Higher spending, tax, debt

November 16, 2017

Economists are warning that the Labour-led government’d Debt will be billions more than planned.

. . . In Opposition Labour laid out a fiscal plan which would borrow around $11 billion more than National had proposed, but still cut debt as a share of the total economic output from 24 per cent to 20 per cent by 2022.

The plan formed a major point of contention during the election campaign, as National finance spokesman Steven Joyce was widely mocked for his claim that Robertson’s plan had a major “fiscal hole”.

This is a very good argument for independent costing of party policies before an election.

But bank economists, who monitor the likely issuance of government bonds, are warning of pressure for Treasury to borrow billions more than Labour had signalled because of new spending promises.

ANZ has forecast that Labour will borrow $13 billion more than Treasury’s pre-election fiscal update maintained the former Government would over the next four years, although around $3b of that would go to the NZ Super Fund.

Borrowing to contribute to the super fund is as reckless as borrowing to play the share market instead of paying off a mortgage.

This would see net Crown debt at 23 per cent of gross domestic product, 3 percentage points higher than Labour’s plan.

Outgoing ANZ chief economist Cameron Bagrie said the estimates for new spending were “conservative”, including an assumption that the new $1b a year regional development fund would come entirely from existing budgets. . . 

BNZ senior economist Craig Ebert said the figures were hard to determine so early in the term, but borrowing “could amount to a number of billion dollars” more than Labour had outlined. . . 

During question time in Parliament on Tuesday, Robertson maintained that the Government was sticking to its pre-election debt plan.

“But what we’re not prepared to put up with is a situation where we do not have enough affordable homes, where we have not made contributions to the [NZ] Super Fund, and where an enormous social deficit is growing,” Robertson said.

“In those circumstances a slower debt repayment track is totally appropriate.”

A much more disciplined approach to spending would be wiser.

National took office when the kitty was empty and Treasury was forecasting a decade of deficits.

In spite of the GFC and natural and financial disasters, it returned the books to surplus without a slash and burn approach to social spending.

This government has taken over with plenty of money in the kitty and forecasts of continuing surpluses.

With careful management, it should be able to

Labour and many on the left talk about the “failed policies of the 80s”.

They never look at the cause of the problems which precipitated those radical policies – higher spending, higher taxes and higher borrowing.

Those were the failed policies.

Unless the new government takes a much more careful approach, it will take path New Zealand down that path again.

Advertisements

Moving targets

November 10, 2017

National used yesterday’s question time to attempt to get clarification on the government’s targets for housing and spending.

The answers weren’t helpful:

1. Rt Hon BILL ENGLISH (Leader of the Opposition) to the Prime Minister: What will the specific measurable targets be, if any, that she will use to hold her Government to account?
Hon KELVIN DAVIS (Acting Prime Minister): As Prime Minister, I will hold my Ministers to account for improving the well-being and living standards of New Zealanders.
Rt Hon Bill English: What is the appropriate measure—[Interruption] 
Mr SPEAKER: Order! Sorry, I’m just going to start right now. Who is the member who interjected then? Right, there’s an additional question to the Opposition.
Rt Hon Bill English: What is the appropriate measure we should follow to monitor progress on KiwiBuild where the Government has committed to build 100,000 houses over the next 10 years?
Hon KELVIN DAVIS: We will make decisions on appropriate targets in due course.
Rt Hon Bill English: So does that mean that the current expression of the Government’s commitment, which is “to build 100,000 houses over the next 10 years” does not necessarily mean what most people would take it to mean?
Hon KELVIN DAVIS: We will make and confirm decisions on appropriate targets in due course.
Rt Hon Bill English: Does the Government stand by—[Interruption] 
Mr SPEAKER: Order! The chief Government whip, I think, interjected, or someone around her did. There is a further supplementary to the Opposition.
Rt Hon Bill English: Does the Prime Minister stand by her Government’s commitment to “build 100,000 houses over the next 10 years”?
Hon KELVIN DAVIS: We will make and confirm decisions on appropriate targets in due course.
Rt Hon Bill English: Why did the Government commit to “build 100,000 houses over the next 10 years” if it is now not willing to re-express that commitment in this House?
Hon KELVIN DAVIS: Because the previous Government didn’t build houses.
Rt Hon Bill English: Is it possible that the Government is revising this commitment because of public statements made by the Minister of Housing and Urban Development, that the commitment may involve not building houses but buying existing houses?
Hon KELVIN DAVIS: No. 
Rt Hon Bill English: What other reason could there possibly be for not being willing to restate a commitment made by all its members right though the election campaign to “build 100,000 houses”? What other reason could there be not to make that commitment here today? 
Hon KELVIN DAVIS: We are not revising targets. We will make and confirm decisions on appropriate targets in due course.
Rt Hon Bill English: So is the commitment to build 100,000 houses an appropriate target, or one that is subject to revision or further decisions, or is it one that we should take at its word? 
Hon KELVIN DAVIS: The member will find out in due course. . . 

That sounds like the answer is if there’s a target it’s a movable one.

Hon Michael Woodhouse: Who is correct: the Minister of Housing and Urban Development, who says that there is a fixed commitment to build 100,000 extra houses, or the Prime Minister, who says such a target has not yet been set?
Hon PHIL TWYFORD: Both the Prime Minister and the Minister of Housing and Urban Development have reiterated our policy, which is to build 100,000 affordable homes to restore affordable homeownership to this country. . . 

That’s the policy but what’s the target?

The Reserve Bank also questions the number of houses that will be built:

The Government has announced an intention to build 100,000 houses
in the next decade. Our working assumption is that the programme
gradually scales up over time to a pace of 10,000 houses per year by
the end of the projection horizon. Given existing pressure on resources
in the construction sector, the aggregate boost to construction activity
from this policy will depend on how resources are allocated across public
and private sector activities. The Government intends to introduce a
‘KiwiBuild visa’ to support the supply of labour to high-need construction related
trades. While accompanying policy initiatives may alleviate
capacity constraints to some extent, our working assumption is that
around half of the proposed increase will be offset by a reduction in
private sector activity.

It could be the new house target is a movable one because there’s more than a little doubt about the finances:

3. Hon STEVEN JOYCE (National) to the Minister of Finance: Can he confirm it is his intention as Minister of Finance to ensure core Crown expenses do not exceed $81.9 billion in 2017/18, $86.1 billion in 2018/19, $88.2 billion in 2019/20, $91.8 billion in 2020/21, and $96.1 billion in 2021/22, as specified in the Labour Party’s pre-election Fiscal Plan?
Hon GRANT ROBERTSON (Minister of Finance): I can confirm that it is my intention for core Crown expenditure as a percentage of GDP to be within the recent historical range. As to the exact figures in the member’s question, I cannot confirm those as, of course, they are subject to detailed Budget decisions and revenue forecasts that are yet to be finalised.
Hon Steven Joyce: Can he confirm that he stands by his statement from 4 September this year, and I quote, “Labour’s Fiscal Plan is robust, the numbers are correct and we stand by them”?
Hon GRANT ROBERTSON: I can confirm that the Budget that this Government is putting together will be robust and it will deliver on a commitment that this Government has made to ensure that all New Zealanders share in prosperity.
Michael Wood: What else, in addition to managing core Crown expenditure, will guide the Government’s approach to responsible fiscal management?
Hon GRANT ROBERTSON: The Government will observe the Budget responsibility rules as indicated in the Speech from the Throne: namely, delivering a sustainable operating balance before gains and losses; reducing net core Crown debt to 20 percent of GDP within 5 years; and ensuring a fair and balanced progressive taxation system. We will also never forget that the purpose of a strong economy is to give every New Zealander the chance to share in prosperity, and we will never be satisfied while children live in poverty or families sleep in cars.
Hon Steven Joyce: Does he stand by his statement also on 4 September, and I quote, that “Our operating expenses are above the line and are clearly stated.”?
Hon GRANT ROBERTSON: The Budget that this Government will prepare will be clear about what we are spending and where the revenue for that is coming from.
Hon Steven Joyce: So that’s a no. Can I also ask: does he stand by his statement, and I quote, “We have quite clearly put in the spending requirements to meet the promises we have made. Our fiscal plan adds up. We are absolutely clear that we have the money to meet the commitments that we’ve made.”, also on 4 September?
Hon GRANT ROBERTSON: The Government will prepare a Budget that shows how we will pay for the important commitments that we have made to ensure that every New Zealander benefits from economic prosperity.
Hon Steven Joyce: Can the Minister of Finance then confirm that it is not his intention to necessarily ensure core Crown expenditure does not exceed $81.9 billion this current financial year, $86.1 billion in the next financial year, $88.2 billion in 2019-20, $91.8 billion in 2020-21, and $96.1 billion in 2021-22? Can he confirm that’s not his intention, even though it was specified in the Labour Party’s pre-election fiscal plan?
Hon GRANT ROBERTSON: I can confirm that we will keep Government expenditure as a percentage of GDP in line with the historical range.
Hon Steven Joyce: Can the finance Minister then confirm that he doesn’t at all stand by the numbers he presented in the Labour Party’s fiscal plan prior to the election?
Hon GRANT ROBERTSON: The Government is currently going through the usual process of putting together a Budget. We are absolutely confident that we will deliver a Budget that is in line with the Budget responsibility rules that were outlined in the Speech from the Throne and that will deliver to New Zealanders a fair share in prosperity. As I said in my primary answer, the final numbers are the subject of the normal Budget process. . . 

Hon Steven Joyce: Is he saying that the actual numbers written on the Labour Party’s fiscal plan prior to this election, which he and his colleagues defended vigorously during the election campaign, are no longer relevant? The comments he has made suggest that he will put whatever numbers he likes in front of the public in due course in the next Budget.
Hon GRANT ROBERTSON: I have been absolutely clear that the commitment that we have made is that Government expenditure as a percentage of GDP will remain in line with the long-run historical trend. Members on the other side of the House well know that we will now be looking at new revenue forecasts and, indeed, new growth forecasts. They will determine the exact numbers that are presented. But we are very clear on this side of the House: our number add up. . . 

Hon Steven Joyce: Has he noted how often the Reserve Bank mentioned policy uncertainty in their Monetary Policy Statement this morning, and has he considered how his statements in the House this afternoon and his responses to questions will not help with that policy uncertainty when the Reserve Bank was obviously placing some credence on his previous statements about Government expenditure and now he is not even standing by those?
Hon GRANT ROBERTSON: The Reserve Bank Governor noted today that his thinking was preliminary, and, just like the member opposite, when the Half Yearly Economic and Fiscal Update and Budget Policy Statement are released before the end of the year, there will be significant certainty about our spending plans. If the member can’t wait, I’ll make up a special advent calendar for him so that he can count down to the half yearly update.

In opposition you might be able to get away with vagueness, but governments need to be much clearer on its spending plans so that public institutions like Treasury and the Reserve Bank have sufficient information to perform their roles effectively.

“This morning’s Monetary Policy Statement from the Reserve Bank makes numerous mentions of domestic policy uncertainty including ‘uncertainty around tax policy’, uncertainty around the ‘future impact of these policy changes’ and ‘heightened uncertainty regarding the domestic outlook,” Mr Joyce says.

“While the Bank is taking a steady as she goes approach at this point, it is clear that their economic forecasting is affected by a lack of clarity from the new Government as to their fiscal and economic plans.

“This is not a surprise as we are all still yet to see the figures underpinning the coalition agreement between Labour and New Zealand First, which was signed over two weeks ago, and we are all still yet to see the Government’s mythical final 100 Day Plan.

“Yesterday’s Speech from the Throne contained 51 new spending commitments, which will put significant pressure on the Government’s spending track and net debt.

“The first Bill In Parliament this week seeks to legislate for $325 million of extra spending, without any reference to how this fits in to the government’s wider spending plan.

“The public will rightly be concerned that the large number of spending promises they have heard about could sacrifice New Zealand’s hard work to get back into surplus and start paying down debt.

“The irony is that in recent years all the economic risks have been offshore. Now just as the world economic outlook is strengthening, all the risk and uncertainty is being generated domestically by the economic opaqueness of the new Government.

“It is time for the Government to be much more transparent and start releasing more details of their fiscal plans.”

It’s possible they haven’t got any fixed ones, like their housing target they’re movable.


National’s 10 big achievements

November 9, 2017

Hutt South MP Chirs Bishop writes on 10 of National’s big achievements in government:

. . Let me say at the outset that no government is perfect. All are affected by global economic circumstances and – as encapsulated in Macmillan’s famous dictum – “events, dear boy, events”. Governments never deliver all the fervent desires of their most ardent supporters, and most aren’t anywhere near as hopeless as partisans from the other side would have you believe.

I believe New Zealanders can look back with pride on nine years of National government. The country is demonstrably a better place than it was in 2008. Since Muldoon (who infamously, and depressingly, promised to leave the country no worse than he found it) that has surely been the litmus test for good government in this country. New Zealand is prouder, wealthier, more confident and aspirational than it was nine years ago. . . 

Nine years ago the country was in recession and forecast to have a decade of deficits.

Thanks to the good work through three terms of National-led government the situation and outlook are much rosier.

1. Getting the country through the global financial crisis – and back into the black

Any account of the last National government has to start with the GFC. Sir John Key, Bill English and team took office in the teeth of the worst financial crisis since the Great Depression, and it’s worth recalling that New Zealand actually entered recession a year before the rest of the world. Treasury predicted never-ending deficits, unemployment to rise to over 10%, and debt to peak at 40% of GDP.

The government didn’t panic – and nor did it slash and burn. Social support was maintained, but poor quality programmes were rationalised, and new Budget operating allowances were pared back. In the years preceding 2008, Labour had increased spending unsustainably (50% in its last five years) for little to no effect. With Bill English in charge of the purse strings, departments were told to focus on results, not just to lobby for ever-escalating spending.

The government books got back into the black in 2014/15. Unemployment is now down to 4.6% and labour force participation is at record levels. Our debt to GDP topped at just 25%, and is coming down (Australia’s is 40, the UK’s is 90 and the USA’s is 108%!).

I’m proud that we did this while maintaining investment in core public services. For example, since 2009 health spending has increased by $3 billion per year, or around 25% (population growth has been 14%).

The incoming government inherits books that are the envy of the developed world.

2. Building a more productive, diverse and competitive economy

While dealing with the GFC, National started the process of consistent, moderate and sustained economic reform to build a more productive and competitive economy.

Through careful, measured tax reform, state asset sales and welfare reform, the results are plain to see. The economy is growing at 3% per year, one of the fastest growth rates in the world, and has generated 274,000 jobs in the last two years. The job numbers are remarkable: New Zealand has the third highest employment rate in the developed world (at a time of record migration – it seems that immigrants don’t “steal” New Zealand jobs, as some like to claim).

Economic strength has flowed through to people’s pay packets: average annual household income is up 42% since 2007, and average wages have increased by more than twice the rate of inflation. In fact after tax wages have increased twice as fast in New Zealand than in Australia since 2008.

The economy is more diverse. When the bottom fell out of dairy in 2014/15, New Zealand kept growing. The technology sector is expanding at a dizzying rate with revenue now over $10 billion. That famous “manufacturing crisis” that Labour used to talk about? The sector’s now been expanding for 57 consecutive months.

3. Dealing with the Canterbury earthquakes

Following the Canterbury earthquakes in 2011, the government was told that the local economy could expect a sustained downturn, a dramatic fall in population, and rising housing costs. National worked quickly to keep jobs in the region and support unemployed workers and businesses facing temporary shutdowns. The SCIRT programme to repair broken roads and pipes was an unequivocal success and the EQC home repair programme has repaired hundreds of thousands of homes – a building project the likes of which New Zealand has never seen. Yes, a small number of the repairs require remedial work, but this is typical in the private sector as well.

Many of the key anchor projects are now complete, including the Bus Interchange and brand new Justice Precinct. A solution has finally been achieved for the Cathedral and progress is being made again on the Convention Centre.The real news is in the results. The Canterbury economy is booming and the population higher than ever. The housing market is stable. The dire predictions following the earthquakes have not come to fruition – on the contrary, Canterbury is thriving and is well on the way to becoming one of the best cities in the world to work and live in.

4. Significant reductions in child poverty

Some will call it chutzpah for including this, but the facts are indisputable: child poverty measures fell on National’s watch, despite absurd hyperbole to the contrary. Using MSD’s Material Wellbeing Index, the number of children in material hardship in 2016 was 135,000. Too many, obviously, but well down on the 170,000 in hardship in 2008; and massively down on the 220,000 following the GFC (in 2011).

For a supposed “neoliberal” government regularly accused of showing no empathy for the disadvantaged, National’s record is impressive: the first real benefit increases in 43 years, massive insulation programmes for state homes (and the private market), breakfasts in schools programmes, free GP visits for all kids under 13, and more. National’s family incomes package (about to be legislated away under urgency by Labour) would have lifted around 50,000 further kids above the poverty line.

5. The Better Public Services programme and Social Investment

In 2012 the government did something quite profound. It set ten targets aimed at delivering results for our customers by reducing welfare dependency and crime, increasing immunisation and achievement at school, and more. This quiet revolution in the public service has led to improvements across the board: crime down 14% (youth crime is down a third), rheumatic fever has reduced 23%, 94% of 8 month olds are now fully immunised, to name a few.

Allied to this was “Social Investment” – targeted, evidence-based investment to secure better long-term results. The government spends $61 billion on social services every year. Far too often we don’t ask much about the efficacy of that spend – particularly for those with complex needs. Bill English often says: “we need to know what works, for whom, and at what cost.” Social Investment is about doing things differently: using sophisticated data to identify need and risk, and to invest up-front in what works. By breaking down silos between agencies, harnessing the power of community instead of big government this approach changes lives for the better, rather than just servicing misery.

6. A more competitive, affordable, secure and renewable electricity system

It’s a bit odd that Labour has promised a full-scale review of the electricity market (although it seems to be what new governments do – we’ve had one every time there’s been a change of government). I’m confident the review will show that New Zealand’s electricity policy settings are outstanding. That’s largely due to the work of Gerry Brownlee, who inherited a totally dysfunctional system. Under Labour consumers were told every second year to save power during winter, prices rose 72% in nine years, and security of supply was at serious risk. Moreover, despite rhetoric to the contrary, gas and coal use massively increased – Labour even underwrote the building of a new gas power plant!

Fast forward nine years and renewable electricity is at near record highs, electricity prices actually fell in 2017 in real terms thanks to more competition, and despite dry years we’ve had no forced conservation campaigns. Most astonishingly, we have decoupled economic growth from increased electricity demand: the economy is growing at around 3% while demand is flat and even falling.

7. Reforms to welfare to reward independence and work

National undertook the most significant reforms to the social welfare system in a generation. Benefit categories were simplified and new expectations introduced for beneficiaries, requiring them to be available for work or getting ready for work. Social obligations for beneficiaries with dependent children were introduced to ensure they were meeting health and education goals. National established the Youth Service, where case managers and providers help young people gain education, training and employment skills. Sixteen and 17 year olds on benefits were placed under money management.

Welfare reform demonstrably worked. The number of sole parents on a benefit is the lowest it has been since 1988. Sixty thousand fewer children are now growing up in a benefit-dependent household since 2011. The current lifetime liability of the benefit system has reduced by $13.7 billion over the last five years. This equates to clients spending 1.3 million fewer years on main benefits over their working lifetimes.

8. A big lift in the number of young Kiwis achieving educational success

When National came to office in 2008, one in two Māori and Pasifika kids left school without NCEA Level 2 – a passport for the future and the recognised minimum standard for other tertiary options.

In 2016, nearly 75% of Māori students, and nearly 80% of Pasifika students, achieved the NCEA Level 2 qualification – remarkable progress by any measure.

Under National, participation in Early Childhood Education hit record highs. The dysfunctional industry training system was overhauled. By 2016, there were 43,000 apprentices around the country, including 100,000 trainees. The Network for Learning was started and completed (on time and under budget) providing ultra-fast, uncapped, high-quality data, at no cost to schools. Pathways from school to study and work were overhauled through the Youth Guarantee and Trades Academies.

9. Treaty of Waitangi Settlements

Despite Māori overwhelmingly voting for them, and Labour liking to preen as the party of and for Māori, the Treaty Settlement process stalled between 1999 and 2006, only getting started once Michael Cullen took over the portfolio.

Using his skills developed in a former life as a negotiator for Ngāi Tahu, and his genuine good-hearted commitment to reconciliation, Chris Finlayson just got on with the job. The results speak for themselves: 59 Deeds of Settlement signed in nine years, meaning the majority of historical Treaty settlements across New Zealand have now been resolved. And consider this: it was Chris Finlayson that delivered the long overdue apology to the Parihaka community for the atrocious actions of the Crown committed almost 140 years ago. Not only that, National gave legal personhood to Te Urewera and the Whanganui River, allowing long-overdue settlements to proceed.

A final point. The Foreshore and Seabed confiscation was one of the most disgraceful acts of the Clark government. National restored the rule of law by restoring the right of Maori to go to court to prove customary rights through the Marine and Coastal Area (Takutai Moana) Act 2011.

10. A turnaround in net migration

One of National’s most effective ads in the 2008 election featured John Key standing in Westpac Stadium, pointing to the 30,000 plus yellow seats, and noting that about the same number of New Zealanders were leaving to move to Australia every year. National said that we’d turn it around – and we did.

Quite remarkably, net migration between New Zealand and Australia for the year to June 2017 was 560 – in our favour. Usually people move from smaller countries to much larger countries. But over the last nine years, New Zealanders literally voted with their feet: staying home and coming home in record numbers. Around 10,000 more Kiwis are coming home than under Labour, and far fewer are leaving.

There’s so much more that could be added: the most significant action on improving freshwater quality in New Zealand’s history, the National Sciences Challenges and a big lift in research and development, huge investments in infrastructure (such as the Waterview tunnel and the Kapiti Expressway), the ambitious goal of Predator Free NZ, and so much more.

National leaves behind a better New Zealand than it inherited from Labour in 2008. And we are hungry to hold the government to account so it doesn’t squander the hard-won gains of the last nine years.

National has left the incoming government with a very solid foundation of success on which to build.

It owes it to all New Zealanders not to fritter it away, to keep the policies that were working well and improve on those which need to be done better.

 

 


Urban sprawl threatens food security

November 3, 2017

Horticulture NZ sees a perfect storm brewing for fresh fruit and vegetable supply:

A perfect storm is brewing for New Zealand’s supply of healthy fresh fruit and vegetables that could see us unable to feed our growing population with domestically grown produce, a report from Horticulture New Zealand says.

In releasing the report, New Zealand domestic vegetable production: the growing story, Horticulture New Zealand chief executive Mike Chapman says it is time to take stock and develop a national food security strategy.

“Our research shows that New Zealanders not only want to know where their fruit and vegetables come from, they want to buy New Zealand grown. This report looks at the factors that will impact security of supply. Our current consumption levels of fresh produce show that net production is already below what is required for domestic consumption, meaning we can expect food shortages if we can’t get that balance of supply from imports,” Chapman says.

“Prime fruit and vegetable growing land is being squeezed by rapid growth in towns and cities and high demand for new housing. Changes in weather patterns and extreme unseasonal weather events are becoming more frequent and damaging, impacting the supply and, consequently, the price of fresh, healthy food.

“Things are changing fast, so we need to look closely at our domestic food supply and be sure that town, city and regional planning decisions are seen in the context of impacting the whole of New Zealand’s food supply.”

The report looks at domestic vegetable supply, particularly of what would be considered staple vegetables, to examine all the factors that go into getting these vegetables from the field to the plate. It examines the challenges to supply, through to what is driving demand and price.

“Information and evidence are required to enable good decisions about New Zealand’s domestic food supply and we are keen to engage the new Government with our call for a national food security strategy,” Chapman says.

“Domestic supply is not being viewed as a national system, with identified strengths and weaknesses, to give New Zealanders continued access to all the fresh fruit and vegetables they need in the future. Local, district and regional decision-making doesn’t look beyond its borders. While this is appropriate in the context of their planning, consideration is not given to national food supply when land is zoned for housing, or when water is allocated.

“We need to future-proof the resources required to supply food to our growing population, and this report looks at this with the backdrop of global megatrends, including rapidly changing consumer demands, growing populations, urbanisation and the impact of life-style blocks on horticulture, emerging technology and the emphasis on sustainability.

“This report doesn’t answer all the questions. It provides a snapshot of domestic vegetable production to start the conversation about food security in New Zealand and is part of a body of research we have planned to ensure food security is taken seriously,” Chapman says.

The report is here.

One cause of housing shortages is restrictions on urban limits but unfettered housing sub-division on productive land could lead to shortages of fresh fruit and vegetables and threaten food security.

You can’t blame horticulturists who work out they’d get more for selling their land than they can earn from growing produce on it.

But planning rules dictate what can happen where already. Should they be applied to stop housing subdivisions sprawling onto productive horticultural land?


NZ best for ease of doing business

November 1, 2017

New Zealand is first in the world for ease of doing business for the second consecutive year.

. . . Doing Business measures aspects of regulation a ecting 11 areas of the life of a business. Ten of these areas are included in this year’s ranking on the ease of doing business: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. Doing Business also measures features of labor market regulation, which is not included in this year’s ranking. . . 

For eight of the 11 Doing Business indica- tor sets, the report’s traditional focus on e ciency—de ned as the time, cost and number of interactions necessary to incorporate a new business or connect a warehouse to the electrical grid—has been complemented with a new focus on regulatory quality. Doing Business data shows that e ciency and quality go hand in hand, reinforcing each other.

Despite these additions and improve- ments, one aspect of Doing Business has remained unchanged: its focus on pro- moting regulatory reform that strengthens the ability of the private sector to create jobs, lift people out of poverty and create more opportunities for the economy to prosper. The notion that the private sector has substantial economic, social and development impact is now universally recognized. Responsible for an estimated 90% of employment in developing economies, the private sector is ideally placed to alleviate poverty by providing the opportunities to secure a good and sustainable standard of living.

Policy reforms catalyze private investment. Promoting a well-functioning private sector is a major undertaking for any government. It requires long-term policies of removing administrative barriers and strengthening laws that promote entrepreneurship.

Hard data helps do that. It gives a voice to the people to demand improved public services. It also increases government accountability. . . 

There is a message here for people who think capitalism has failed. It’s the private sector which is ideally placed to alleviate poverty. The government’s role is to remove barriers and strengthen laws that promote entrepreneurship.

The rankings are here.

While New Zealand does well overall, there’s lots of room for improvement in four areas: getting electricity, enforcing contracts and resolving insolvency.

 

 

 


Economic growth is the means

September 28, 2017

National is unapologetic about its focus on economic growth in spite of criticisms that this means it doesn’t care about people.

What the critics don’t, or won’t, understand, is that economic growth is the means not the end.

The only sustainable way to provide first world services and infrastructure and to help people is through economic growth.

Any government can throw money at problems.

A good government aims for quality spending rather than quantity.

National  had done that in the last three terms. It worked hard to make sure the country could afford its initiatives and that the money spent was spent wisely, focussing on addressing the causes of problems not just treating the symptoms.

That is the best way to make a positive difference to people and the country.


Water tax by the numbers

September 21, 2017

When policy is based on politics rather than logic it’s difficult to work out the cost, but IrrigtionNZ has done the numbers for the water tax:

Recent attempts to estimate the cost of Labour’s proposed water tax to farmers have demonstrated a basic lack of understanding of how irrigation works, says nonprofit membership body IrrigationNZ.

This issue, which is compounded by a lack of detail from Labour about how the tax would be applied, has resulted in some widely varying estimates. Radio New Zealand’s ‘Fact or Fiction’ series calculated the cost for irrigated farms at $13,800 a year, whereas figures from DairyNZ have estimated a figure of $45,000 a year.

On top of this, yesterday Jacinda Ardern told TVNZ there are 12,000 farms in New Zealand and 2,000 of them have irrigation. In fact according to Statistics NZ and the 2012 Agricultural Census there are 58,071 farms in NZ and 10,500 have consent for irrigation. Irrigation NZ estimates the number of irrigated farms is now at around 11,000.

‘The public will rightly be confused by these very different figures,’ says IrrigationNZ Chief Executive Andrew Curtis. ‘But the lack of detail on how Labour would apply a water tax compounded with the sheer number of variables between farms – for example their size, what they produce, and how dry the region is, makes it hard to estimate with accuracy. While recent coverage has focused on the impact on dairy farms – just over half of our irrigated farms are not used for dairy – but for sheep or beef, arable farming, horticulture or vineyards. These farmers and growers will also pay the tax.”

IrrigationNZ has spent the last decade developing a comprehensive suite of standards, codes of practice, guidelines and knowledge resources on irrigation, and now run over 50 training courses a year nationally. IrrigationNZ’s main focus is providing knowledge and training to help irrigators achieve ‘excellence in irrigation.

‘Our figures, based on the average irrigated farm in Canterbury of 220 hectares, show an actual average cost of $24,000 to $29,000 a year (at 2 cents per 1000 litres). We’ve used Canterbury figures because there is no national average figure available for the size of an irrigated farm – but there is for Canterbury, where 60 per cent of irrigated land is.’

‘When this additional cost is put in context of the profit generated by a family farming business – it will create a significant impact, particularly for sheep and beef, arable and vegetable farmers who have reasonably tight operating margins.”

Mr Curtis adds that there will be larger farms and those farmers operating in drier climates who will be facing significantly higher bills of $40,000 to $50,000 or more.

Will non-irrigated farms pay?

While both Radio New Zealand and DairyNZ calculated water tax costs for non-irrigated farms, it remains unclear whether these farms would be paying the tax as it is unclear whether they would qualify as ‘large commercial users of water’. The only users mentioned by Labour are water bottlers and irrigators.

6% of New Zealand farms are irrigated (around 11,000 farms). Regardless of whether other farms may pay some of the tax costs, the majority of the tax will fall on a small subset of farmers.

Calculating a water tax on irrigated farms – key variables:

Type of farming – from dairy, to sheep, arable, or horticulture (DairyNZ’s figures were for dairy farms)
Size of farm
Amount of rainfall
Actual water use vs consented take
Number of days irrigation water is applied
The cost of the tax.
IrrigationNZ has been surprised by the growing number of irrigation experts in NZ.

‘Academics, economists and organisations that wouldn’t have the knowledge to turn on an irrigator are all offering their expert opinions on the cost of a water tax. Anyone talking about the potential cost of a water tax must have some basic understanding of water use by irrigators and not everyone offering an opinion currently seems to have that,” says Andrew Curtis.

‘We’d be happy to run a special course for the growing list of water tax experts – to help people to brush-up on their irrigation knowledge and assumptions.’

Calculating irrigation water use – the backbround

Before entering into the ‘how much will irrigators pay’ debate some basic knowledge of water use by irrigators is required.

‘The key piece of information is 1 mm of rainfall (noting rainfall is measured in millimetres not millilitres) falling over 1 hectare is equivalent to 10m3 which is equivalent to 10,000 litres). This provides some context around the sensationalist numbers being used by some parties around irrigation water use,’ says Andrew Curtis.

“For example over the Canterbury region (4.5 million hectares) an annual rainfall of just under 1,650mm or 74 trillion litres falls. However, we all know this isn’t distributed evenly and that’s why we need to irrigate – to provide additional rain for a crop to grow during dry periods. Under 500 mm falls at the coast, rising to 1,000 mm in the foothills and well over 2,000 mm in the mountains.”

For the 500,000 ha of irrigation in Canterbury (based on a seasonal allocation of 550 mm which is explained below) this means the maximum use for irrigation is 4.5 trillion litres or 6% of the annual rainfall.

“It is important to realise irrigators must hold a consent to take water for irrigation, and this contains a seasonal allocation expressed as a volume in m3. This volume is the maximum amount of water an irrigator is allowed to take and based on 80% application efficiency (the agreed industry standard) and 90% supply reliability,” says Mr Curtis.

Councils use a water allocation tool, such as Irricalc (http://irrigationnz.co.nz/practical-resources/irrigation-development/water-allocation-calculator/) to calculate a farms seasonal irrigation allocation requirements. These tools are based on a daily time step water balance model that uses the local climate and the farms soil water holding properties.

“However, when we case study an individual farm we always base it on the seasonal volume written on their consent – as this is the most likely method through which a water tax charge will be calculated,” says Mr Curtis.

David Clark gives the impact the tax will have on his cropping farm:

 


%d bloggers like this: