s economic programme, Finance Minister Bill English says.

As the IMF notes in its concluding statement issued today, New Zealand’s economic expansion is becoming increasingly embedded and broad-based. It forecasts annual economic growth will increase to about 3.5 per cent this year.

“It’s encouraging that the IMF has again noted that our macro-economic framework remains sound and provides policy space to respond to adverse shocks,” Mr English says

“In particular, it concludes the Government’s focus on returning to surplus next year will help to preserve its favourable standing with external creditors against New Zealand’s background of relatively high net foreign liabilities.

“I also agree with the IMF that New Zealand faces some risks, including globally from any downturn in the fortunes of China and the rest of Asia, and on the domestic front from issues around housing affordability.

“As the IMF notes, the Government’s steps to help alleviate housing supply bottlenecks and the Reserve Bank’s measures to tighten mortgage lending and to raise interest rates should help to ease house price pressures.

“The Government’s fiscal deficit reduction programme is also expected to take some pressure off the exchange rate, as the IMF acknowledges.

“So this latest report on New Zealand confirms we remain on the right track to build a faster-growing economy and to manage the global and domestic risks that might come our way,” Mr English says. “That’s important if we are to support more jobs and higher incomes for New Zealand families.”

Support for the National-led government’s prescription is also a shot across the bows of the opposition parties which want to change it with higher taxes, higher spending and meddling with the Reserve Bank.

 


Employment optimism rising

April 1, 2014

Optimism about jobs is at its highest since the GFC:

New Zealand employment confidence has risen in the first quarter, suggesting the labour market is starting to reflect a general upturn in the economy.

The Westpac McDermott Miller Employment Confidence Index rose to 109.4 in the first three months of 2014, from 103.4 in the final quarter of 2013.

The index is now at its highest level since the global financial crisis and ensuing recession although it is still weaker than before the recession hit, according to Westpac chief economist Dominick Stephens.

While households’ perceptions of job opportunities improved to the best reading since December 2008, it is still deeply negative at a net -32 percent from -46.9 percent.

“The fruits of New Zealand’s economic upturn are increasingly becoming apparent to workers and jobseekers,” Mr Stephens said. . . .

Confidence is still weaker than before the recession but the trend is upwards which is encouraging and GDP growth means it is likely to get better.
• Real GDP grew by a robust 0.9% in the December 2013 quarter, and the current account deficit narrowed sharply.
• All signs remain consistent with the economy maintaining significant momentum in the first half of 2014.

• International economic data were broadly positive, despite financial market jitters.

 


Reverse Midas touch working again

March 29, 2014

Labour spent months telling us manufacturing was doomed and look what’s happened:
Photo: Crisis? What crisis? Stats NZ says manufacturing is sparking. Read more at http://tinyurl.com/mmqv6vz

 

They’ve also put a lot of energy into telling us the regions are going backwards but the reverse Midas touch is working here too.

They hold only two general seats outside the main centres which means they’re out of touch.

Their MPs swan into the regions,  tell us how dreadful things are and go back to the city.

Those of us who live in the provinces know the story they tell doesn’t match the reality we live.

This picture shows the true story:
Photo: Regional New Zealand is leading our recovery from the GFC. Find out more at www.national.org.nz/Article.aspx?articleId=43489

 


Provinces lead recovery

March 28, 2014

Data on economic activity since 2008 shows the provinces have led the economic recovery:

Provincial regions across the country have led New Zealand’s economic recovery from the Global Financial Crisis according to new Statistics New Zealand numbers released today, Economic Development Minister Steven Joyce says.

Bay Of Plenty, Gisborne and Hawke’s Bay in the North Island, and Nelson/Tasman, Canterbury, Otago, and Southland, have experienced growth above the national average of the five year period from 2008 to 2013, while Auckland, the West Coast, and Waikato have been just under the average. Meanwhile Taranaki continues to generate the highest GDP per capita by some margin.

Taranaki has milk and minerals and they’re benefiting from both.

“This new regional data, which wasn’t previously calculated, is the clearest indicator yet that it is our regional economies that have led New Zealand’s recovery from the GFC,” Mr Joyce says. “Sustained economic growth is the only way we can create more jobs and increase incomes.”

New regional GDP data, which is now available up until 31 March last year, covers the period of the GFC, the Canterbury earthquakes, and last summer’s drought which affected agricultural regions across the country.

“We can see in the data the clear effects of the drought last summer with a number of more farming-based regions having a tougher time in the year to 31 March 2013.  We can also see the positive effect of the first stages of the earthquake rebuild in Canterbury, with growth of six per cent recorded in just one year,” Mr Joyce says.

“Overall the South Island has experienced stronger growth than the North Island over the last five years. The South has grown at 21 per cent while the North has grown 13 per cent in five years. That’s another signal, alongside lower unemployment rates, that there are significant job opportunities in the South Island.

Mr Joyce says regional GDP statistics would become a regular feature of the national landscape in the years ahead. 

“It’s important to have clear indicators for the regions of the results of their efforts to attract investment and encourage growth,” Mr Joyce says.

Labour continues its doom and gloom approach saying the regions have been hollowed out under National.

But they’re only looking at last year:

Decreases were recorded in eight of 15 regions as a result of fluctuations in commodity prices and the 2012/13 drought, which was the worst since 1946. . .

Both of those are beyond government control.

The Canterbury rebuild is certainly having a positive impact on economic growth in the south but farming, in particular dairying; tourism – helped by newly developed cycle trails – and other sectors are doing well throughout the south.

Labour holds only two provincial seats and while its MPs like to grace the provinces with occasional visits to tell us how bad things are, the reality is much brighter.

It will continue to be that way if we can keep a National-led government which focuses on what matters, which includes keeping a tight rein on its own spending and better performance for less money from public services.

The outlook won’t be nearly as bright if there’s a change and we get a Labour/Green government propped up by whichever other parties they need imposing higher spending and more taxes on us.


Forgetting or ignoring?

March 24, 2014

More headless chookery from Labour:

New Zealand’s interest rates are among the highest in the world and homeowners that are bearing the brunt of them should join Labour’s call for an Economic Upgrade, Labour Leader David Cunliffe says.

“New Zealand mortgage rates are higher than Australia and much of the developed world. That’s because our economy is not paying its way in the world and has major issues that need to be fixed. . .

Any difference in interest rates is a sign of the health of our economies. New Zealand’s is doing better than Australia’s.

That does present us with the threat of inflation which the Reserve Bank has a duty to keep under control.

That’s why the Official Cash Rate eased up from months at an historic low to 2.75 percent last week.

That’s no reason for Cunliffe to run round pretending the sky is falling.

Has he forgotten that people were paying around 11% on mortgages when the government in which he was a minister lost power in 2008?

Has he forgotten that one of the reasons for that was the high taxing, high spending policies of his government?

If he isn’t forgetting that then he’s ignoring the lessons from that and his own education which would be worse.

But that would explain why he’s peddling the unfortunately similar prescription of more tax, more churn, more spending which is what Labour policies announced so far threaten.


Change in leader not enough for Labour

March 21, 2014

Trans Tasman notes that this week’s poll continuing the dismal trend for Labour confirms that the party needed more than a change of leader.

Labour’s slump in support in the latest poll underlines the party’s problems are more deep seated than can be overcome by a change in leadership. David Cunliffe’s poll ratings are now below those of the man he replaced. But even though anxiety among lower-ranked MPs is growing over their electoral future, there is unlikely to be any fresh moves to change the leadership, despite Shane Jones looking a better bet. The Herald-Digipoll confirmed the trend in other polls, though it’s the first to show Labour below 30%.

The only major changes in the party since it lost the 2008 election are three leaders and rules which can inflict a leader on the caucus without its support.

It is offering almost all the same old stale faces and most of the new policies announced are failed ones from the past.

. . . The significant lesson Labour doesn’t appear to have absorbed is the bulk of voters think the country is heading in the right direction.

The latest poll showed the gap between those who think things are moving in the right direction, and those who do not, expanding from around 3 percentage points to more than 17 points compared with December. Yet this week in Parliament Labour MPs were strumming the theme the present Govt has the worst economic record of any Govt for the last 40 years. They haven’t got the message the Key-led coalition has won the battle on fiscal prudence. And with such a mindset, fresh promises of new spending provoke the opposite response among voters to the one they are seeking. . .

