No Problem With Inflation?

July 4, 2008

In the wake of what might be a decision by Labour  to loosen the reins on inflation it is instructive to look at the Telegraph’s  report on what’s happening in Zimbabwe.

The highest value banknote is worth Z$50 billion – which is presently enough to buy one can of baked beans. At the TM supermarket in Harare’s northern suburb of Borrowdale, many shelves were bare yesterday. But a kilogramme of mince cost Z$490 billion and a kilogramme of sausage was going for Z$170 billion. A litre of imported orange juice cost an eye-watering Z$303 billion.

Some prices have trebled from a week ago, when toilet paper worked out at just under Z$22 million for a single sheet. There was none in the supermarket yesterday, but by now there is probably an alternative use for the Z$50 million note.

It is only 20 years ago that New Zealand had inflation above 20% . I remember only too well the individuals and businesses which were casulaties of it; and the difficulties associated with bringing it down again.

No-one is suggesting we would be in danger of ending up like Zimbabwe if inflation was allowed to increase a bit, but the only winners from even a small increase will be speculators. 

Hat tip: Tumeke!


Roadside Poll: People 1 – Labour 0

July 4, 2008

In her speech to a journalism conference  last year Helen Clark talked about seminal events.

Today’s truckers’ protest will be one in the life, or perhaps that should be death, of this Government.

Its significance is not in the protest itself, but in the widespread support for it by the general public.

The people watching and cheering provided a roadside poll which is saying loud and clear that they are mad and they’ll use the election to get even.


Dunedin South Still Simmering

July 4, 2008

The ODT reports that tension  between two factions of Labour Party supporters in Dunedin South worsened this week with the resignation of a branch offical amidst allegations of mismanagement.


Message Manners

July 4, 2008

There’s a message on the answerphone, it’s long and involved. The phone number is left at the end but I miss it so I have to listen to the whole message again; and because I’m not sure if I’ve caught it correctly I have to listen a third time to check but because I’ve got the gist of the message my mind wanders and I miss the number…

I’m trying to train myself to leave my number at the start and end of messages so other people don’t have to go through that before they can ring me back.


Trainwreck Back To The Future

July 4, 2008

The best advice I had from a racing driver was to look where you’re going because you’ll go where you’re looking.  Jim Hopkins  proves the lesson doesn’t just apply to the road:

We like looking back. We love the rear-vision mirror. It’s our true compass.

That’s why we’ve just bought all those trains, lock, stock and funnel – for $640 million or a billion, depending on who you believe.

And, apparently, all us good old, rear-vision Kiwis are positively chuffed we’ve got the trains back. We think it’s great that Michael Cullen’s the new Thin Controller.

No matter that we didn’t need to buy 100 per cent of Toll when 51 per cent would’ve been perfectly fine.

No matter that we’re now obliged to spend $300,000,000 on new kit. No matter that any increase in rail traffic will, paradoxically, increase the demand for better roads – to truck goods from the hinterland to the track.

Because we’re back where we were. And yesterday is such a cosy place.

Meanwhile, Kupe and Cook are in India, talking to the Tata motor company, which is busily developing a French-invented compressed-air engine that will replace the gas-guzzlers we’ve got in our cars and trucks.

And that’s just one of the innovations under way in places where people look forward.

Mark my words. Within a decade, the world’s roads will be teeming with vehicles running on air, hydrogen, fuel cells, electricity and, who knows, maybe even that weird stuff you find in your belly button when you’ve forgotten to wash it for a while.

The combination of a ubiquitous infrastructure and a propulsive revolution will make trains even quainter than they are now. And no amount of sticking up RUCs to screw the transport scrum on the very day you become Brutish Rail will change that.

If you haven’t read this yet, it’s probably because your paper’s late and that’s probably because the roads are jammed with angry truckers who’ve probably decided they’ve had enough because they probably think our great leap backwards has gone off the rails.

And we’ll all be casualties of the train wreck that results from this reckless ride back to the future on 19th century technology, fuelled by 20th century ideology and funded by 21st century tax payers.


Recession Similar But Positively Different in Provinces

July 4, 2008

Brian Fallow  quotes Split Enz: History never repeats.

There is always some difference that makes a difference. But the similarities can be instructive, too.

A couple of Reserve Bank economists, Michael Reddell and Cath Sleeman, have been looking at six previous recessions in New Zealand – the imbalances which preceded them, what triggered them and what made them worse.

They draw no conclusions about the situation now, beyond saying that “there is nothing in the material in this article to suggest any greater reason for optimism” than the downbeat view expressed in the bank’s June monetary policy statement.

They note the mitigating factors – fiscal stimulus and commodity boom – but say these factors “have much to mitigate”.

By my count 12, maybe 13, of the 17 recessionary factors they list are at work now, two of them – a global credit squeeze and a large rise in oil prices – in spades.

The recession which made the deepest impression on me was that of the mid 1980s. There are several differences between then and now.

Our economy was a mess before then – subsidies, tarrifs and import duties protected producers and manufacturers and increased costs for consumers; just about everything was regulated and/or taxed. Then came the 1984 Lange Government and Roger Douglas’s first budget.

Subsidies ended and farmers were brought kicking and screaming into the real world. The dollar was floated and rose on the back of high interest rates – at one stage we were paying more than 25% on seasonal finance –  inflation raged, commodity prices fell but tarrifs kept the price of inputs up and the labour market was still heavily regulated.

North Otago was particularly hard hit by the ag-sag because too many farms were too small to be economic anyway and there was not much irrigation so we were forever suffering from recurring droughts. At one stage it cost more to transport stock to the freezing works than they were worth. Property prices plummeted and a lot of us were technically bankrupt, owing more than the value of what we owned.

As farmers retrenched those who worked for, serviced or supplied us were hit too and the problems spread to provincial towns. Meanwhile cities were booming on the back rising property prices and the sharemarket. It was only when the market crashed in October 1987 that cities began to feel the country’s pain.

A lot of economic fundamentals have changed since then. A small economy like New Zealand’s will always be at the mercy of international factors, but thanks to those “failed policies of the 80s and 90s” we are in a much stronger position to withstand the worst impact of them.

Another difference is that this time the problems are starting in the cities and, the impact of drought aside, the country is still doing well. Even though sheep farmers have had an appalling season, falling income has been cushioned by rising land prices.

While people are worried about what’s happening elsewhere, the North Otago economy is still growing and property prices are rising. There hasn’t been an empty shop on the main street for a couple of years and a retailer told me he’d paid more GST in the past two months than at any other time since he’d been in business.

People on low fixed incomes, and some earning more, are struggling with steeping rising prices of fuel and food. But the district’s economy as a whole is benefitting from development associated with increased irrigation and the dairy boom.

If we are in a recession right now, as many economists believe, it won’t be official until the June GDP figures are released in September.

And if the statistics mirror anecdotal evidence they will show that this time the recession is starting in the cities and the picture in the provinces is sitll pretty positive.


Maori Party not Maori Seats give Maori Voice

July 4, 2008

Tariana Turia  said on Agenda that Maori have only had a dedicated Maori voice since the Maori Party has been in parliament.

I think what our people are starting to realise though is that when they voted Maori people into Labour they never got a Maori voice, they got a Labour voice and that was the difference, and they’ve only begun to realise it since the Maori Party came into parliament, because it is the first time that they have heard significant Maori issues raised on a daily basis.

In other words it’s not the Maori seats which give Maori people a voice it’s the Maori Party.

Hold that thought for a moment and consider what might happen if a future government decided that the rural people weren’t being represented adequately and created special rural seats.  A Country Party then forms and takes all the seats but gets only a small percentage of the party vote which creates a two or three seat overhang and gives them the balance of power. When urban people complain and want the seats removed, the country people say that would be for them to decide.

Would that be fair or right? No and for the same reasons it is neither fair nor right to have Maori seats nor to leave the decision on their existance up to Maori.

 It has nothing to do with race, the Treaty, or rights of indigenous people, it’s about democracy in which one group of people should not have the right to make a decision on something which affects everyone.

The Maori seats impact on us all in two ways: the potential for overhang distorts the proportionality of parliament which is one of the merits of MMP; and if Maori seats were disbanded there could be more general seats so electorates would be smaller and and more manageable for MPs and their constituents.

The Royal Commission which drew up recommendations for MMP said there would be no need for Maori seats and that has been confirmed by the Maori Party leader’s own words – it’s not the seats but the party  which gives a dedicated Maori voice.

P.S. Muriel Newman disccuses Maori seats here and refers to a paper by  David Round which is here.


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