Budget changes will benefit children – Dr Lance O’Sullivan

May 24, 2015

Northland GP and New Zealander of the Year says the Budget announcement of more money for beneficiary families and the requirement to seek work when the youngest child turns three is a good move:

Dr O’Sullivan says in the Northland communities he works in, the kids of beneficiaries are often better off out of the home because they’re less exposed to social dysfunction.

“Now that could be alcohol, drug abuse; that could be violence; that could be mental health problems; that could be problems with incarceration,” says Dr O’Sullivan.

He says putting those children into childcare during the day ensures they have some good role models early on.

“I think we should be able to expose them to positive environments, keep them warm, safe and dry and give them a learning opportunity that will prepare them for school. I don’t believe we should waiting until they’re five.” . . .

Home ought to be the safest place for children.

Parents ought to be the best teachers and role models but tragically for too many children they aren’t.

Dr O’Sullivan sees them and knows that these children will be better away from their homes, if only while their parents are at work.


Rural round-up

May 23, 2015

Modern farming has had its day – Annette Scott:

Modern agriculture, at about 70 years old, was the product of post WWII food shortages and while it had been effective in its primary aim of increasing yields it has to change, an industry expert says.

The 2020s would be the new 1960s as agriculture and social change entered a period as significant as the 1950s and 1960s, Dr Charles Merfield of the Biological Husbandry Unit’s Future Farming Centre said.

“Our times are once again changing,” he told farmers at a sustainable agriculture seminar run by the FFC and the Foundation for Arable Research in Ashburton. . .

Agricultural and Agri-Food Producers Call for an Ambitious, Fair, and Comprehensive Agreement through the Trans-Pacific Partnership:

As Trans-Pacific Partnership (TPP) nations meet this week in Guam to continue negotiations, agri-food producer and processor organisations from Canada, the United States, Australia and New Zealand remain united in their call for a modern trade agreement that includes meaningful and comprehensive market access opportunities for agriculture and agri-food.

The organisations advocating for an ambitious, fair and comprehensive TPP agreement are the Canadian Agri-Food Trade Alliance, the American Farm Bureau Federation, the Australian National Farmers’ Federation, and the Federated Farmers of New Zealand. Together, they represent hundreds of thousands of farmers, producers, processors and exporters who, in turn, employ millions of workers across the TPP region.

“Our agricultural sectors and the jobs they provide depend on a thriving network of export markets,” said Brian Innes, president of the Canadian Agri-Food Trade Alliance. . .

Working to surplus the best news for farmers in the Budget:

Federated Farmers says it’s disappointed there is no Budget surplus this year, but the best news for farmers from the Government is that it is on track for a surplus next year.

Acting President Anders Crofoot says Federated Farmers welcomes a number of measures in the Budget, but the best thing to assist the rural economy is to control government spending enough to create an enduring surplus to enable debt repayment and to keep pressure off inflation, monetary policy and the exchange rate.

“The Government is clearly trying to balance the need to responsibly manage its finances with the pressing and growing demands to do something about housing and child hardship.” . .

Budget biosecurity announcements a good response to changing risks:

The Dairy Companies Association of New Zealand (DCANZ) has welcomed the 2015 budget announcements in support of better biosecurity outcomes.

“Short of a major volcanic eruption in Auckland there is very little that trumps the impact that a biosecurity incursion could have on the New Zealand economy. A bad biosecurity incursion would shut down exports and derail much of our country’s productive capability.” says DCANZ Chairman Malcolm Bailey.

“Unlike a volcanic eruption, there are things we can do as a country to lessen the risk of a biosecurity incursion. DCANZ thanks the Government for its commitment to responding to the changes which are altering New Zealand’s biosecurity risk profile.” . . .

NZ wool prices jump to multi-year high at auction, amid strong exporter demand – Tina Morrison:

(BusinessDesk) – New Zealand wool prices jumped to multi-year highs at auction even as the volume on offer rose 78 percent, amid strong demand from exporters.

The price for clean 35-micron wool, a benchmark for crossbred wool used for carpets and accounting for the majority of New Zealand’s production, rose to $6.20 per kilogram at yesterday’s South Island auction, from $5.80/kg in the North Island auction last week, and reaching its highest level since November 2013, according to AgriHQ. Lamb wool jumped to $6.90/kg, from $6.65/kg, marking its highest level since April 2011. . .

Blenheim the place to be in June for Ag contractors:

Rural Contractors New Zealand (RCNZ) is encouraging all of its members – and any others interested in the agricultural contracting sector – to attend its annual conference being held in Blenheim later next month.

Chief executive Roger Parton says this year’s RCNZ annual conference is being held at the Marlborough Convention Centre, in Blenheim, from June 22-25.

“The conference is less than a month away and for those who have not registered yet; now is the time to do so,” he explains. “We will be unable to hold any accommodation past the end of this month, so if people want come they need to get their registrations in now.” . . .


Frugal new normal

May 23, 2015

This is good news:

The days of big Budget handouts are long gone and New Zealanders need to get used to the “new normal” that is frugal Government spending.

That was the message of Prime Minister John Key in his post-Budget address at a Trans-Tasman Business Circle function this afternoon.

“The days of Budgets being these massive hand-outs of money we don’t have, I think, are gone,” he said.

“The new normal is the Government learning to live with about a billion dollars – maybe a billion-and-a-half dollars.

“Those days of three, four and five billion dollars’ worth of extra expenditure are over.” . . .

Frugality has been forced on National since it came to power in 2008.

It made a conscious decision to protect the most vulnerable from the worst of the global financial crisis by not taking a slash and burn approach and committed to helping Canterbury recover from the earthquakes.

But it has taken a necessaryily Presbyterian approach to spending in other areas  and required government departments to do more with less which is as it should be.

We need to return to surplus and once there need to reduce debt in order to be ready for the next crisis.

But the return to surplus should not be taken as a licence to return to the big spending budgets in which the lst Labour indulged.

A concerted effort must be made to ensure that government becomes and stays a smaller part of the economy.

That would leave more money in the pockets of the businesses and individuals who earn it and put the country on a stronger economic foundation for sustainable growth.


Business as usual with surprises

May 22, 2015

The Budget which was expected to be boring was a business as usual one with surprises.

The business as usual bit is continuing focus on the careful management of public money and getting back to surplus without the slash and burn approach which past governments took.

The big surprise was an increase in benefits, above the normal adjustment for inflation, for the first time in more than 40 years.

Even the opposition was struggling to oppose that and balancing the increase is the requirement for sole parents to seek work once their youngest child is three and increased work obligations for those on job seeker benefits helps.

Dene Mackenzie says Bill English has pulled off a master stroke:

He pushed his political opponents off stride by announcing social spending better than anything Labour did during its most recent nine years in Government.

Mr English will continue to be criticised by opponents for not delivering his prized surplus this year, but spending $790 million on a package to help children in some of New Zealand’s poorest families was a touch of genius.

The package included more child-care support for low-income families, a $25-a-week increase in benefit rates for families with children, an increase in Working for Families payments to low-income families not on a benefit, and increased work obligations for sole parents on a benefit.

”This package strikes a balance that offers more support to low-income families with children while ensuring there remains a strong incentive for parents to move from welfare to work,” he said.

He also made it difficult for his political opponents to make any meaningful criticism by lifting benefit rates by more than inflation for the first time since 1972.

The Finance Minister has always been the social conscience of National, right from the days when he was a member of the party’s ”brat pack”.

At political conferences more than 20 years ago, he talked about ensuring a ”truck driver” from Balclutha could earn enough to feed and house his family. . .

The increase to Working for Families at the lower end of income ensures the truck driver and any other parents in paid work will be better off than those on benefits.

I don’t support WFF for families earning well above the average income but can’t think of a better way to ensure there’s a decent gap between income from benefits and low paid jobs.

The Budget at a glance is here.

I was listening to talkback on my way home from Christchurch last night. The cut in the $1000 kickstart for Kiwisaver wasn’t popular but it was less likely to go to those who’d need it most and tax credits and employer contributions remain.

Border security and the risk of biosecurity breeches is of increasing concern with more travellers. Requiring $6 from departing travellers and $16 from incoming ones is a little bit of user-pays.

The Finance Minister’s speech is here.

. . . New Zealand remains one of the faster-growing developed economies, with conditions supporting sustained solid growth, forecast at 2.8 per cent on average over the next four years.

Growth matters. It means more jobs, higher incomes and opportunities for families to get ahead.

By mid-2019, the number of people in work is expected to rise by another 150,000 and the unemployment rate to drop to 4.5 per cent. The average wage is also expected to rise by $7,000 to $63,000 a year.

New Zealand’s positive economic performance, relative to others, is demonstrated by the strength of the New Zealand dollar and the very low number of people leaving for Australia – the lowest, in net terms, since 1992.

Lower dairy prices are a headwind for growth, however, and global uncertainties remain. Monetary policy easing in other countries is helping to keep upward pressure on the exchange rate.

Unusually, given our current growth, New Zealand is experiencing very low inflation.

Annual CPI inflation is only 0.1 per cent, compared to the Budget 2014 forecast of 1.8 per cent.

This is good news for consumers and workers because their income goes a bit further and they get good value for any pay rises.

Low inflation is also keeping down interest rates. The concerns I expressed in last year’s Budget about rising interest rates have largely disappeared.

But lower-than-expected prices also mean that nominal GDP – the size of the economy in dollar terms – is not rising as quickly as previously expected, despite solid growth in the real economy.

This means tax revenue is not rising as quickly either.

Compared to what was forecast in last year’s Budget, nominal GDP is expected to be $15 billion lower in total over this year and the next three years, and tax revenue to be $4.5 billion lower in total over the same period. . .

Government’s fiscal priorities are:

Returning to surplus this year and maintaining surpluses in the future

Reducing net debt to 20 per cent of GDP by 2020, including repaying debt in dollar terms in 2017/18

Further reducing ACC levies

Beginning to reduce income taxes from 2017, and

Using any further fiscal headroom to reduce debt faster.

The Government is making good progress on all these fiscal priorities.

While expenditure is firmly under control, tax revenue – as I mentioned – is not rising as quickly as expected.

This is lowering operating balances across the forecast period, compared to Budget 2014 predictions.

But the overall trajectory has not changed. We have come from an $18.4 billion deficit four years ago to seeing steadily rising surpluses into the future.

A deficit of $684 million is now forecast for 2014/15, which is $2.2 billion better than last year’s deficit.

A surplus of $176 million is expected in 2015/16, followed by $1.5 billion in 2016/17 and rising to $3.6 billion in 2018/19.

As I’ve said previously, the Government has no intention of making spending cuts simply to chase a surplus in a particular year.

The surplus target has been successful in applying greater discipline to government spending.

That discipline has turned the Government’s books around, and the fiscal outlook remains very positive. . .

The government can, and should, control its spending and the disciplined approach to it that has been taken since National came to power in 2008 is the major reason New Zealand is doing as well as it is.

The government can influence the environment which helps the income side, but sustainable growth comes from the private sector.


Quote of the day

May 22, 2015

. . . An enormous gulf has opened up between what used to be the core Labour voter, particularly in provincial regions, and the metropolitan elites, with their state-funded salaries and public sector pensions. The consequence is the current generation of Labour politicians are stumped when it comes to enunciating policies for the delivery of a better life for working people.

There is now a fundamental unease in the NZ population the collectivism inherent in the original concept of the welfare state doesn’t necessarily deliver the results originally envisaged. It is based on evidence the safety net the welfare state was intended to provide has been turned almost into a lifestyle for many who spend years on benefits. Now when the Govt says testing for spending effectiveness (in welfare programmes) will be core to the new processes it is introducing, and funding will be re-prioritised to providers to get results, Labour doesn’t seem to have an answer, or an alternative. . . Trans Tasman


More of what’s working not boring

May 21, 2015

Several commentators are criticising today’s Budget for being boring.

Boring in the sense of no surprises is good for Budgets.

We should be grateful the days when everyone stocked up on fuel and fags then sat round the radio listening to the Finance Minister add taxes here and give out subsidies and other taxpayer largesse there are long gone.

But a Budget that delivers more of what’s working for New Zealand shouldn’t be written off as boring and the programme being built on in successive Budgets is working.

NBR editor Nevil Gibson writes of a Budget success story we don’t hear about:

One of the biggest contributors to the reduction in the budget deficit is the money not being spent on welfare.

It’s a success story you won’t hear much about as opposition parties insist a rise in the welfare budget is a better measure.

But, like the ACC reforms and its lower fees, the savings in welfare benefits are like a tax cut for all other taxpayers. . .

The reduction of people on benefits pays dividends in financial and human terms.

The reduction in benefit numbers since the reforms began in 2012 and the projections are described as “startling” by an Australian commentator, Rick Morton. 

His column quotes figures that show the number of years people will spend on benefits has fallen 12%, worth 650,000 years of benefit receipt in the next five decades.

“Two-thirds of this is due to a reduction in the number of people who will gain benefits and one-third is a reduction in the time they will spend on those benefits,” Mr Morton writes.

“From $NZ86 billion, the future liability of the welfare recipients shrank to $76.5 billion in 2013 and to $69 billion last year, largely on the back of economic factors such as inflation.

“But $2.2 billion of the reduction was attributed, in a report released earlier this year, to the ‘effectiveness’ of the policy, which is measured by fewer people getting access to benefits and more people leaving them.” . .

Lindsay Mitchell notes the success in reducing the number of teen pregnancies:

. . . To be demonstrating prevention-success alongside support for the diminishing number who do become teenage parents is a political dream. 

Stopping people going on to welfare and getting beneficiaries from welfare to work are two of the best ways to alleviate poverty.

Whatever further measures to address the problem of poverty are announced in today’s Budget, the significant reduction in the long-term financial and social costs of welfare are anything but boring.

An email from the National Party yesterday made these points:

  1. 194,000 new jobs created since the start of 2011 under National – that equates to around 120 new jobs every day.
  2. We’ve turned the Government’s books around – the deficit peaked at $18.4 billion in 2011 and now we’re expected to be back in surplus next year, a year later than the target we set in 2011. We’ll still be one of the first developed countries to be back in surplus after the global financial crisis.
  3. This will be the type of Budget a responsible Government can deliver when it’s following a plan that’s working.
  4. Budget 2015 will contain $1 billion in new spending. It continues to support New Zealanders and help families while responsibly managing the growing economy and the Government’s finances.
  5. The Government will continue building on what we’ve put in place to address the drivers of hardship. This approach is working – there are now 42,000 fewer children in benefit-dependent families than three years ago. So our spending will make a difference to those who receive it, while at the same time we respect the taxpayers who pay for it.

There is no money for a lolly scramble budget and even if there was that would be wrong.

A business as usual budget might be boring to some but it’s working for New Zealand.

 


Quote of the day

May 21, 2015

. . . What New Zealand needs is more high-paying jobs but, to achieve this, we need higher educational standards. There are too many families dependent on low-income jobs, if indeed they are working.  Fifty per cent of households in which no one works are poor. If one person is working, the poverty rate falls to 19% and to 4% if two or more people work. Research indicates that a parent obtaining fulltime paid employment with sufficient earnings is the most important contributor to lifting children out of poverty.

And this shouldn’t be the responsibility of the government alone. There needs to be a co-ordinated approach between central government, local government, iwi, Pacifika, social service providers, businesses, industry training organisations and communities to deliver well-paying job opportunities, especially in the regions.  . .Peter Sherwin.


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