Labour might think the economic and natural disasters since 2008 have been beyond the government’s power. But many voters recognise the difficulties National has faced, the progress it has made in dealing with them and the positive difference it is making.


Front page news

March 21, 2014

It’s not unusual for Prime Minister John Key to be front page news in New Zealand.

It is something of an accomplishment, and an honour, to be front page news in China, a country with a population of 1.3 billion.
Making front page news in China – not bad in a country with 1.3 billion people

The Prime Minister also had a dinner with President Xi Jinping and the visit has helped strengthen links between our countries:

Prime Minister John Key says agreements entered into with China at his meeting with Premier Li Keqiang highlight the continuing strength of the relationship between our two countries.

Mr Key and Premier Li Keqiang met at the Great Hall of the People. Mr Key’s visit to China marks the third time the countries’ top leaders have met in less than 12 months.

The meeting emphasised the value both countries place on the political, trade and economic relationship which, has continued to grow rapidly.

New Zealand and China are well on track to achieve a shared goal, agreed by the Prime Minister and Premier Wen Jiabao in 2010, to double two-way trade to NZ$20 billion by 2015. Two-way trade is currently worth over $18 billion.

“My meeting highlighted the mutually beneficial nature of the bilateral trade, with China becoming our number one goods export market, and remaining the number one source of imports for New Zealand,” says Mr Key.

The Prime Minister said that he was pleased to see the particularly strong growth in dairy exports to China, which reached nearly NZ$5 billion in 2013, an increase of 75 percent.

“My meeting provided the opportunity to brief Premier Li on the outcomes of the Whey Protein Concentrate Contamination Incident Government Inquiries, emphasising that they underline that New Zealand is a producer of high quality food, with world class regulatory systems,” says Mr Key.

The Prime Minister and Premier Li discussed New Zealand and China’s shared interest in strengthening financial sector cooperation, as well as cooperation in the areas of agriculture and food safety.

Six new initiatives have been agreed at the meeting, including:

  • The launch of direct trading of the New Zealand dollar against the Chinese Renminbi.
  • Agreement to renegotiate the 1986 Double Tax Agreement.
  • Implementation of an electronic equipment Mutual Recognition Agreement that will enable New Zealand to become the first country in the world to test, inspect and certify electrical products outside of China.
  • Enhanced agricultural cooperation in dairy herd improvement, agricultural management, veterinary training scholarships and professional development exchanges.
  • Improved food safety cooperation including the launch of a scholarship programme in food safety and risk management.

“The financial sector offers great potential for further cooperation between New Zealand and China. Today’s announcements will make doing business with China easier by reducing compliance costs and contribute to the wider expansion of the economic and financial cooperation between the two countries,” says Mr Key. . .

This visit and a stronger relationship will bring benefits to New Zealand:

China is important to New Zealand. We are on track to achieve the goal of doubling two-way trade to $20 billion by 2015. This week President Xi Jinping and I set an ambitious new goal for trade to reach $30 billion by 2020.

Our growing trade with China is a shot in the arm for New Zealand exporters and industry. It is one of several reasons the New Zealand economy continues to grow strongly.

Figures released today showed GDP increasing by more than 3 per cent in the past year – making New Zealand one of the fastest growing economies in the world.

This is great news for families.

A stronger economy means more jobs, higher incomes, and more opportunities for young people. It means we can invest more in important public services like schools and hospitals.

If we continue with National’s successful programme, New Zealanders can lock in the economic gains we’re starting to see.

That if depends on another National-led government because as  Bill English said during Question Time yesterday, the job isn’t finished:

. . . New Zealand’s growth rate is better than that of quite a few developed countries, but, of course, the real measure of its success is whether it is providing more jobs for New Zealanders and higher incomes for New Zealanders. The good news is that forecasters are generally expecting that New Zealand’s growth rate will be maintained through 2014. This, however, is no cause for complacency or for a fiscal lolly scramble. This country has a lot of work to do yet to ensure that every New Zealander who can work can get a job, and that all those New Zealanders who have a job are paid in a manner that they regard as appropriate. . .

