To be seen or not to be seen

April 16, 2014

Campbell Live wanted to do a series on party leaders at home.

It is the sort of publicity politicians can’t buy and an opportunity to show voters the people behind the politics.

John Key was first up last week.

Peter Dunne and Winston Peters declined to take part.

David Cunliffe was scheduled for Monday evening this week  but he pulled out.

. . . Mr Cunliffe has also cancelled an invitation for a second time to have television cameras in his home for an election year leaders series. Mr Parker says Mr Cunliffe has a young family and a right to privacy. . .

His family does have a right to privacy but if last week’s session at home with the Keys was anything to go by, there would have been no need for the family to be involved.

It is much more likely he doesn’t want people to see he doesn’t live in a modest house, in a modest suburb.

The family was a silly excuse and his decision an error of judgement similar to turning down the invitation for a weekly interview on the Farming Show.

It has been compounded by his not turning up in parliament at Question Time, choosing to address some business leaders instead.

We’re not hearing him on the Farming Show, we’re not see him on TV and we’re not seeing him in the House yet only last week he was complaining because he wasn’t going to be seen enough with the Royals.

Does he want to be seen and heard or doesn’t he?


Leaders lead but do followers follow?

April 11, 2014

David Cunliffe declared that a pre-election coalition between Labour and the Green Party was not going to be an option.

But was that the decision of his caucus or just his own?

The second tweet has a recording of David Parker saying that the decision was that of the leadership group but when asked to clarify that he suggests it was Cunliffe’s because “leaders lead”.

Leaders do lead but followers don’t always follow.

A caucus with a majority which didn’t consider Cunliffe their first choice as leader is quite likely to give less than its wholehearted support to any initiatives he takes.

Whether or not they do it’s yet another story which shows Labour hasn’t got its own act together and is, therefore, still not ready for government.


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.

 


Compulsory or universal

April 9, 2014

Australia’s compulsory superannuation scheme is often held up as an example we should follow.

However, this exchange during Question Time yesterday threw up a little-known fact:

Hon David Parker: Does he accept that Australia’s successful universal workplace savings scheme, introduced a decade after National axed ours, is why Australia owns its banks and ours, and why Australians have higher wages?

Hon BILL ENGLISH: No, but I do know that two of the effects of it in Australia are that Australians have less money invested in businesses than New Zealanders—

Grant Robertson: Rubbish.

Hon BILL ENGLISH: —no, it is true—and its rise in household debt directly parallels its rise in nominal household savings. But if the member believes he wants the Australian system, he should be open with the New Zealand public that he is going to strictly means test national superannuation. There is nowhere in the world that has compulsory superannuation and universal national superannuation.

How many people who urge compulsory superannuation know that nowhere that has it also has a universal scheme?

If superannuation savings can be either compulsory or universal how popular would compulsion be?

Hon David Parker: Will the Minister now admit that National was wrong to vote against KiwiSaver, which it now supports, and to call the Cullen fund, which it now supports, a dog?

Hon BILL ENGLISH: No, but if the member is going to advocate what he calls universal but is actually compulsory superannuation, he needs to explain what impact that will have on New Zealand superannuation. I think those who have been in this Parliament for a while will recognise that we have spent—what—20 years in vigorous discussion over the nature of national superannuation. It ended up universal because that is what the public wanted, and Labour is now advocating the Australian scheme, which involves strict income testing of national superannuation. I invite the member to announce that at the next Grey Power meeting he goes to.

. . . Hon David Parker: Is the Minister able to table any document that he has received that proves the assertion he made in his last answer, which was that the Labour Party is moving to a meansbased superannuation when that, in fact, is not our policy?

Mr SPEAKER: Order! It is quite a different question, but carry on.

Hon BILL ENGLISH: If I could find a coherent, rational, sensible Labour Party document on this matter, I would table it. But I cannot, so I will table the results of the 1975 and 2008 elections, where these issues were litigated.

What we do know is that Labour plans to increase the age of eligibility for superannuation.

It also plans to tax more and spend more which will aggravate inflation which will erode the real value of wages making it more difficult to save and erode the real value of any savings, be they voluntary or compulsory.

 


No room to splash cash

March 12, 2014

Parties on the left like to think the government is the answer to most problems.

By contrast, National recognises the importance of individuals, households and businesses, and careful management of government resources.

Hon KATE WILKINSON (National—Waimakariri) to the Minister of Finance: What will be the focus of the Government’s economic programme going into the election on 20 September?

Hon BILL ENGLISH (Minister of Finance): The Government will focus on building on the recovery that is now under way to support New Zealand households and businesses, to create more jobs, and to earn higher incomes. Now that we have been able to manage through a very significant recession and the impact of the earthquake, and clean up some of the damage done by the last Labour Government, we will look forward to helping New Zealanders organise the capital and the skills required to take advantage of the very substantial opportunities offered by a growing Asia- Pacific region.

Hon Kate Wilkinson: What progress is the Government making with its economic programme and how is this helping households and businesses?

Hon BILL ENGLISH: First of all, the recovery in the economy is principally the work of New Zealand’s households and businesses, supported by Government. Government policy that has helped to support that has been to get the Government finances under control and get back to surplus; and to focus on all those areas across the economy that support growth, such as better infrastructure investment, a tidier, more effective, and more efficient system for giving young New Zealanders skills, reducing welfare dependency, re-regulating the use of our natural resources so that we can be a prosperous economy as well as a clean, green economy, and, of course, there are many other ways we have been supporting New Zealand households and businesses.

Reducing the burden of government is one of the bests ways to help people and businesses.

Hon David Parker: Why is he claiming that everything is going swimmingly when the $1 billion deficit to 31 January in his Government’s accounts is $637 million worse than he forecast in just December?

Hon BILL ENGLISH: As I have pointed out regularly in this House, we can control expenditure to a significant extent but revenue can fluctuate. In this case—

Hon Members: Ha, ha!

