On the cusp

November 14, 2014

Transfer Tasman asks is economic transformation finally being delivered?

During the election campaign John Key said he believes “NZ is on the cusp of something special” (as Trans-Tasman reported September 18). He was ridiculed by Labour (look what happened to them), by NZ First leader Winston Peters (who was predicting to his suck-it-up audiences the economy would crash in November) and by various “woe-is-me” pundits like Rod Oram. But now some hard data is emerging to suggest Key has a better sense of the way the economy is moving than his critics. Job statistics last week showed NZ’s unemployment rate is now lower than Aust’s, despite inwards migration reaching new highs. Canterbury is driving jobs growth, up 11% over the past year, and reporting the lowest unemployment across the regions at 3.2%.

This week the share market NZX top 50 index punched up to the 5500-mark, a new record high. Investors are chasing high dividend yields, and some of the big companies sitting on cash mountains are obliging them: witness Wellington-based Infratil this week paying a special dividend of 15c a share worth $84m on top of its interim dividend of 4.5c. Other evidence came from the ANZ Bank which headed up its latest Truckometer readings “High speed zone.” The two traffic indices, one concurrent with GDP, and the other providing a 6-month lead on GDP growth, both rose strongly in October, suggesting solid momentum over the second half of the year and into next.

ANZ economist Sharon Zollner in her commentary says “it is going to take more than a halving in global dairy prices to stop this juggernaut.” She sees the NZ economy continuing to vie for the lead in the OECD growth race. But the real kicker in all this is with annual CPI inflation running at just 1%, there is no sign of the engine overheating. This is why NZ might be on the cusp of something special – sustainable growth over the cycle above the long-term trend, without the Governor of the Reserve Bank having to slam on the brakes, and bring the economy to a shuddering halt. So this may be the economic transformation, long heralded, but at last being delivered.

The cycle of boom and bust is all too familiar in New Zealand.

The challenge of sustainable growth without inflation has proved too difficult in the past.

This time there are encouraging signs it could be achieved.

 


Helping to help selves

September 29, 2014

Prime Minister John Key has asked officials to come up with fresh ideas to tackle the issue of child poverty.

. . . Key’s genius is to sense developing problems, define what needs to be done and then act decisively to cauterise them. No better example is the call he has made this week for the DPMC, Treasury and other departments to delve into the issue of child poverty, and come up with fresh advice on how to wrap services into meeting the needs of those families who are struggling.

Left to its own, child poverty could lead to the evolution of a frustrated under-class and long-term a divided society. Key is going to make sure the issue is dealt to and doesn’t become a political headache. He doesn’t belong to the school which believes throwing more money at the problem is the solution. There’s a fundamental tension between ensuring sufficient welfare assistance is available and ensuring incentives to get into work are strong enough. Two out of five children said to be in poverty are in homes where one parent at least is in work.

Working for Families and other welfare measures are tactical measures: the overall strategy lies in more jobs, and, as Key sees it, in upskilling those who lack the skills for the opportunities opening up. Key argues the million NZers who voted for National on Saturday are caring people who will want to see the Govt understands the issue and is working its way through it. But he says those million people will also want to see those to whom assistance is targeted helping themselves. . .

Children shouldn’t be punished for poor decisions their parents make but nor should parents be paid, or compensated, for abrogating their responsibilities.

Only the hardest of hearts would begrudge assistance to the most vulnerable.

But most people work hard for their money and expect that those their taxes help, help themselves if and when they are able to.

Simply throwing money at the problem would entrench dependency and the social and economic issues that follow.


Only National can provide stability

September 12, 2014

Trans Tasman:

Polls midway through the campaign are continuing to point to a win for the incumbents on September 20, but Ministers reckon it will be a “tight finish.” On current polling, the Centre-Right parties appear to be about 15 points ahead of those on the Centre-Left. So is NZ becoming more conservative? Or is the Centre-Right domination of the political landscape due to John Key shifting National to the centre? The answers to those questions may only emerge in time, but after the hard slog through the global financial crisis and the Christchurch earthquakes, NZers have a clear and pressing priority. They overwhelmingly want a stable Govt to deliver steady, if not spectacular, progress.

They are averse to radical, dislocating change, or of “reformers” who want to re-shape their world. . . .