The economy is growing and the free trade agreement with China, has played an important role in that.

With growth improvements in other indicators which depend on that including education, employment and health  are following.

But there is more to do.

The government has laid a strong foundation and it needs another term to build on that.


Manufacturing at highest level since 2006

March 20, 2014

Remember all the time and money the Opposition wasted on manufacturing a manufacturing crisis?

They’ll be hoping we don’t as the good news continues:

Strong growth in manufacturing saw gross domestic product (GDP) rise 0.9 percent in the December 2013 quarter, Statistics New Zealand said today.

Manufacturing activity grew 2.1 percent, driven by increases in food, beverage, and tobacco, and machinery and equipment manufacturing. Manufacturing activity is now at its highest level since March 2006.

Dairy farming and dairy product manufacturing both fell this quarter, after strong increases last quarter, when production rebounded from the drought earlier in 2013.

“While dairy activity fell this quarter, exports were up strongly, as production from last quarter was sold overseas,” national accounts manager Michele Lloyd said.

Wholesale trade, including machinery and equipment wholesaling, increased 3.2 percent this quarter. Strong machinery and equipment sales also led to a 7.5 percent increase in investment in these goods. Investment in plant, machinery, and equipment is now at its highest level since the series began.

The expenditure measure of GDP was up 0.6 percent in the December 2013 quarter, driven by exports (up 3.1 percent) and household spending on goods and services (up 1.3 percent).

The volume of spending by New Zealand households in the December 2013 year grew 3.4 percent, driven by a 7.4 percent increase in spending on durable goods. This is the largest annual increase in spending on durable goods since June 2005.

Businesses would not be making the highest investment in plant, machinery and equipment since the series began if they didn’t have a lot more confidence in manufacturing than the opposition.

It contributed to economic growth of 3.1% in 2013 and that figure is more good news.
Photo: Just announced: 3.1% economic growth in 2013 - National is building a stronger economy.


NZ at tipping point

March 19, 2014

The sharp increase in productivity suggests the New Zealand economy is at a tipping point, ANZ Bank’s chief economist, Cameron Bagrie, says.

Productivity figures released by Statistics New Zealand today show productivity growth in the year to March 2013 of 2.1 percent, well above the average annual rate of 1.6 percent recorded during the 17-year period since the crucial measure of economic competitiveness was first collected, and equivalent with average annual productivity growth in Australia.

The increase reflected both an increase of 1.2 percent in multifactor productivity – a complex measure of factors including skills, costs, and value added per worker – and a 0.9 percent growth in the amount of capital available per worker,” Statistics NZ said.

Bagrie said improving productivity was an unsung part of the current economic recovery.

Everyone’s looking at the obvious factors that are driving New Zealand’s renaissance,” he said, citing strong terms of trade, the Christchurch rebuild, and high population inflows, “but no one’s talking about the productivity story.”

“I reckon we hit that tipping point about the middle of last year.”

Bagrie said the productivity improvements suggested that business management was improving.

“2008 to 20012 (the recession after the global financial crisis) was a huge wake-up call for New Zealand businesses,” said Bagrie, although they had a long way to go to catch up to Australia, which remained “a moving target” despite its productivity record slowing. . . .

Productivity is a key indicator for economic performance.

If, as Bagrie says, we’ve reached a tipping point, that’s a very good sign that the growth will be sustained.

 


Labour productivity improving

March 18, 2014

The good news continues:

Labour productivity increased 2.1 percent in the March 2013 year, Statistics New Zealand said today. This is higher than the average annual rate of 1.6 percent for the 17-year period since 1996, when the series began.

“The 2.1 percent increase in labour productivity was driven by both an increase of 1.2 percent in multifactor productivity and a 0.9 percent growth in the amount of capital available per worker,” national accounts manager Michele Lloyd said.

Labour productivity measures the quantity of goods and services (output) produced for each hour of labour. The latest figures show that 100 products could have been produced in one hour of labour in 1996, compared with 132 in one hour of labour in 2013.

In the March 2013 year, multifactor productivity, which measures how efficiently goods and services are produced in the economy, grew 1.2 percent. This was because outputs (goods and services) grew faster than the inputs (hours of labour, and capital, like land and buildings) used to produce them. Growth in this area shows more efficient production and is often associated with technological change, organisational change, or economies of scale. 