Hon BILL ENGLISH: Well, bear in mind that in the previous financial year we finished about $3 billion ahead of budget. On the most recent figures in this year tax revenue is about $800 million

behind budget. The people who should take the most notice of that are the Opposition parties, because it makes it pretty clear there is not room to splash cash everywhere in election year.

Hon Kate Wilkinson: What are some of the ongoing economic challenges the economy faces, and how will the Government work to overcome them?

Hon BILL ENGLISH: Probably the main economic challenge is to manage our way through the next growth cycle, avoiding the excessive damage created during the last growth cycle under the last Labour Government. For instance, it is inevitable that interest rates will rise some time this year, according to decisions of the Reserve Bank. We want to make sure that interest rates are not driven to 10.5 to 11 percent by bad Government policy and excessive Government spending. That is probably one of the best things we can do to support New Zealand households.

Government spending has a significant influence on interest rates.

Labour’s profligacy was a major cause of high interest rates, National’s Presbyterian approach to other people’s money has helped to keep them low.

Hon David Parker: Is it correct that having inherited close to zero net Government debt he is soon to clock over $60 billion of borrowings; and is this more than any other Minister of Finance in New Zealand’s history in nominal terms and the worst in real terms since Muldoon?

Hon BILL ENGLISH: No, but it is another symptom of “Planet Labour”, a place where the global financial crisis and the Christchurch earthquakes never happened. Voters will increasingly see a party marooned on “Planet Labour”—1970s Fabianism at its worst.

Hon Kate Wilkinson: Going into the election on 20 September, what economic policies will this Government reject because they would impose costs on households and cost jobs?

Hon BILL ENGLISH: It is pretty clear from lessons learnt from the last cycle through the early 2000s up to 2008 what policies to avoid. One of those is a sharp increase in Government spending, because that will push interest rates up much faster than they need to go. The second one would be imposing a costly emissions trading system, which is guaranteed to put power bills up by around $500 per year and, in combination with a single-buyer electricity authority, would make household electricity bills significantly more expensive, not cheaper, as the Opposition claims.

Labour and Greens both plan to tax us more, directly and indirectly, and then splash the cash around.

Not only will that leave us with less of our own money, it will fuel interest rates and inflation.


Pushed will have nothing to lose

February 5, 2014

A party working towards a third term in government often looks stale and in need of refreshment.

National doesn’t have that problem.

It gained new MPs in both 2008 and 2011 and with resignations and retirements can expect a good number of new members after this year’s election.

Labour by contrast is in opposition and looking stale.

Only one of their MPs, Ross Robertson, has announced his retirement. Since no-one else is jumping they’re going to get a push:

. . . Mr Cunliffe also said he and deputy leader David Parker will meet with each of the MPs individually over the next fortnight and were already in discussions with some about their political futures within Labour. “There are one or two conversations with one or two colleagues that go to their long-term planning, but that is a private matter between them and the leadership team.” He would not say if they had approached him or he had shoulder tapped them. “We’ve got processes in place where we are setting goals for all our colleagues.” . . .

One reason for National’s renewal is that its MPs have other options and plenty of other things to do with their lives.

Many sacrificed income to go into parliament and can expect to earn more out of it.

The reluctance of Labour MPs to go graciously suggests they don’t have those options.

The caucus is already unstable, having to work under a leader a majority of them didn’t regard as their first choice.

Disgruntled MPs who feel they’re being pushed out will have nothing to lose if they let their disloyalty get in the way of caucus unity and their party’s best interests.


Equality of opportunity or outcomes?

January 23, 2014

While Labour leader David Cunliffe is talking hard left politics to mollify his supporters, the party’s spokesman is being touted as more moderate so as not to scare the horses in the centre.

But is this the view of an economic moderate?

“Not just equality of opportunity,” he says. “I believe in equality of outcome.That doesn’t mean communism,” he adds, pre-empting my question. I ask it anyway. Doesn’t it? “No, no, no. I personally wish I had made more money for myself. I’m not a pauper but neither am I a super-wealthy person. I believe that people should be rewarded for their efforts.”

That is muddled and contradictory but it’s not moderate.

Equality of opportunity doesn’t mean treating everyone equally. Those who start at a disadvantage would require more help.

But policies which provide equality of opportunity generally allow those who make the effort to get the rewards.

If you aim for equality of outcomes, it encourages people to sit back and get rewards without troubling themselves with the effort.

Equality of opportunity is reasonable and desirable. Equality of outcome is radical left.


Labour will meddle in power market

January 17, 2014

Labour is planning to follow through on its policy to meddle in the power market if it is in government:

. . . Labour and the Greens unveiled plans to overhaul New Zealand’s electricity market on the eve of the government’s MightyRiverPower selldown last year. The operator of nine hydro stations on the Waikato River has traded below its $2.50 IPO price since just after the sale last May.  Meridian Energy, sold in October, is hovering around its listing price.

The opposition parties want to create a single, state-owned power buyer and a restructured pricing model, to eliminate excessive power company profits and pass savings onto consumers through cheaper electricity prices.

“A wise investor will be aware if the pricing model changes, in this case to stop the profiteering of public rivers, that will change the companies’ profits,” Parker, who would be finance minister in a Labour government, told BusinessDesk.

“Investors are already discounting those stocks because of what might happen if we win,” he said. “It’s actually a good example of how the market works.” . . .

If they can reduce the value of companies and the wealth of investors this much when they’re in opposition, they will do much worse in government.

Investors have already assessed the threat. The New Zealand stock exchange energy group index, which includes all listed power companies along with Z Energy and NZ Refining, has dropped 9.6 percent in the past 12 months, while the NZX 50 Index has rallied about 17 percent.

“Some people just won’t touch them because they are scared of a Labour-Greens government,” said Mark Lister, head of private wealth research at Craigs Investment Partners. “Others say because they’re dirt cheap people are pessimistic. If National got re-elected they’d go up again.”

