Our money not theirs

May 18, 2018

Taxpayers’ Union chair Barrie Saunders calls it a classic Labour Budget:

Robertson’s first budget was written in extraordinarily benign circumstances. The economy is growing at a sustainable rate of around 3%, tax revenues for the June 2018 year will exceed Budget 2017 estimates, unemployment is down to 4.5%, employment levels are very high at 73.1%, and public debt at 21.7% of GDP is low and trending downwards. 

The economy is in vastly better shape than any new Government has inherited since 1972. That year Labour leader Norman Kirk won with a thumping majority and an inexperienced team. Labour lost to National’s Rob Muldoon, with a similar majority in 1975, and no more clues as to how to manage structural problems with the economy, which led to the economic crisis of 1984 and the Lange/Douglas reforms. 

Prime Ministers Bolger, Clark and Key would have been over the moon if they could have assumed office with today’s economic fundamentals.

The TU notes two wins for taxpayers.

  1. Fiscal responsibility

It is very encouraging that the Government is remaining within the pre-election ‘Budgetary Responsibility Rules’.  We think Steven Joyce’s allegations that Labour had an $11.7 billion hole (which Labour vehemently denied) had also been helpful in keeping the Government restrained in the face of criticism from some on the left who say they should borrow more. 

  1. Independent election policy costing office

Budget 2018 announced that “public consultation will be launched in August on establishing an independent body to better inform public debate in our democracy.”   This is something the Taxpayers’ Union has been pushing for since 2014 – for transparency and accountability of what political party policies will cost taxpayers.

For decades political parties during election campaigns have made allegations about expenditure policies of others.  That’s why we worked so hard last year with our election “Bribe-O-Meter”.  . .

National left the economy in very good shape and the government has at least budgeted to retain surpluses.

But let’s not forget it’s our money not theirs and that a surplus means it’s taking more in tax than it needs.

Had National still been in power all of us would have been able to keep a little more of what we earn.

This red-green-black government couldn’t even increase tax thresholds to address bracket creep which Treasury predicts will put average taxpayers into the top tax category by 2022.

. . .Taxpayers’ Union Economist Joe Ascroft says “This is the eighth successive Budget that has not delivered income tax relief. While most New Zealanders expect only the most well off should pay the top rate of tax, if the current trend continues, even the average taxpayer will be paying the top rate.”

“In fact, much of the wage growth over the last eight years has actually just been keeping up with inflation, so while many families don’t feel much better off, they are paying more in tax than ever before. Inflation will similarly push families into the top tax bracket over the next four years.” . .

The only tax cuts in this business were for hot horses.

In terms of tax relief, unless you breed horses you are out of luck. Winston Peters has announced $4.8 million in tax reductions for ‘high quality’ horses (defined in the media release as being based on bloodlines, looks, and racing potential!).

 

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Govt sowing seeds for another ag-sag?

May 7, 2018

Let’s start with something we can agree on: we all want clean waterways.

Where opinion diverges is on how that is to be achieved.

The government thinks part of the solution is in reducing cow numbers:

Environment Minister David Parker told TVNZ 1’s Q+A programme that in some parts of New Zealand cow numbers may have to be cut.

‘Well, cow numbers have already peaked and are going down, but yes, in some areas, the number of cows per hectare is higher than the environment can sustain. That won’t be done through a raw cap on cow numbers; it will be done on nutrient limits, the amount of nutrient that can be lost from a farm to a waterway, because it’s not just a dairy cow issue.’

It’s not just a cow issue and it’s not just nitrogen and phosphorus as this chart from the Agricultural Research Centre shows:

As I have said many times before, the major contributor to problems in the Kakanui River isn’t farming it’s  seagulls.

Back to Q&A, just like with the government’s decision to end oil and gas exploration, it has no idea about the economic impact of reducing cow numbers:

CORIN This is a massive signal. This is like your oil and gas. This is you saying to the farming sector, ‘You cannot continue with some of your practices in dairying, and we will force you to have less cows.’ What work have you done to look at what the economic impact of that would be? Because we know if there’s a drought, for example, and milk production goes down a couple of percent, it takes off a percent off GDP.

DAVID Mm. Well, I think the Landcorp example is illustrative that it’s not the end of the world for dairying.

The Landcorp example is not a good one because the company’s return on capital is abysmal and it’s propensity for making losses couldn’t be sustained by private businesses.

CORIN Have you done the work that shows what the economic impact for some, particularly dairying regions, would be?

DAVID We haven’t done an analysis of what the economic effects would be. But it’s very, very difficult to model, because second-best from the farmer perspective may still be very close to the same outcome profit-wise. Can I go back to what I was saying that I think one of the answers to this in south Canterbury, for example, lies in land use change towards more cropping, more horticulture, which are high-value land uses. . . 

It’s not just difficult to model, it’s ignoring the reality that land, climate and soils that suit dairying don’t necessarily suit horticulture.

Jacqueline Rowarth pointed out nearly two years ago, a reduction in cow numbers would have unexpected consequences:

Replacing dairy with horticulture might have some economic merit, but land suitability has to be considered, as does the supporting infrastructure and inputs.

The point about any land-based activity is that it suits the topography and climate, which interact with the parent material to create the soil. Farmers and growers understand the nature of the interaction, and then manage the deficiencies – fertilisers, irrigation, shelters, for instance.

They also consider the infrastructure, processors and markets. Land that can be used economically and environmentally sustainably for horticulture has mostly been converted already.

There are also detrimental environmental impacts to be considered. Research on the Canterbury Plains reported in the media last year indicated that dairy conversions involving fertiliser and irrigation, actually increased organic matter.

The reverse is also true. And when organic matter breaks down, nitrogen is released as is carbon dioxide.

Massey University’s professor Tony Parsons has examined the land-use challenge with funding from the New Zealand Agricultural Research Centre (NZAGRC). He has calculated that at a given N input, dairy produces two to three times as much food, similar or less methane and less than half the amount of nitrogen loss.

He has also shown the use of supplements improves efficiencies. Combined with strategic use of shelters and feed pads, nitrogen losses can be reduced. . . 

A lot of work has been, and continues to be, done into improved practices which reduce dairying’s environmental impact

Keith Woodford says that we need a rational debate about water:

In recent years, the debates about water rights and water pollution in New Zealand have become increasingly torrid. Most New Zealanders have fixed views on the topic and are confident their views are correct. Human nature then leads to so-called facts being organised to buttress those fixed views.

There is a term for this phenomenon called ‘noble cause corruption’.    The problem is that ‘we’ have the ‘noble cause’ and ‘they’ have the ‘corruption’. And so, within this framework, the water debate has been characterised by huge superficiality, rhetoric and shouting. The opportunities for shared learning and accommodation have been minimal. . . 

Radical environmentalists and anti-farming groups have done a very good job with the superficiality, rhetoric and shoutingWhat we need now is science and the recognition that problems decades in the making will take time to solve and that improving water quality isn’t as simple as reducing cow numbers.

Currently, there is great confusion between issues of water quantity and water quality.  Dirty dairying has become the catch phrase.  At a public level, distinguishing between nitrogen leaching, phosphorus runoff, bacterial loadings and sediment does not occur.  There is also very poor understanding as to the constraints to cash crop and horticulture production in the absence of irrigation.

The rural community also has to accept that change is necessary. . . 

The rural community, and farmers in particular have generally not only accepted that change is necessary but have poured money into making changes which enhance and protect waterways.

They are aware, as the government and many others don’t appear to be, that water quality isn’t just about the environment, it also has a direct impact on the economy.

It is remarkable how huge swathes of the big-city populations have lost sight of the dependence New Zealand has on its natural resource-based industries. They do not appreciate that destruction of agriculture is incompatible with poverty elimination. . . .

Dairying has revived communities that were dying, creating jobs on farms and in businesses which service and supply them. Schools which were in danger of closing have had their rolls boosted, sports clubs which were in decline have been revived.

It has also provided a huge boost to the national economy, as the biggest or second biggest export earner and a major contributor to the annual tax-take.

The regional slush fund will be no compensation for the destruction of businesses and the people who depend on them. The fund itself will be in danger if the tax take and export income are severely reduced by attacks on farms and farmers.

The Lange-Douglas policies created the ag-sag of the 80s.

Few would argue with the necessity for change and what that government did but this government ought to have learned from the damage done by how they did it.

Farmers aren’t arguing against the need for clean water.

We’re just very worried that the government is sowing the seeds for another ag-sag.

They, and too many other people, don’t understand the economic and social cost of forcing fast changes, especially where they’re not backed by science.


He tangata

May 1, 2018

National Party leader Simon Bridges delivered his first speech on the economy yesterday:
 . . Now sometimes people can think the economy equals boring, or that we’re focused on balance sheets rather than people.

But when I talk about the economy, I’m talking about jobs for our children.

About wages for our families.

About the local sparky as much as the big corporation in the CBD.

About the opportunities we can give those kids from Rutherford College to move into work and follow their passion.

He tangata – it is people. The economy is the what and how, people is the why.

We need a strong and growing economy to look after people – to provide the services and infrastructure they need.

We also need a strong economy to enable businesses to succeed, to provide jobs and produce goods and services that we need to export in order to afford the imports that keep us in the first world.

All of this flows from a strong economy.

But those opportunities aren’t created by accident.

They’re built on the hard work of people who get up early in the morning to go to work, or who stay up late the night before to make the school lunches.

They’re built on the entrepreneurs who take a risk and hire their first staff member, or their hundredth, and the workers who produce world-class exports. 

