Desperado

Happy birthday Don Henley, 63 today.

Take The Long Way Home

Happy birthday Rick Davies, 66 today.

From gloom to growth

Finance Minister Bill English is encouraged by signs some of the imbalances handicapping New Zealand’s economy for the past five or six years are easing,

It’s an indictment on the spend and tax policies of the previous government that the tradeables side of the economy –  exporting and import-competing industries -went into recession about six years ago.

At the same time  the non-tradeables sector – government and domestic industries – grew by about 12 per cent.

That’s a recipe for disaster but measures introduced by this government are having a positive impact.

Mr English identified a number of indicators which suggest New Zealand’s economic imbalances are at least stabilising.

“First and foremost, the economy is now growing, as opposed to shrinking as it did in Labour’s last term. The Budget also forecast 170,000 new jobs over the next four years and average household incomes to rise by about $7000 in that time.

“Second, the tradeables sector grew 3.4 per cent in the nine months to March 2010, compared with just 1.2 per cent growth in the non-tradeables sector. This is the largest positive gap between the two sectors over a nine-month period since December 2002.

“Finally, New Zealanders are being more careful with their spending. Per capita private sector consumption increased by only 1 per cent in the past year, after consistently increasing by more than 4 per cent, year on year, between 2002 and 2007.

“Reserve Bank figures show household debt is also easing for the first time in more than a decade. After increasing rapidly from 100 per cent of disposable income in early 2000 to a peak of 159 per cent in mid-2008, household debt has eased to 155 per cent of disposable income.”

Mr English emphasised that these were only early signs of the economy rebalancing and more work was needed to build this momentum, particularly with New Zealand – households, business and the Government – owing almost $170 billion in debt to the rest of the world.

We’re on the right track but only a short way into the journey back to budget surpluses and sustainable growth in the tradeable sector rather than artificial growth spurred by a property bubble, government spending and consumption funded by borrowing.

My parents, like most of their generation, went through the Depression and never forgot the lessons they learned. Too many people either didn’t learn from the 1980s or forgot the lessons and the global financial melt-down was a sharp reminder of the dangers of that.

Hurunui moratorium right decision

A moratorium on new water takes from a river is unusual, but it’s the right decision  for the Hurunui River.

Environment Minister Nick Smith says:

“The Hurunui moratorium proposal makes good sense when there is no proper plan for the river and catchment,” Dr Smith said. “It will provide much needed breathing space in which stakeholders can develop a balanced and comprehensive plan for the Hurunui River ahead of major decisions on proposals for irrigation development and water conservation orders that will impact upon the future of the river for generations to come.” . . .

. . . “This moratorium will breathe life into the Canterbury Water Management Strategy and the recently announced Hurunui-Waiau Zone Committee. It provides a window of opportunity for a collaborative local approach in which provision is made for both the economic development and environmental sustainability of the Hurunui River.

“That the first use of the special powers under the Environment Canterbury Act (2010) is a moratorium reinforces the Government’s intent that irrigation development in Canterbury needs to occur in a planned and sustainable way.” 

Both irrigators and those who want to leave the river untouched are happy with the decision.

Irrigation NZ says it makes sense when there is no water plan.

Irrigators are often accused of not being mindful of environmental issues but most understand how important it is not to degrade waterways by taking too much water from them. Existing irrigators are also mindful that without a plan their water rights may be compromised.

Conservation groups are also supportive though Nick Smith points out the irony in that. This move is only possible because of the Environment Canterbury legislation which at least some of those on the green end of the political spectrum opposed.

At last a Labour ag spokesman

It’s a sad reflection on Labour’s regard for agriculture that the party hasn’t had anyone in its caucus with responsibility for the portfolio for several years.

Jim Anderton might have been Labour in all but name but he wasn’t in the caucus when he was Minister of Agriculture in the Labour-led government. He talked lots and delivered little as minister and I can’t remember anything of note he’s said since he became the opposition spokesman after the 2008 election.

Now he’s giving up completely to campaign fulltime for the Christchurch mayoralty at our expense :

“In my time remaining as an MP, I have decided to prioritise workable models for affordable dental treatment and the reform of alcohol legislation.” .

Damien O’Connor will take over the role with two things going for him – he was (perhaps still is?) a dairy farmer and he is a member of the Labour caucus where he might have a chance of influencing policy.

Kiwiblog and Keeping Stock have similar views  on Anderton.

Future-proofing pensions

If we regarded tax as an insurance premium without complaining that a lack of catastrophe means we can’t make a claim, the debate on pensions in the future would be simpler.

Most people would accept that universal superannuation at 65 is not necessarily good policy and pensions would be means tested.

However, that is politically unpalatable for at least two reasons: 

• people who’d done nothing to help themselves would get taxpayer assistance while those who’d made sacrifices and worked hard to  save for their retirements would not.
• too many of us regard tax not like an insurance premium but more like an investment and superannuation is therefore one of the dividends.

Various attempts have been made to sort out an enduring and sustainable policy on superannuation. Don Brash is among those who think we haven’t got there yet.

In a speech entitled challenges for New Zealand’s future pension system he says:

. . . it’s estimated that the fiscal cost of New Zealand Super will increase from its present level of 4.4% of GDP to over 8%.  Of course, that’s still lower than the current fiscal cost of the age pension in Greece (at 11.5%) and some other European countries, as noted, but that’s not a lot of consolation given the fiscal challenges those countries currently face! 

Part of the reason for this prospect is the sharp fall-off in the birth rate, but the main driver of the increased cost is the arrival at age 65 of the baby boomer generation, and in particular the increased life expectancy which we all enjoy.  Over the past half century, life expectancy at birth has increased by nearly two years every decade.  While that increase is projected to slow, a person turning 65 in 2050 can expect to live an additional 24 years, more than four years longer than a 65 year-old in 2008[5], and of course considerably longer than when the age pension was first introduced for those reaching 65 in 1898.

When the increased fiscal cost of healthcare and long-term care for the elderly is added to the increased fiscal cost of New Zealand Superannuation if the present parameters remain, it’s clear that, if we’re to avoid a substantial increase in the tax burden on that portion of the population which is still employed, something needs to change.

His solution is to gradually raise the age at of eligibility for superannuation, giving people a choice between retiring sooner with a lower pension or delaying retirement and receiving a bit more.

 We raised the age of eligibility from 60 to 65 in the nineties and there was widespread acceptance of the need for that change.  Nobody seriously suggests lowering that age again.  There is a widespread understanding that we are living much longer than we were in the past, and that that is a continuing trend.  Most 65 year-olds no longer feel “elderly”, or ready for the scrap-heap. 

Last year, Australia announced that the age of eligibility for their age pension will be progressively raised to 67.  Germany and the US are also raising the age of eligibility to 67, and the UK is going for 68.  Denmark is targeting 67, and then indexing the age of eligibility to future improvements in life expectancy.

In my own view, raising the age of eligibility could be made more politically acceptable if we were to allow a degree of flexibility regarding when the pension is actually taken.  If the age of eligibility were 67, for example, under a policy allowing flexibility regarding the age at which it could be drawn somebody might choose to take the pension at, say, 65.  At that younger age, the amount received would be actuarially adjusted downwards, and would remain at that lower level (with regular upward adjustments with wages of course) until death.  Conversely, if somebody chose to defer drawing the pension until, say 69 or 70, the amount received would be actuarially adjusted upwards. 

Such a system would allow people a greater degree of choice about when to retire.  It would not directly reduce the fiscal cost of New Zealand Super of course – by definition, the amounts paid would be actuarially equivalent to drawing the pension at the age of eligibility.  But by encouraging people to stay in the workforce for longer, it would have fiscal benefits in terms of higher tax revenue and, probably, lower health costs, given that there is evidence that people who remain employed are often healthier, physically and mentally, than those who have left the workforce.

One of our staff is 80 and still works fulltime, another is 76 but not quite as diligent – he takes Wednesday afternoons off to play bridge. Neither has plans to retire soon yet both have been receiving a pension since they turned 65.

Not everyone has the ability, or will, to work into their 70s and beyond, but I can see the appeal of giving those who might the choice to do so.

It won’t happen while J9ohn Key is Prime Minister.

During the last election campaign he was asked about future changes to superannuation.  

His first answer was there would be no changes in the first term, that led to a question about future terms. It was one of those have-you-stopped-beating-your-wife questions for which he couldn’t give a right answer. Had he  stuck to “not in the first term” or refused to answer, political opponents, and the media, would have turned no commitment to make no changes in a future term into accusations that there would be change.

That is unfortunate.

No matter how hard people have worked and how much tax they’ve paid, simply turning 65 isn’t a good reason to start giving them something back when there are so many more urgent calls on taxpayers’ funds.

Don’s suggestion of a gradual increase in the age of eligibility, with a choice of lower payments for earlier retirements and higher payments for later ones, has merit but that’s not a good enough reason to go back on a pre-election commitment.

July 22 in history

On July 22:

838 Battle of Anzen: the Byzantine emperor Theophilos suffered a heavy defeat by the Abbasids.

 

1099  First Crusade: Godfrey of Bouillon was elected the first Defender of the Holy Sepulchre of The Kingdom of Jerusalem.

 

1298 Wars of Scottish Independence: Battle of Falkirk – King Edward I of England and his longbowmen defeated William Wallace and his Scottish schiltrons.

1456 Ottoman Wars in Europe: Siege of Belgrade – John Hunyadi, Regent of Kingdom of Hungary defeated Mehmet II of Ottoman Empire.

1484  Battle of Lochmaben Fair – a 500-man raiding party led by Alexander Stewart, Duke of Albany and James Douglas, 9th Earl of Douglas were defeated by Scots forces loyal to Albany’s brother James III of Scotland.

1499  Battle of Dornach – the Swiss decisively defeated the Imperial army of Emperor Maximilian I.

 

1510 Alessandro de’ Medici, Duke of Florence, was born  (d. 1537).

1587  Colony of Roanoke: a second group of English settlers arrived on Roanoke Island off North Carolina to re-establish the deserted colony.

1793 Alexander Mackenzie reached the Pacific Ocean becoming the first Euro-American to complete a transcontinental crossing of Canada.

1805  Napoleonic Wars: War of the Third Coalition – Battle of Cape Finisterre – an inconclusive naval action was fought between a combined French and Spanish fleets under Admiral Pierre-Charles Villeneuve of Spain and a British fleet under Admiral Robert Calder.

 

1812  Napoleonic Wars: Peninsular War – Battle of Salamanca – British forces led by Arthur Wellesley (later the Duke of Wellington) defeated French troops.

1844 William Archibald Spooner, English priest and scholar, was born  (d. 1930).

1849 Emma Lazarus, American poet, was born (d. 1887).

1864 – American Civil War:  Battle of Atlanta – Confederate General John Bell Hood led an unsuccessful attack on Union troops under General William T. Sherman on Bald Hill.

1890  Rose Fitzgerald Kennedy, American Kennedy family matriarch, was born (d. 1995).

1894  First ever motorised racing event was held between the cities of Paris and Rouen – won by comte Jules-Albert de Dion.

 

1908 Amy Vanderbilt, American author, was born (d. 1974).

1916 A bomb exploded on Market Street, San Francisco during a Preparedness Day parade killing 10 and injuring 40.

1932 Oscar De la Renta, Dominican/American fashion designer, was born.

1933 Wiley Post became the first person to fly solo around the world traveling 15,596 miles in 7 days, 18 hours and 45 minutes.

1934 “Public Enemy No. 1” John Dillinger was mortally wounded by FBI agents.

1936 Tom Robbins, American author, was born.

1942  The United States government began compulsory civilian gasoline rationing due to the wartime demands.

1942  Holocaust: the systematic deportation of Jews from the Warsaw Ghetto began.

 

 1943  Bobby Sherman, American singer and actor, was born. 

1944 Anand Satyanand, Governor-General of New Zealand, was born.

1944 Estelle Bennett, American singer (Ronettes), was born (d. 2009).

1944  Rick Davies, British musician (Supertramp) , was born.

1944  The Polish Committee of National Liberation published its manifesto, starting the period of Communist rule.

 

1946  King David Hotel bombing: Irgun bombed King David Hotel in Jerusalem, headquarters of the British civil and military administration, killing 90.

1947  Don Henley, American musician (Eagles), was born.

1951 Dezik (Дезик) and Tsygan (Цыган, “Gypsy”) were the first dogs to make a sub-orbital flight.

 

1962 Mariner programme: Mariner 1 spacecraft flew erratically several minutes after launch and had to be destroyed.

 

1970 Craig Baird, New Zealander racing driver, was born.

1976  Japan completed its last reparation to the Philippines for war crimes committed in Japan’s imperial conquest of the country in the Second World War

1977  Chinese leader Deng Xiaoping was restored to power.

1980 Scott Dixon, New Zealand racing driver, was born.

1983 Martial law in Poland was officially revoked.

 

1987 Lotto went on sale for the first time with a first division prize of $360,000.

1992   Colombian drug lord Pablo Escobar escaped from his luxury prison.

1993  Great Flood of 1993: Levees near Kaskaskia, Illinois ruptured, forcing the entire town to evacuate by barges operated by the Army Corps of Engineers.

1997 The second Blue Water Bridge opened between Port Huron, Michigan and Sarnia, Ontario.

2002 Israel killed terrorist Salah Shahade, the Commander-in-Chief of Hamas’s military arm, the Izz ad-Din al-Qassam Brigades.

 

2003 Members of 101st Airborne of the United States, aided by Special Forces, attacked a compound in Iraq, killing Saddam Hussein’s sons Uday and Qusay, plus Mustapha Hussein, Qusay’s 14-year old son, and a bodyguard.

2005  Jean Charles de Menezes was killed by police as the hunt started for the London Bombers responsible for the 7 July 2005 London bombings and the 21 July 2005 London bombings.

Sourced from NZ History Online & WIkipedia