A potential change of government may pose risks to other sectors as well, he said.

“Regulatory risk is weighing on those sectors which could be in for attention from a Labour government,” Lister said. “The market is aware of the sectors susceptible to regulation – SkyCity, the electricity sector and Chorus have a cloud hanging over them, which will continue to the election.” . . .

If there’s a Labour/Green/New Zealand Firs/Mana and whichever else party after the election that cloud will darken.


This isn’t a recipe for growth

January 16, 2014

Colin Espiner interviews Labour’s finance spokesman David Parker and finds that:

If Parker is holding the country’s purse strings after this year’s general election, there’s plenty he wants to change. The top tax rate would be 39% on income over $150,000, although the company rate would be unchanged at 28% (and no, he doesn’t think that would encourage tax evasion). He’d introduce research and development tax credits, a living wage of $18.40 an hour for state-sector workers, a higher retirement age and a 15% capital gains tax.

This isn’t a recipe for growth.

Increasing the top tax rate is merely pandering to the sock-the-rich politics of envy. Those on the top tax rate already pay far more than their fair share of tax and adding the burden will increase tax avoidance as it always has in the past.

Treasury and Brian Scott have shown the flaws in the living wage concept.

Only a small proportion of those who get less than that now are single-income families and they get top-ups through Working for Families. Anything they gain through an increase in pay they’d lose through losing WWF. there’s not even any gain for the taxpayer, they’d be paying less in WFF but more in wages.

I’m not opposed to a capital gains tax in theory but if it is to do any good it must be universal and replace other taxes. Labour’s will exempt the family home and will be on top of other taxes.

The underlying theme to all this – and what really seems to drive him – is recapturing the egalitarian spirit he believes we inherited but are slowly squandering. “Not just equality of opportunity,” he says. “I believe in equality of outcome. That doesn’t mean communism,” he adds, pre-empting my question. I ask it anyway. Doesn’t it? “No, no, no. I personally wish I had made more money for myself. I’m not a pauper but neither am I a super-wealthy person. I believe that people should be rewarded for their efforts.”

Redistribution won’t recapture the egalitarian spirit and equality of outcome is impossible without the state playing a far greater role in the economy and society than is desirable and that is communism which has failed.

The best ways to improve life is to have sustainable economic growth.

We won’t get that with more of the higher tax, higher spending policies which Labour promoted  through the noughties and which put New Zealand into recession well before the global financial crisis.


Silly question, sensible answer

December 12, 2013

It’s a political maxim that you should never ask a question to which you don’t know the answer.

David Parker was silly enough to do that during question time yesterday and got a very sensible answer in response:

Hon DAVID PARKER (Deputy Leader—Labour) to the Minister of Finance: Which, if any, is his greatest failing in 2013 as Minister of Finance?

Hon BILL ENGLISH (Minister of Finance): This question does test one’s humility. Without doubt, though, my greatest failing as a Minister of Finance was, as it has been for each of the past 5 years, underestimating the damage done to this economy by the previous Labour Government, and overestimating the ability of Labour members to understand that and apologise for it.

The initial question provided the opportunity for another:

Tim Macindoe: What further progress has the Government made in 2013 in improving the range of negative economic indicators it inherited 5 years ago?

Hon BILL ENGLISH: In the first place, I would say the credit for progress goes to the households and businesses of New Zealand, which have dealt with difficult circumstances with remarkable resilience and fortitude, and they are achieving results. The economy is growing 2.5 to 3 percent—one of the fastest growth rates in the OECD. We are on track to surplus by 2014-15—one of a handful of countries that will achieve surplus by that time. Back in 2008 the current account deficit was over 8 percent of GDP and it currently sits at less than 4 percent of GDP. Five years ago inflation was running at 5 percent. It is now running at just over 1 percent. Five years ago mortgage interest rates averaged almost 11 percent. Floating rates are now less than 6 percent, although forecast to rise somewhat next year. The tradable sector, which went into recession in 2007, is now succeeding, and we are particularly gratified that the manufacturing sector is expanding and even more gratified that the regions are expanding, many of them at a faster rate than in Auckland.

Labour squandered the good times and left office forecasting a decade of deficits, before the global financial crisis.

National has turned that around, in spite of financial and natural disasters and is now on track back to surplus.

This is an achievement of which the government, and the businesses and households which also weathered the storms, can be proud.

Our economic growth is the envy of many other countries but it would be at great risk should Labour manage to cobble together enough support to form a government after next year’s election.

It’s policies show it hasn’t learned from its high-spending, high taxing mistakes and is determined to repeat them.


Cavalier attitude to taxpayers’ money

November 6, 2013

The Press, which is very familiar with insurance issues in Christchurch was less than impressed with Labour’s plan to establish a state-owned insurance company.

. . . The proposal for a new state-owned insurance company – KiwiAssure – would, Cunliffe says, be an effort to address problems over the responsiveness of private companies in settling claims and of the price of insurance. But in a market as competitive as the New Zealand one is, the price of insurance is determined by risk and the cost of covering it on the overseas reinsurance market. That applies whether the entity is private or state-owned. A state-owned enterprise required to lower its prices or be more generous towards customers than competitors could only do so at the expense of taxpayers.

As for the implication that a state-owned enterprise might provide a better customer experience in general than a private company, that only shows how far Auckland is from Christchurch. There are many in Christchurch who have dealt with EQC who could put Cunliffe right on that point. . .

The Herald is equally unenthusiastic about the idea:

. . . Ironically, the frustrations experienced by home-owners in Christchurch have much to do with government insurance in the form of the Earthquake Commission. . .

Nothing in the policy announced by Mr Cunliffe at the weekend dealt with any of the real insurance policy issues arising from Christchurch. The announcement was little more than a replay of a commercial for KiwiBank which, like it or not, could be saddled with the insurance company. “KiwiAssure will work for all New Zealanders,” Mr Cunliffe declared. It would be “a service-focused, state-owned company that has their best interests at heart”. It would “keep profits from this crucial industry in New Zealand”.