From 1996 to 2013, labour productivity grew more in Australia than in New Zealand, up by an average of 2.1 percent and 1.6 percent per year, respectively. Over the same period, Australia’s annual average output growth was also higher, at 3.5 percent compared with 2.6 percent in New Zealand. 

Productivity is regarded as key to increasing New Zealand’s standard of living and is a major driver of gross domestic product – the main indicator of economic activity. Productivity statistics cover approximately 80 percent of the economy and exclude government administration and defence, health, and education.

Productivity  is one of the positive indicators which has been lagging.

The improvement means production is more efficient and that an important ingredient in economic growth.


How foreign investment works

March 18, 2014

Act leader Jamie White explains how foreign investment works:

. . . The value of a business depends on its expected future profits. The seller of a company is in effect swapping the profits she would have got over future years for a lump sum she gets today. The lump sum (the purchase price) represents the present value of the future profits.
When a foreigner buys a New Zealand business, all the expected future profits of the business come into the country in the purchase price. When the actual future profits then go out to the new owner overseas, there is no net loss.
In fact, the transaction must involve a net gain for New Zealand. This is because, if the purchase price were exactly equal to the present value of the expected future profits, the Kiwi owner would have gained nothing from the transaction and would not have sold. The Kiwi seller must have valued the purchase price higher than the future earnings. So the transaction creates a net gain to New Zealand. . .
His comment was prompted by a speech from Labour leader David Cunliffe.
If Mr Cunliffe does not understand this, then he learnt little from his days at the Boston Consulting Group. If he does understand it but still peddles the popular myth of profits lost overseas, well, that is even worse. 
The worse option is the most likely one. Cunliffe should understand economics.
In ignoring what he knows he’s just pandering to prejudice in the hope it will win some votes.

Left’s jiggery pokery won’t work

March 17, 2014

I find it difficult to understand the headless chookery that’s going on about the very small increase in the official cash rate from a historically low level.

People with income from interest-bearing investments will be pleased and while the rest of us who are paying more for loans might not like it, we knew it was coming.

It was well signalled and anyone with the slightest bit of financial acumen would have known the odds of a rise were far greater than a fall or keeping the rate at its historic low of 2.5%.

In spite of this the opposition and some commentators are playing at Chicken Little, acting like the sky is falling and inevitably calling on the government to do something.

Well, the government is doing something.

Finance Minister Bill English told TVNZ’s Q+A programme that the Government is doing all it can to help households affected by interest rate rises:

“There isn’t some kind of magic solution her like jiggery-pokery with the Reserve Bank Act, or pretending prices are lower than they are, which is what the Greens and Labour are promising. It’s about the kind of diligent hard work we’ve all been doing, not just this government but households and businesses, becoming more productive, more careful with our spending, getting debt down, a bit less consumption, and good control of inflation. So we have the opportunity here for a sustained economic recovery, and if we work on keeping our costs down, increasing our productivity, we could have four or five years where there are more jobs and higher incomes, and that’s what helps households get on top of increases in interest rates.”

The government’s careful management and strict control on its spending are two reasons interest rates have been so low for so long.

The need to keep on that path is just as great now the economy is growing because a government splashing cash around would fuel inflation which in turn would put pressure on interest rates.

He said this week’s OCR increase is due to the relative strength of our economy

“The small increase in interest rates that was announced the other day is an indication of the relative strength of our economy. There’s a lot of economies around the world would like to see some signs that interest rates were reflecting the fact that the economy’s growing. The other job we have is to support households and businesses by doing everything a government can to reduce pressure on what are inevitably rising interest rates and we’re pretty clear about that where we can influence that pressure, it’s around the housing market where we spent two or three years working on improving supply to the housing market. It’s around the labour market where we’re doing our best to align our training systems and migration with the skills that are needed in a tight labour market. . . 

If there was a magic solution every country in the world would have employed it.

There isn’t – there’s the jiggery pokery the opposition are threatening us with which won’t work, or the careful management and restrained spending which the National-led government is doing that is working.


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