Only National can provide stable government.

The internal divisions in Labour  have been overshadowed by other events and issues in the election campaign.

But they haven’t gone away and are one of the reasons the party is polling so poorly.

The unions and members lumbered caucus with a leader they didn’t want and who some still don’t support.

Throw in the Green Party wanting around half the cabinet positions plus Winston Peters, Hone Harawira, Laila Harre . . .  and you get a recipe for instability and no progress.

Thanks for tuning in tonight. If you want a National Government, party vote National. #Decision14 #Working4NZ


Foreign ownership boosts wages:

September 5, 2014

Trans Tasman on foreign ownership:

The proposed sale of the 13,800ha Lochinver Station, near Taupo to Shanghai Pengxin, which bought the Crafar Farms in a joint venture with Landcorp, reignited the political debate about foreign investment and purchases of Kiwi land. Labour has promised to block the sale if it is not approved before the September 20 election and stop land sales over 5ha except in rare circumstances. Finance spokesman David Parker says land sales to foreigners do not increase output and do not release capital to be reinvested by the NZ owner to create new jobs. Finance Minister Bill English, however, reckons the Govt has struck the right balance between attracting foreign investment and tightening the rules for overseas investment in sensitive land.
Public Disquiet. Chinese investors have been making other investments in the farm sector: they have a minority stake in Blue Sky Meats and the Overseas Investment Office is considering an application to buy Prime Range Meats. Farm leaders have become disquieted. Federated Farmers supports positive overseas investment in NZ’s farming system but is concerned there would be little benefit to NZ if the Lochinver deal is clinched. President William Rolleston says “NZ absolutely needs foreign investment” but only if it benefits the local and national economy. He wants a “substantial and identifiable” benefit test incorporated in overseas investment eligibility criteria. Public opinion survey results this week suggest a majority of voters similarly approve of farm sales to foreigners only when it brings a significant advantage over an NZ buyer such as jobs. Almost 33% want farm sales to foreigners banned.

National raised the already high hurdle foreign buyers have to jump before a purchase is approved and benefits above and beyond those sales to domestic buyers would provide is one of the criteria.

 Better For Workers. An upcoming working paper by Motu Economic and Public Policy Research economists throws some light on the economics by examining how employment in foreign-owned firms affects NZ workers’ earnings. Using data from Statistics NZ’s Integrated Data Infrastructure, which tracks workers as they move between firms, the researchers found workers in foreign firms tend to receive, on average, around 14% higher monthly starting earnings than workers in domestically-owned firms. Compositional differences are the main explanation: foreign firms tend to be bigger and employ workers who would have received relatively high wages regardless of where they worked. The authors also found under-25 year olds get greater gains from joining a foreign firm and smaller losses on exit than older groups, while more highly skilled workers attract a stronger wage premium while working in the foreign-firm sector. In short, foreign firms not only tend to hire more highly skilled workers; they also remunerate these workers more generously.

A very small percentage of land  – around 2% – is in foreign ownership now.

The problem is one of perception based on emotion taking no account of the facts and benefits which include better wages for staff employed by foreign owners.


What matters

August 31, 2014

Trans Tasman on what matters to voters:

The vital factor for NZers as they come to vote are issues which impact on their lives: the trajectory of the economy, jobs, living standards, inflation, house prices, education and health services. Voters’ assessments on the credibility, competency and leadership of the parties weigh equally heavily. And a primary concern is stability of the Govt to be elected under the MMP system. . .

Anyone who understands the issues, the policies, the parties has a clear choice.

A stable, National-led government will continue with the policies which are working in these important areas; a weak unstable Labour-led government propped up by the Green, New Zealand First and Internet Mana parties won’t.

There are major differences in policies too, not the least of which is tax:

Where Labour is talking of raising taxes, National is dropping broad hints it wants to lower taxes by revising tax thresholds to provide some relief for those on low and middle incomes.  . .

The PREFU supported the government’s claims that the books will be back in surplus.

There is no justification for increasing tax rates. If conditions allow, there could be a case for some reductions, if only to counter bracket creep.

The only justification for adding a new tax would be by taking away an existing one.

Labour and its left-wing cling-ons want to increase tax rates and introduce new ones as extras not replacements.

High tax and high spending under the last Labour-led government put New Zealand into recession long before the rest of the world. That they haven’t learned from that mistake shows they can’t be trusted with the public purse again.
In their last five years in government, Labour’s spending increased by 50%, pushing mortgage rates to 11%, causing inflation to exceed 5%, and putting the economy into recession well before the global financial crisis. Now they want to make the same mistakes all over again.

In stark contrast National has spent the last six years working for New Zealand with policies that are working for New Zealanders and this week announced more of its plan for the next three years:

We’re focused on the things that matter to New Zealanders. If you’ve missed any of our policy announcements this week, we’ve summed them up below. If you want more information on any of these announcements visit: www.national.org.nz/plan #Working4NZ


Prudence best recipe for sustainability

August 15, 2014

Trans Tasman previews next weeks PREFU:

. . . What the PREFU will highlight are Treasury forecasts on economic growth remaining robust, but “normalising” after the dairy boom last season, and on fiscal surpluses thinner than those set out in the budget.

There’s no windfall in revenue as there was in 2005 when the Govt of the day, caught by surprise, scrambled to splash out big spending programmes like Working for Families. The economic situation NZ finds itself in during this cycle is very different. Then credit growth was running at around 10%, compared with 4% now, inflation was high, and consumption was fuelled by rampant debt. This time round, the Reserve Bank Governor Graeme Wheeler jumped in early, and has got the surge in house prices under control. Inflation is subdued, wage growth is only moderate, productivity is rising, households are keeping their spending in check, and corporate balance sheets are in good shape. 

So the cycle this time will have a flatter, steadier profile, but growth will be at a sustainable pace, lasting longer. The economy is growing another “leg,” with hi-tech exports rising exponentially. For the Govt, the aim is to keep the economy running on a smooth, upward trajectory. Its eyes are on winning not just this election, but in 2017 as well. For this to be achieved, it has to deliver rising standards of living through the whole cycle. It can’t yet risk another boom-bust, of the kind which has dogged NZ over the last half century, if is to capitalise on the reputation it has sought to nurture of being the most prudent economic managers the country has had in the modern era. . .

The improving outlook for the country has been hard-won and is a result of careful management.

The expected outlook for growth at a sustainable pace and lasting longer is encouraging but it’s not assured.

We know what a National-led government has achieved and can be confident they will continue with the same prudent recipe to ensure that growth is sustainable

A prospect of a weak Labour Party leading a coalition propped up by the Green, New Zealand First and Internet Mana Parties gives no cause for confidence.

Policies announced so far are repeating the failed recipe of the past based on the toxic ingredients of  higher taxing, higher spending.


Need to earn respect

August 1, 2014

Trans Tasman on complaints of media bias:

The tawdry cry of media bias, marinated in bitterness and misanthropy, has been held aloft by Labour activitists. They have a point, but not the one they think they are making. How journalists’ view political parties is affected by many factors, and individual political biases and prejudgements is only one of them – and seldom the most important. Almost every journalist in the press gallery has tales of slow or non-existent response from Labour to requests for information, or of interviews/appearances agreed to and then “pulled” at the last minute.

It isn’t a matter of incompetent staff: the almost total turnover in the past three years is only one indication something deeper is the problem. No one knows what is going on because people who should be told are not told, and the big reason for this is internal levels of mistrust are so toxic. It adds up to an organisation – and we use the word ‘organisation’ with some degree of over-stretch here – which cannot do the political equivalent of walk from Mum’s car to the kindergarten gate without having a trouser incident.

And of course this affects coverage. Journalists experience this level of cluster-fornication every day and it has a deep impact. And this is before we get to the public snafus, the destructive and bitter factionalism and the way many electorate candidates are distancing themselves from the current, official election strategy. Almost everything Labour does at the moment sends the message it is in no position to run anything.

If there is a tone of disrespect in how journalists cover Labour – and there very definitely is – it is because Labour is not behaving in a way which earns respect.

Daily displays of cluster-fornication don’t earn respect.

Nor do obvious internal divisions, a predilection for sideshows and failure to learn from mistakes.

Labour is in a mess and that’s reflected in media coverage.

It’s a mess of the party’s own making and the media can’t be blamed for showing it in a negative light when there’s so little positive to focus on.


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