Wisely, he did not quite claim it would offer cheaper premiums than existing companies. Christchurch had an insurance company that did that. AMI had come to dominate the local market by undercutting competitors and the earthquake exposed its inability to meet all of its liabilities.

The AMI experience is salutary for national taxpayers, too, when they hear Labour’s assurance that its company would not carry a government guarantee. The present Government quickly came to the relief of AMI’s policy holders, taking over the worst liabilities and selling AMI as a going concern to the multinational IAG. It is hard to imagine a Labour Government acting any differently if a state-owned insurer fell into the same trouble.

Insurance is almost the last business that should be nationalised. Its purpose is to share risk internationally. Labour’s company, like KiwiBank, might appeal to those who dislike profit-seeking private enterprise and prefer to deal with a state agency, but they will be under-written by a global insurance network of private enterprise. The profits of insurance provide security for all its subscribers.

The illusion of a “home-grown alternative”, as Mr Cunliffe calls it, has a powerful commercial appeal.

Members of the Insurance Council do not relish competing with a new state company for that reason. Taxpayers should be wary too. When a political party goes into business for no reason better than ideological satisfaction, it is likely to create a commercial lemon requiring ever more capital to survive. Let us hope this is one we will never see.

The ODT raises concerns:

. . . The suggestion KiwiAssure will be run by Kiwibank is not sensible.

The success of Kiwibank will be put at risk by tacking on an insurance company with a domestic focus.

Voters only have to look at the downfall of AMI, a Christchurch-based insurance company which substantially undervalued its reinsurance obligations and ended up with the Government – and taxpayers – having to step in to bail it out.

Of course, a government bail-out is exactly what will happen to KiwiAssure if it does not spread its reassurance risks widely.

Reinsurance for a totally-owned government-controlled insurance company will be expensive.

There can be no discounted policies on offer; it does not make sense.

Residents of Christchurch, and other cities and towns, should be asked how they feel about the state-run EQC, or the many people waiting for some help from ACC, to get some indication of whether they feel comfortable with a state-owned insurance company looking after their interests.

Overseas-owned insurance companies, although receiving much criticism for the slowness of their reviews and delays in payments, at least have a global reach of funds on which to draw. . .

Labour’s insurer will be completely exposed to events in New Zealand, a country at major risk of incurring heavy losses from natural disasters. . .

The Auditor General’s report on EQC said its response in Christchurch had been mixed.

There is nothing in the report to give any confidence in a new sate owned insurance company.

Labour leader David Cunliffe  tried to get some traction for the idea in Question time yesterday but gave Prime Minister John Key an opportunity to remind everyone of the risks instead:

. . . According to the public register, believe it or not, a total of 96 insurance firms have a full licence from the Reserve Bank’s carry-on insurance business in New Zealand. I have heard of a group proposing to set up a 97th insurer. The only point of difference is that that insurance business would put hundreds of millions of dollars of taxpayers’ money at risk by entering a market in which that group has no expertise and for which it cannot offer any competitive advantage. That cavalier attitude to taxpayers’ money comes from who else but the Labour Party. . . 

Hon David Cunliffe: Is it not true that the Prime Minister called Kiwibank a “failing institution” after almost a million Kiwis signed up as customers; therefore, why could not KiwiAssure also provide a locally owned, competitive, and high-quality option in the insurance market?

Rt Hon JOHN KEY: It is great that it has taken to supplementary question No. 4, but we will get to the heart of it. These are the reasons. For a start off, let us just take Kiwibank. Yes, it is a good little business. I might point out, though, that it has taken $860 million of taxpayers’ money and it has never paid a dividend in over 10 years. Secondly, the insurance market is hardly a free ride, because insurance companies happen to be in the process of paying $20 billion out in Christchurch. So if we had KiwiAssure, which the member wants to talk about, then New Zealand taxpayers would be paying a fortune into Christchurch. Thirdly, it is a competitive market at the moment. So if one assumes that they are just going to lay off their risk, they will be laying it off with the same reinsurers. Fourthly—     

. . .  Rt Hon JOHN KEY: To my fourth point as to why an insurance company would be a bad idea—name another major bank that operates in New Zealand that has an insurance company. It would not make sense to lend money [Interruption]—no, lend money—and actually have the insurance on the same property they are renting. They do not do that. . .

Finance Minister Bill English got a further opportunity to reinforce the risks in the proposal:

David Parker—Labour) to the Minister of Finance: Does he agree with IAG’s submission to the Commerce Commission that “there is real potential for major banks to begin underwriting their own general insurance products, and to compete directly with the incumbent insurance companies at the underwriting level as they already do at a retail level of the insurance market”?

Hon BILL ENGLISH (Minister of Finance): I have no responsibility for the opinion of IAG New Zealand but I can give the member the benefit of the experience of watching and working closely with the Reserve Bank to reduce the risks of our banking system to the New Zealand taxpayer. There have been 3 or 4 years where capital requirements have been increased, the core funding ratio has been increased, and we have put in place an open bank resolution system. The idea of a bank taking on more insurance risk is about the dumbest proposal that could possibly be made in the light on the events following the global financial crisis. The member should think very carefully before putting forward a policy that heads in exactly the opposite direction to where every other country in the world is heading.

Hon David Parker: Am I correct, then, to infer that he does not support the creation of a Kiwibank-style insurer to serve New Zealand consumers, which would reduce the dominance of overseas-owned insurers, keep profits in New Zealand, and bring added competition, added flexibility, and choice to New Zealanders?

Hon BILL ENGLISH: That is exactly the misleading pitch around this proposition. If there is one thing every taxpayer in the developed world now understands but the Labour Party does not, it is that the risk would be on taxpayers—taxpayers in Ireland, Spain, the US, and the UK. A billiondollar impost on New Zealand taxpayers arises exactly from financial institutions taking too much risk and loading it on to the Government. That is why his proposition is stupid. . .