They’re built on a nation of innovative, passionate Kiwis who back themselves to succeed – the farmers just out of town, the butchers down the road, and scientists and teachers and IT whizzes.

There is, however, one group of people who don’t directly create those jobs – and that’s politicians.

Of course we have some part to play. Our role should be to get the settings right and then get out of the way – making good, consistent, sensible policy choices that give businesses the confidence to do business. . . 

The government has made a lot of fuss about regional development and has given one minister $1 billion to play with.

The best and most important thing any government can do for the regions and the cities is to get the settings and policies right then and get of the way of people and businesses.

Confident businesses invest and take the risks that enable them to produce more and create more jobs.

They make a bigger contribution to the economy and that enables them and the government to do more for people.


Stadiums don’t make profits but

April 3, 2018

Economists generally agree that stadiums don’t make profits.

I am not equipped to argue against that but, profitable or not, Dunedin’s Forsyth Barr stadium is making a huge contribution to the social life and economy not just of the city but the wider region.

South-bound traffic was bumper to bumper on State Highway 1 through Oamaru on Thursday as people from Canterbury headed to Dunedin for Ed Sheeran’s first concert.

Traffic heading north and east to the city were just as busy.

The ODT reported on a city full of people enjoying themselves, and spending up large through the weekend.

North-bound traffic was bumper to bumper as people headed home yesterday and businesses en route benefitted from travellers who stopped.

Riverstone Kitchen, north of Oamaru and a few kilometres on the right side of the Waitaki River, is always popular with locals and travellers.

But this Facebook post shows how busy it was this weekend, owing in no small part to concert goers stopping on their way to and from Dunedin.

Easter Weekend – 5 record breaking MAMMOTH DAYS!

Here’s a few stats for you:
38kg Coffee used
over 1/2 tonne of potatoes
25 staff with an accumulated 916 hours worked
2420 people eating in the restaurant ( plus many more takeaways we didn’t count)
95kg fish
312 litres milk
and 218 Hot Cross Buns (sold on just 1 day!)

We hope you all had a good weekend and got to relax a little more than we did.  . . 

The building of the stadium attracted a lot of critics, some still argue against it. They may have grounds for their criticism.

But when the stadium has a show that attracts visitors numbering more than half the city’s population and their spending benefits many businesses en route as well, the optimism of those who backed it is vindicated too.

 


Where did the lollies come from?

December 22, 2017

National left office with an economy that many other countries would envy:

There was confirmation today that the new Coalition Government has inherited a strong economic growth story from the previous National-led Government, National Party Finance Spokesperson Steven Joyce says.

“Stats New Zealand’s report of 3 per cent growth for the year to September together with upward revisions to recent growth figures paint a clear picture of a strong economy over the last few years,” Mr Joyce says.

“They have revised New Zealand’s growth figures for the 2014, 2015, and 2016 calendar years to 3.6 per cent, 3.5 per cent and 4 per cent respectively. That’s a highly respectable growth story in anyone’s language.

“GDP per capita has also been revised upwards in those years. We’ve had 8.3 per cent in real GDP per capita growth over the last five years.

Mr Joyce says the figures released today finally put to bed the fallacy that New Zealand was having a ‘productivity recession’.

“In addition, the figures today show that the construction industry remains strong with the largest quarterly growth since March 2016. Road and rail infrastructure was a key driver, with the largest increase in ten years.

“New Zealand has now experienced 18 quarters of consecutive economic growth; and has grown in 26 out of the last 27 quarters, all the way back to December 2010.

“These figures provide clear confirmation that the new Government has inherited a very strong economy driven by the strong economic plan of the previous Government.

“The Labour-led Coalition needs to take heed of softening business and consumer confidence numbers since the election and make sure their policy changes don’t muck this story up.”

The incoming government is showing great delight in spending the money the strong economy has generated but if it understands how that was achieved, it’s not showing that, as Bill English pointed out in the adjournment debate:

I must say, it has been a bit rich sitting here listening to the moral awesomeness and self-congratulation of the Labour Government over the family incomes package when they opposed every single measure that it took to generate the surpluses that they are handing out. That is why they won’t get the credit they expect from the New Zealand public, because the New Zealand public know it’s a bunch of people who found the lolly bag and ran the lolly scramble without having any idea where it came from. 

The money came from taxes generated from the work and ingenuity of taxpayers under three terms of National-led government’s careful stewardship.

The words and actions of the incoming government give no cause for confidence that the respect for, and careful stewardship of, taxpayers’ money will continue.

 

 


Saluting Norman John Daysh

November 29, 2017

Who was Norman John Daysh?

I didn’t know until I read this – Kiwi innovator an inspiration to all farmers:

New Zealand farmers are saluting Norman John Daysh today – the godfather of the modern milking machine.

Mr Daysh is globally acknowledged for inventing a mechanism that effectively liberated dairy farmers from their milking stools.

His ingenuity is being celebrated at an anniversary event today at Hamilton to mark the commercial launch, 100 years ago.

Federated Farmers’ Dairy Industry Chair Chris Lewis says all kiwi farmers should feel a sense of pride and be inspired by Mr Daysh’s feat, which was the first notable disruption in the modern farming era.

“Cockies throughout the land should afford a smile today remembering Mr Daysh. He was truly ahead of his time-a true kiwi innovator. Apparently he started making milking machines from 18 years-old and was selling them to neighbouring families.

“His legacy has become part of farmer folklore. He had great compassion for his animals, and legend has it, he was the first milk machine designer to consider the effect on cows.

“The milkers back in the day would have appreciated him too, as the earliest milking machines were cumbersome, unreliable and actually painful to use.

“Mr Daysh had the foresight to go overseas to America to refine his prototype and gain globally acknowledged patents, this in itself was quite an undertaking for a humble kiwi farmer in 1913,” says Chris.

The DeLaval Milker was launched in 1917. A testament to its success and innovation was the fact none of the original 100 machines were returned.

You can listen to Kim HIll interview the inventor’s grandson, John Daysh here.

The milking machine didn’t just liberate farmers from their milking stools it enabled them to milk more cows which has provided massive economic, nutritional and social benefits to New Zealand and many other countries.

Recent conversion to dairying and intensification of farming has come at an environmental cost but the same ingenuity which led Daysh to develop his milking machines is being applied by scientists and farmers to repair the damage and ensure that dairy’s future environmental footprint is much smaller.


NZ loses its way

November 22, 2017

For several years, New Zealand has received international attention and praise for its economic success.

Just a few weeks with a new government this commentary from Jared Dillian at Forbes is less than enthusiastic about its policies:

On September 23, the people of New Zealand elected 37-year-old Jacinda Ardern as prime minister, the youngest prime minister in New Zealand’s history. Ardern has brought youthful energy to New Zealand politics, but her scary rhetoric during the campaign (like calling capitalism a “blatant failure”) has some people wondering if she will take the country back to the bad old days of the 70s and early 80s.

New Zealand is a supply-side economic miracle. Not long ago, it was one of the most unfree economies that was not actually Communist in name. Most industry was nationalized, from telecommunications and transportation, to banks and hotels. There were strict capital controls and prohibitions on owning foreign assets. And of course punitively high tax rates, inflation, and extraordinary levels of government debt. . .

Those policies from the early 80s back are the ones which failed us.

The 1980s saw an enormous rollback in the size and scope of government, and the beginning of a supply-side revolution. Of course, economic liberalization was happening around the world at that time, but it was most dramatic in tiny New Zealand.

New Zealand enjoyed unprecedented economic growth, and leapfrogged to near the top of the economic freedom rankings, where it usually sits only behind Hong Kong and Singapore. It became one of the richest countries in the world. Part of New Zealand’s success was due to good central banking; the Reserve Bank of New Zealand was the first central bank in the world to institute a formal policy of inflation targeting, which other central banks have copied over the years, to everyone’s benefit. . . 

Inflation is theft. It steals the real value of money and it’s the poorest who are hit hardest by it.

It seems likely that New Zealand will experience a recession during Ardern’s term. Nobody is predicting a return to the bad old days of the 70s, but New Zealand will probably lose its status as one of the most open, free economies in the world. It takes decades to weaken an economy, just like it takes decades to strengthen it. But investors will probably want to avoid New Zealand for the time being.

This government has taken down the welcome sign to immigrants and inwards investment.

Richard Harman at Politik reports the Government is to put the approval of overseas purchases of farmland on hold as it gets advice from officials on how to carry out its coalition agreement with NZ First to strengthen the Overseas Investment Act.

The hold is likely to affect tens of millions of dollars of property sales and possibly hundreds of millions of dollars worth of business transactions.

POLITIK understands that the sale of one large South Island property and the potential sale of an iconic Wanaka station along with two large North Island dairy properties are likely to be caught up in the move.

It was not clear from the comments from Prime Minister Jacinda Ardern yesterday whether the hold will also apply to overseas business investments – but if that is the case, there are proposed takeovers in both the oil and gas and private hospital sectors that could be affected. . . 

The sale of Icebreaker  to VF Corporation which needs OIO approval as will the sale of carpet maker Godfrey Hirst to global flooring manufacturer Mohawk Industries.

Uncertainty over the economy, the inflationary affect of a lower dollar and higher borrowing, and whether immigrants will be available to fill staff vacancies is denting business confidence.

Less confidence means businesses are less willing to take risks, including hiring more staff.

It’s very early days but if overseas investors are being warned off and local businesses are losing confidence, it’s a sign that New Zealand is losing its way.

 


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