Hon BILL ENGLISH:  . . . Secondly, what is surprising here is that when we have had the biggest manifestation of risk, it going wrong, and its impact on taxpayers in 100 years, the Labour Party still does not get it.

Hon David Parker: Why should anyone accept what the Minister of Finance says about KiwiAssure when 10 years ago he was pouring scorn on Kiwibank, saying it was “a small bank that has got no long-term viability.”?

Hon BILL ENGLISH: It is a small bank and it has never paid a dividend. It is great that it meets the needs of New Zealanders but it is certainly not an argument for creating a parallel insurance company. It is absolutely clear from our experience with the Earthquake Commission, AMI Insurance, and South Canterbury Finance that when the taxpayer has to underwrite this kind of risk, it can go wrong and taxpayers can be up for billions of dollars. Having low-income people working in the rain, paying their PAYE, and underwriting financial risk is as dumb an idea as you can have in the 2020s.

Rt Hon Winston Peters: Why would any sane New Zealander believe that last diatribe given that just 10 years ago, when the Cullen fund was announced, he said the very same thing about that, then went down just last week to its 10-year celebration and humbly had to admit what a fool he was?

Hon BILL ENGLISH: Well, as the member will know, because he was there, I did not say that. I did praise Dr Cullen for finding a way of stopping the Labour caucus spending billions of dollars in surpluses. If Dr Cullen had been there, he would have said that that was why he set up the Superannuation Fund—to protect New Zealand from the Labour caucus.

The one thing that is saving us from Labour’s cavalier attitude to taxpayers’ money is the proviso on the policy that a business case stacks up.

It is very unlikely a business case will so this isn’t so much policy or a promise as an attempt to get votes in the Christchurch by-election the outcome of which will be settled well before the business case is found to be faulty.

The business case for #gigatownoamaru stacks up well.


Economic policy crucial for election

September 30, 2013

For all the sideshows and media circuses around particular policies, people and events, when it comes to elections what really matters most to most voters are the economy, education, health, welfare and security.

The ability to make significant progress in the last three depends on the first.

The economy really does matter most and, as Rob Hosking points out in the print edition of the NBR (not online), economic policy will be crucial in the election and that’s an area of tension for the opposition.

While attention has been on likely tensions between Labour and the Greens, there are also tensions within Labour – tensions between those who kind of get the importance of economic growth and those for whom it is more an academic exercise.

This group is never exactly anti-economic growth; they just view the policies required to produce that growth with a degree of disdain and, by and large, they would rather talk about climate change and taxing things more.

And Mr Parker is definitely from this wing of Labour.

With a preference for talking about climate change and taxing more, that wing has a lot in common with the Greens.

The phalanx of economic spokesperson-ships Mr Cunliffe announced on Monday is not, if labour were to form a government, just there to form a human shield around Beehive photocopiers so Russel Norman doesn’t go berserk with the currency.

It is also to balance out Labour’s own tensions.

A party with internal tensions over economic policy isn’t one best placed to run the economy.

Against this, National will have the known quantity of Mr English, who should be able to offer a return to surplus and, no doubt some election sweeteners (probably on savings and investment policy) and a track record of having got through the worst economic crisis since the 1930s in what is actually quite remarkably good shape.

That is going to be as important a match up as the John Key/David Cunliffe battle.

John Key and Bill English against Davids Cunliffe and Parker with Russel Norman wanting a major role too?

That’s sound economic policy that is working against a lurch to the left that has failed every time it’s been tried.


So much for the south

September 27, 2013

Labour’s abandonment of the provinces is particularly noticeable in the South Island and the dearth of representation has been highlighted by the party’s reshuffle.

The first South Island MP in the line-up is list MP Clayton Cosgrove at number 7.

The next is another list MP Maryan Street at 12 and then West Coast Tasman MP Damien O’Connor at 19.

The party has only two MPs south of Christchurch. One of those, David Clark who is supposed to be well regarded in and outside parliament, has been demoted to 20.

Megan Woods is 24 and the other South Islanders, Ruth Dyson, Clare Curran, and Rino Tirikatene are unranked.

The ODT says that new deputy, and another list MP,  David Parker’s links give Labour south cover.

David Parker pledged his loyalty to the South after his election yesterday as deputy leader of the Labour Party.

The election of Mr Parker – a list MP who has a house in Dunedin, visits the city two weekends out of three and still calls the city his base – provides Labour with South coverage to complement Mr Cunliffe’s coverage of the North as MP for New Lynn.

The prime reason for those visits will be to keep contact with his children. That is his business but shouldn’t be confused with political representation.

He might have pledged his loyalty to the south but his actions don’t match his words. He chose to leave Dunedin and stand for Epsom at the last election.

The one before that, 2008, he was the candidate for Waitaki but showed his lack of commitment to that when he conceded the seat at a public meeting a couple of weeks before the election, for which local party members still haven’t forgiven him.

If it gets into government, the party’s anti-growth policies will hit the regions hard and the lack of representation in the senior ranks of the party will make it more difficult for the concerns of the south to be heard.


Different David same policy

September 24, 2013

David Cunliffe plans no changes to Labour’s main policy planks:

. . . After unveiling a new shadow Cabinet line-up, Mr Cunliffe confirmed his deputy, David Parker’s key policy initiatives would remain in place and, in some places, be extended.

“They are all intact although I think it’s probably fair to say you may see more work from David Parker in the monetary policy area, quite possibly,” Mr Cunliffe told Businessdesk on Monday.

“Capital gains tax is intact. We may do some fine-tuning. The KiwiBuild policy is great. There may be some other changes in that portfolio as well.”

He confirmed the New Zealand Power single electricity buyer policy was also “intact.” . . .

There’s a different David leading the party but he’s spouting the same policies.

They were bad enough by themselves.

Add the ones promised during the campaign and the concessions labour would have to make to the Green Party if it’s a coalition party and you have an even greater lurch to the left.


Spending less, delivering more

September 4, 2013

Labour’s aspiring leaders’ expensive promises have provided the government with a golden opportunity to highlight the responsible position it has taken to economic management.

2. JAMI-LEE ROSS (National—Botany) to the Minister of Finance: What steps is the Government taking to responsibly manage its finances and deliver better public services, following fast-rising government spending of the mid-2000s?

Hon BILL ENGLISH (Minister of Finance): We have followed some fairly basic rules that any prudent household or organisation would follow. We make sure that spending commitments are costed and that there are funds available to pay for those spending commitments, at the same time as balancing the need to support New Zealand families through uncertain times. The Government is on track for surplus next year. We have been able to deliver better results in health, education, welfare, and justice at the same time as reducing a very large surplus due in part to the Christchurch earthquake but also due in part to the policies of the previous Government. We intend to continue to deliver better results, in many cases for less funding.

Jami-Lee Ross: What are the benefits for New Zealand families of the Government’s responsible economic and fiscal management?

Hon BILL ENGLISH: The main benefit for New Zealand families has been that they have had a degree of security about their income support and their jobs through some of the more difficult times that this economy has endured in the last 30 years. The cost of living is rising at less than 1 percent a year—a 14-year low. The export sector has been growing in the last 2 or 3 years, despite a high dollar. New Zealand’s 2.5 percent growth in the last year puts us among the faster-growing economies in the Western World. Business and consumer confidence is at, or near, a multi-year high. The Government’s disciplined spending is taking pressure off exchange rates and interest rates.

Jami-Lee Ross: How does New Zealand’s current economic performance compare with the position that the Government inherited in 2008?

Hon BILL ENGLISH: The Government inherited the triple problems of domestic recession, which began early in 2008; the global financial crisis; and the unfunded spending commitments of the previous Government, which saw public spending increase by 50 percent between 2003 and 2008. The New Zealand public is being treated to a display of all the attitudes that led to that, in listening to the Labour leadership contest—

Mr SPEAKER: Order! [Interruption] Order! . . .

Jami-Lee Ross: I will try this one, Mr Speaker. What alternative policies has he seen, and what are the differences between those alternatives and the approach being taken by this Government?

Hon BILL ENGLISH: The Government has set out on a plan to protect the most vulnerable through difficult times, to return to surplus, and to build a more competitive economy. Our policies have been directed at enabling businesses, in particular, to make the decision to invest another dollar, employ another person, and pay a better wage. There are alternative approaches that involve reckless spending promises with no credible plan to fund them, and policy proposals where the Government uses its regulatory powers as well as its cheque book to buy votes. That is the approach we saw through the mid-2000s. But to give credit where it is due, the Labour leadership candidates are promising to spend—

Mr SPEAKER: Order! [Interruption] Order! The Minister has no responsibility for that.

Hon David Parker: After Labour ran nine Budget surpluses and reduced net Government debt from 18 percent of GDP to zero, did he say in 2008, when the global financial crisis and recession hit: “This is the rainy day that Government has been saving up for.”?

Hon BILL ENGLISH: I did say that because we were presented with a pre-election update showing 10 years of deficits ahead of us and ever-rising public debt—that is, public debt that never stopped increasing—in those forecasts. I am pleased to say that we have turned it round, but I am worried to think that the Labour leadership candidates think that they could do it all again.

Mr SPEAKER: Order!

Hon David Parker: Why does he repeatedly blame the global financial crisis and the Canterbury earthquakes for his record borrowing of more than $50 billion in the last 5 years, and if the Government’s spending track was left in such bad shape, how was it that he could responsibly cut taxes?

Hon BILL ENGLISH: Well, it is just hard to know where to start there. The fact is that the tax packages were revenue-neutral—

Hon David Parker: 40 percent to the top 10 percent.

Hon BILL ENGLISH: No, they were revenue-neutral, and I am proud to say that we are the only developed country that has been table to increase GST and cut income taxes. No one else has actually been able to pull that off. In respect of the Government finances, well, as I said to the member, we were presented with 10 years of ever-growing deficits and ever-growing debt and with public services that were a complete shambles. We are proud to have been able to fix up that mess and do better.

Hon David Parker: Why is it that he finds corporate welfare so easy to justify, yet the idea of supporting the working New Zealanders, who keep this country going, through decent labour laws and fair wages seems to get him into a cold sweat and in need of a lie-down?

Hon BILL ENGLISH: The member is simply wrong. This Government has ensured, with regard to the people whom he is referring to—the people who go to work every day, work hard, and pay their taxes—first, that they get taxed at a fair rate, not a ridiculously high rate; secondly, that when they pay their tax, they actually get public services that work; and, thirdly, that they get an economy managed in a way that they can have some security that when they go back to work the next day, they will still have a job. We are very proud of our record in supporting working people in New Zealand through tough times.

The leadership circus has shown that Labour hasn’t learned from its mistakes and highlights the contrast with National which has focussed on spending less and delivering more.


Dairying is diversification

August 9, 2013

Labour’s initial response to the whey protein contamination was restrained but the restraint didn’t last long.

During Question Time yesterday David Parker reminded us that his party doesn’t like dairying.

Hon David Parker: Does he agree with the article in the Washington Post on 7 August that the botulism issue highlights New Zealand’s reliance on dairy exports?

Hon BILL ENGLISH: Well, you did not need the botulism issue to highlight the importance of the dairy industry to New Zealand. I must say that the dairy industry deserves some support, despite New Zealand talking for 20 or 30 years about being too reliant on commodities. The dairy industry has performed better than the fashion industry, the IT industry, the wine industry, and the film industry, and it has injected billions of dollars of extra income into this economy in the last decade. We think that is not a bad performance.

Hon David Parker: Given that over the last 5 years under National, New Zealand’s reliance upon dairying has increased and the latest jobs statistics show a further decline in manufacturing employment, how can he deny that he has failed to rebalance and diversify the export sector despite his promise to do so?

Hon BILL ENGLISH: As the member may well know, it is not really a matter of whether Governments can just pick to have another industry. New Zealand has 30 years of experience of trying to do that, and how it has turned out is that we are very good at some things, such as the production of protein and high-value niche manufacturing, and those are the growing parts of the economy. Labour thinks it is good at government, and it decided to grow the Government part of the economy. Well, it turned out that that does not work very well.

This week’s food health scare, made worse by Fonterra’s response, has reinforced just how reliant we are on dairying.

It would be better if our economy was more diversified but Rob Hosking points out that diversification is a slogan not a policy.

He also points out that dairying is diversification.

Forty years ago we depended on the produce of one animal in one market – sheep in Britain.

Successive governments tried various ways to foster a variety of industries, without success, but dairying has grown without any government initiatives.

Farmers have made the most of New Zealand’s natural advantages to respond to international market signals driven by growing global demand for protein by producing, and selling more milk.

The export income and economic growth which has resulted from that has made a significant contribution to helping the country through the global financial crisis.

We would have done even better had we been producing lots more of whatever else the world wants and is prepared to pay for.

A broader economic base would make the country stronger but Labour’s failed strategy of bigger government wouldn’t.


LabourGreen shonky power policy even shonkier

August 3, 2013

The headline says: Greens/Labour made up ‘super profit’ claim for shonky power policy – source.

The story is behind  the paywall but explains that Stanford University professor Frank Wolak said LabourGreen took his figures, on which they based the rationale for the policy, out of context to suit their own agenda.

In another NBR story, Professor Wolak says New Zealand’s existing market arrangements are starting to work better and should be improved further.

In a wide-ranging interview with BusinessDesk, Professor Frank Wolak of Stanford University described the Greens/Labour NZ Power single buyer policy as “a sham that might make me feel a bit better” but was the wrong weapon to attack “runaway” retail electricity tariffs, which he says are the real problem in current market arrangements. . .

. . . he made it clear he did not calculate the $4.3 billion figure which critics say are proof of excessive power company profits and a consumer “rip-off”.

“That certainly attracted a lot of attention, most of it unwarranted,” he said.

Prof Wolak says the NZ Power policy, which would unpick a 25-year-old experiment in electricity market design in favour of a centrally planned model, “may not even solve the problem, which is runaway retail prices”.

Prof Wolak urged more competitive reform in electricity generation and retailing and far tougher regulation of the monopoly parts of the system: the Transpower national grid and local electricity distribution networks.

“It may look good, but it’s got lots of challenges,” he says of the Greens/Labour policy. “You’re throwing the entire baby out just to get rid of the bathwater and you’re going to start over, as if you have all these problems.

“My argument is that some of the changes since 2009 are pushing in the right direction,” says Prof Wolak, whose 2009 report for the commission found evidence of electricity generators wielding market power at different times, to maximise the value of their generation efforts. . .

Labour’s economic spokesman David Parker who was behind the policy rejects the criticism.

There’s no surprise in that when the man whose figures he used says they’ve been taken out of context and the policy wouldn’t work.


OECD doesn’t back LabourGreen CGT

June 7, 2013

New Zealand’s economic policies have been endorsed by the OECD.

The Organisation for Economic Co-operation and Development has confirmed New Zealand’s macroeconomic policies strike the right balance between supporting the recovery and ensuring sustainable medium-term growth, Finance Minister Bill English says.

In its Economic Survey of New Zealand for 2013, the OECD also notes the economy is gaining momentum, with post-earthquake reconstruction in Canterbury, and business investment and household spending gathering pace.

“The OECD confirms the Government’s economic plan is on the right track,” Mr English says. “In particular, it notes our work in improving productivity to support long-term growth, it confirms the banking system is in good shape and well supervised, and it supports our focus on getting back to surplus and reducing debt.

“It concludes that reducing government debt will establish a favourable starting position for confronting longer-term cost pressures from an ageing population. It will also tend to raise national saving rates and reduce New Zealand’s external vulnerabilities.

“This is a welcome endorsement of the Government’s economic programme from the OECD, coming just a few weeks after the International Monetary Fund also confirmed we have struck an appropriate balance with our programme.”

Mr English agrees with the OECD’s assessment that New Zealand’s high private debt levels, large external imbalances and an over-valued exchange rate are among the main risks to growth.

“That’s why the Government is taking a number of steps, such as through the Business Growth Agenda and the internationally-focused growth package in the Budget, to help businesses and exporters become more competitive and to sell more to the world.

“While the OECD’s modelling predicts relatively small growth impacts from achieving some of the specific Business Growth targets, taken as a package evidence suggests they could make a material difference to productivity and incomes,” Mr English says.

The OECD notes that New Zealand policymakers are increasingly attuned to social equity and welfare issues.

It says welfare reforms are attempting to reduce long-run benefit dependency by emphasising education and training for at-risk youth, placing more conditions on beneficiaries and requiring stronger accountability from public and private providers.

“I’m pleased with the OECD’s positive assessment of the main elements of the youth package within our welfare reforms, and other recent changes to increase educational achievement and reduce youth unemployment.

“We will carefully monitor progress to ensure we further improve the participation of young people in education and training.”

One area the OECD report differs from the government’s policies is a Capital Gains Tax.

Mr English says the Government does not agree with the OECD about the need for a comprehensive capital gains tax applying to all assets, including the family home.

“Two comprehensive, expert reviews of New Zealand’s tax system – the 2001 Tax Review and the 2009 Tax Working Group – did not recommend a widespread capital gains tax of the sort the OECD recommends.

“The Government significantly tightened the tax rules around property investment in Budget 2010, which is expected to raise an additional $3 billion in tax revenue over four years.

Labour and the Green Party policy is for a CPT and they’ve seized on the OECD report as vindication of their stance.

However, that conveniently overlooks the report’s recommendation that a CTG covers the family home and replaces other taxes.

The LabourGreen version would exclude the family home and those parties wouldn’t reduce other taxes.

Labour lost the argument over this in parliament on Wednesday:

Hon David Parker: Why does he continue to refuse to adopt a capital gains tax excluding the family home when it is clear it would reduce inequality, it is clear it would take the pressure off house prices, and it is clear some people would pay their fair share of tax, and, at the same time, it would improve the economy?

Hon BILL ENGLISH: If a capital gains tax had all those magical powers, then you would not see a whole lot of developed country economies on their knees because of excessive housing markets. We have not implemented it, for a couple of reasons. One is that we believe the other tax measures we have taken, which are collecting $3 billion in tax revenue over 4 years, are more effective, and, secondly, we believe that changing the planning laws to allow more supply of houses will have a much bigger impact on fixing wealth inequality than a capital gains tax.

Rt Hon John Key: Has he seen any reports about a period of time between 1999 and 2008 when there was a substantial increase in the housing market in New Zealand and when there was a major amount of work done, to extent that half of the work of the Department of the Prime Minister and Cabinet was about the housing market, and, by the way, was there a recommendation for a capital gains tax that was adopted in that period of time?

Hon BILL ENGLISH: It is funny you should mention that. Some of the things the last Labour Government did were sensible. In 2001 it commissioned a tax review—a comprehensive review of New Zealand’s tax system. That review concluded that a capital gains tax that exempted the family home would not be effective. Faced with the fastest-rising housing market in New Zealand’s history through the mid-2000s, the previous Labour Government, in which most of the Opposition’s current front bench served, did not implement a capital gains tax. . . 

Hon David Parker: Is the truth of the matter not that Mr English and his colleagues stopped the Savings Working Group and others looking at a capital gains tax by putting it out of their ambit, and is it not the reality that National’s refusal to introduce a capital gains tax is because it does not suit the vested interests of its backers?

Hon BILL ENGLISH: Well, with, I think, 47 percent of New Zealanders voting for the National Government in the last election, we are very pleased to represent a very broad range of backers—in fact, a much broader range of New Zealanders than the Opposition Labour Party, which claims to represent everybody. No, the reason we have not implemented a capital gains tax is that when you exempt most of the housing market, it becomes a tax purely on successful, profitable businesses, and that would be bad for growth. We are addressing the problem of rising house prices by addressing the real issue of the lack of supply, particularly in Auckland.

How typical – LabourGreen have a policy which wouldn’t address Auckland’s housing affordability and would be a tax on successful, profitable businesses which would be bad for growth.

Offsetting Behaviour also argues against a CGT:

 

 

 

 

 


LabourGreen power plan will increase prices

April 19, 2013

The LabourGreen plan to power us back to the socialist seventies will increase the price of power - and at least one of their MPs knows it.

Electricity consumers should be under no illusion that the Labour-Greens power plan will hit them in the pocket, says Energy and Resources Minister Simon Bridges.

“Harking back to the 1970s with a half-baked nationalisation plan will ultimately cost consumers as it returns the country to the days of supply constraints, power blackouts and ultimately higher prices.

“David Parker himself said this in advice to the Cabinet in 2006.

“As Minister of Energy he said that “a single buyer would likely result in higher capital and operating costs”. He went on to say that: “The risks involved in changing arrangements could be significant. The resulting uncertainty could lead to investment proposals being put on hold. Direct implementation costs could be large.” And, he admitted that “The single buyer would be relatively poor at sustaining pressure on operational costs.

“Competition is by far the best tool for delivering electricity at competitive prices,” says Mr Bridges.

“Our 2010 reforms mean that there is more competition amongst generators and retailers than under Labour. We are seeing more innovation and efficiency with 800,000 smart meters operating in New Zealand homes without any need for state intervention.

“Kiwi consumers have the power in their own hands. They are switching in their thousands for a better deal from suppliers and saving hundreds of dollars a year in the process.

“The Labour-Greens policies will actually result in higher prices over time because we’ve seen before that politicians and central bureaucracies do a bad job of setting prices and ensuring supply. Anyone who remembers the power blackouts of the past will know this.

“So does David Parker.”

The Cabinet papers are here.

Parker said publicly on more than one occasion that he stood for Labour because of Max Bradford’s power reforms.

He also said publicly that Labour hadn’t made any major changes to them because it couldn’t.

The Cabinet Papers back that up and show the LabourGreen plan won’t work.

 


Labour’s desperate attempt at sabotage

April 15, 2013

Labour is making a last-ditch desperate attempt to sabotage the partial sale of Mighty River Power.

Shares in Mighty River Power go on sale today, but Labour is warning potential investors it plans to makes changes in the electricity sector if elected next year. . .

He won’t say what the changes will be, only that is was fair to warn potential investors.

“What we’re most concerned about is the rise in power prices and the fact that when these assets are sold the likelihood is that power prices are going to go up and that the companies are going to be increasingly held in foreign hands.” . .

The Labour leader is playing at being David Shearerpisos again.

There are no details on what they’d do because there is nothing they could do. If he’d asked his Finance Spokesman, David Parker, he’d know that.

Power prices went up far more steeply in the nine year’s when Labour was last in government than they have since National took over in 2008.

At a public meeting, when he was a Minister, Parker was asked about power prices and said he’d joined Labour because of Max Bradford’s electricity reforms.

In response to a question about why Labour had done nothing to reverse the changes or moderate them he said it was too late, there was nothing the government could do.

Shearer’s latest release is empty rhetoric. It displays the party’s contempt for, and ignorance of ,business and provides another reason to ensure they won’t be leading the government after next year’s election.


Follow

Get every new post delivered to your Inbox.

Join 1,163 other followers

%d bloggers like this: