Why so glum?

August 8, 2019

The quarterly unemployment rate is down to 3.9%; and the official cash rate is at an historic low of 1%.

Yesterday’s GlobalDairyTrade was down 2.6%, the fifth drop in the last six auctions but no-one’s suggesting the milk payout will be lower than $6.

Horticulture and wine are getting healthy returns, arable incomes are reasonable, wool is dismal but the outlook for sheep meat and beef is positive.

But Business confidence is down to -44.3% :

. . .That was the worst reading since August last year, when the index was at -50.3. Employment intentions slumped (-5.5 vs 0) as firms sought to cut jobs, capacity utilization weakened to its lowest since 2009 (0.4 vs 5.3), and activity outlook (5.0 vs 8.0) and export expectations (1.4 vs 5.3) deteriorated. In addition, profit expectations fell further(-16.3 vs -12.5), while investment intentions turned to negative (-0.3 vs 2.5). . . 

And consumer confidence is also gloomy:

The Westpac-McDermott Miller consumer confidence index in New Zealand fell to 103.5 in the second quarter of 2019 from 103.5 in the previous period. Households became increasingly worried about conditions in the global economy over the next five years (-3.5 points to 11.9); and the number of households who think now is a good time to purchase a major item has fallen to a two-year low (-5.5 points to 17.9).  . . 

Why are we so glum?

Today’s historic cut to the Official Cash Rate down to just one per cent sounds a dramatic warning that the New Zealand economy is slowing and the Government needs to get serious about growth, National’s Finance Spokesperson Paul Goldsmith says.

“The Reserve Bank’s cut came with the message, ‘Indicators of growth remained weak or weakened further over the past few months’.

“The only time in the history of the OCR there has been a cut of this magnitude have been after the 9/11 terrorist attack, during the Global Financial Crisis, and after the Christchurch earthquake.

“Of greatest concern is the absence of any clear growth plan from this Government.

“Budget 2019 was devoted almost exclusively to spreading national wealth, with very few policies to grow the economy. The most expensive Budget commitment to transform the economy was a $1 billion subsidy for rail. There was little else.

“Instead of ramping up infrastructure investment, the Government has stopped or postponed a dozen roading projects which were ready to get underway, and replaced them with projects that aren’t ready to go, and won’t be for a lot time yet’.

“We need to move beyond policies that add costs to the business and drive down business confidence.

“National would revive the economy by having a plan for growth which would see confidence bounce back and the economy gain the strength it’s lost under this Government.”

There is no doubt what the government is doing and not doing are a large part of the problem.

In spite of at least reasonable returns for almost all primary products farmers feel under-siege with very real concerns about the costs and restrictions the government will impose on them.

Other businesses have similar worries, not helped by the latest confidence-sapping message sent by the Prime Minister’s ordering Fletchers to not build anything until the Ihumātao dispute is settled.

Then there’s the on-going argument over the letter Associate Transport Minister Julie Anne Genter is refusing to release and the questions that raises over the part she played in delaying Wellington transport plans.

Concerns over this aren’t helped by claims from Wellington City Councilors that the Green Party confidence and supply agreement would have been put in jeopardy if a watered down Let’s Get Wellington Moving wasn’t accepted.

All of this points to government instability and is compounded by Winston Peters’ latest game playing over requiring a referendum on changes to abortion law.

When interest rates were already so low, it is unlikely the larger than expected drop in the OCR will have much impact on the productive economy when there are so many reasons pointing to the need for caution.

And while low interest rates help borrowers they punish savers.

All in all there is little to give anyone confidence anything is going to get better soon and plenty of reasons to doubt the government has the plans and policies to help.

And now the Reserve Bank has dropped the OCR, it raises the question of what happens when, as is likely, economic conditions get worse.


Government vs activism

August 5, 2019

The Green Party excluded the media from most of its conference, contradicting its vision of openness and transparency.

One reason for that was probably because that the party didn’t want the public to hear from members like this.

Ahead of the party’s annual general meeting in Dunedin this weekend, Jack McDonald said he would not be running as the Te Tai Hauauru candidate in next year’s election.

He would also not be seeking re-election as the Greens’ policy co-convenor.

He said the party’s direction was one of the factors.

“As an indigenous ecosocialist the last few years have been tough; the 2017 campaign, Metiria’s [Turei] resignation, and the continued centrist drift of the party’s direction under James Shaw’s co-leadership.

“When the IPCC [Intergovernmental Panel on Climate Change] says we have 12 years to save the world from climate catastrophe, we simply don’t have time for centrism, moderation or fiscal austerity.” . .

This is what happens when activism comes up against the realities of government.

In spite of the screaming from climate alarmists, the majority of people support centrist and moderate policies and are not ready for the economic sabotage that dark green activists like McDonald and his ilk would inflict on us.

The difference between government and activism hasn’t got through to Green co-leader Manama Davidson and her colleagues who have blundered into the ​Ihumātao protests.

That their party supports the government but isn’t in it is a distinction without a difference to most people. Their joining a protest which tramples over property rights and threatens the Treaty process is the action of activists not MPs.

The other co-leader James Shaw usually acts like an MP but in an interview on The Nation he slipped into activist mode:

Look, I would never empower someone with as little personal integrity as Simon Bridges to become prime minister.

about which Adam Smith at the Inquiring Mind blogs:

. . . I have ceased to be surprised at just how often leading Greens seem only to honour these values in the breach.

Shaw in his vile and obnoxious comment showed just how far the Greens have deviated from their values.

It is high time they were called out for continually donning a cloak of moral sanctimony and pretending to be above the fray, when in fact they are as nasty and vicious as anyome else in the bearpit of politics.

Quite.

 


H word and F word

July 3, 2019

In opposition the three parties now in government were opposed to foreign ownership of farmland.

In government they have made it so much harder for foreigners to buy farms to farm it’s almost impossible for them to do so. But the hoops the overseas buyers have to go through to buy farms to convert to forestry are much lower.

That means would-be foreign buyers are very, very unlikely to get Overseas Investment Office approval to buy distressed dairy or sheep and beef farms, even with plans, and both the ability and funds, to  improve them.

But the same buyers would be Almost certain to get OIO approval to buy those same farms if they intended to turn them into forests.

Overseas interests already own 70% of New Zealand forestry.

Making it much easier to buy farms to plant trees than to raise stock, for arable farming or horticulture,  will mean even more forestry is foreign owned.

Forestry is becoming an F word among farmers and rural communities concerned about the environmental, economic and social impacts of the rapid afforestation of productive farmland.

They can rightly apply the  H word – hypocrisy – to Labour, New Zealand First and Green Parties for their policy of making it easier for overseas purchasers to do this.

But wait there’s more.

These overseas entities will be able to offset their carbon emissions in their homelands, or from investments in other countries, with the trees they plant here.

It’s very tempting to use another F word to express my feelings about this.


The Genter pay gap

June 27, 2019

Labour and the Greens like to think they’re champions of women but there’s a Genter gender gap at the Women’s Ministry:

Women’s Minister Julie-Anne Genter has confirmed that women are paid less than men at the very Ministry that is focussed on eliminating the gender pay gap, National’s Women’s spokesperson Paula Bennett says.

“Julie-Anne Genter told a Select Committee that the men at her Ministry are paid six per cent more than the women. The pay gap at the Ministry has changed in favour of men since this Government came into power.

“If Julie-Anne Genter wants to have any credibility criticising private businesses or other Government departments, she needs to sort out her own Ministry first.

It’s so much easier to talk about the theory than to have it work in practice.

“This is another example of hypocrisy by Green Party Ministers who have swallowed more dead rats than a hungry stray cat. They supported the Waka-Jumping legislation, they didn’t get their Capital Gains Tax and there’s been no progress on the Kermadecs.

“Under a National Government the Gender Pay Gap decreased from 12 per cent to 9 per cent. It hasn’t changed under this Government.

“There are only 30 per cent women in this Government’s Cabinet, fewer than under the National Government. The Prime Minister has the opportunity to address this tomorrow in her reshuffle.

“The Greens were incredibly vocal in Opposition but they’re finding the reality of Government much harder. It’s time for them start walking the walk, because until now they’ve been all talk.”

One of the reasons the two women who were demoted from Cabinet haven’t been replaced is because the most likely candidates are men.

That poses a problem for a PM and a party that worries more about gender than ability and performance.


Which poll is right?

June 9, 2019

Or:

David Farrar says both can’t be right:

. . .You basically can’t reconcile these . One (or both) of them seem to be outside the 95% confidence interval, ie is the 1 in 20 “rogue” result.

The only other plausible explanation is that as the ONCB poll started a few days after NRR, Labour had a massive drop in support after those first few days. But the difference in dates is unlikely to explain the massive gap.

The polls ever show the direction of change differently. One has Labour down 6% and the other up 3.3%. National is up 4% in one and down 4% in another.

The NZ First result is also outside the margin of error. A 5% and a 2.8% result is outside the 95% confidence interval. . .

Both can’t be right, and just a few weeks ago all the pollsters were wrong about the Australian election.

 


No CGT but . . .

April 18, 2019

The government is not going to adopt a capital gains tax .

The backdown has cost $2 million and 18 months of uncertainty but Simon Bridges point out there will be more taxes:

“While the Government has backed down on a Capital Gains Tax, there are still a range of taxes on the table. They include a vacant land tax, an agricultural tax and a waste tax.

“Prime Minister Jacinda Ardern says she personally still wants a Capital Gains Tax and that our tax system is unfair. New Zealanders simply can’t trust Labour when it comes to tax. 

“The New Zealand economy has suffered while the Government has had a public discussion about a policy they couldn’t agree on. Put simply, this is political and economic mismanagement. . . 

The government asked a question, the answer to which its three constituent parties couldn’t agree on.

Remember James Shaw saying:

“The last question we should be asking ourselves is, ‘can we be re-elected if we do this?’ The only question we should be asking ourselves is, ‘do we deserve to be re-elected if we don’t?'”

Labour and the Green Party had to swallow a big dead rat, served to them by Winston Peters:

. . .It wasn’t even an hour after the Prime Minister had put the final nail in the coffin that is the capital gains tax (CGT) when RNZ asked Mr Peters whether Labour will be expecting his party’s support on another issue in return for losing this flagship policy. Mr Peters fired back: “May I remind you, the Labour Party is in government because of my party.”

No reading between the lines necessary. . .

New Zealand First is polling under the 5% threshold, it couldn’t afford to alienate the dwindling number of its supporters.

The capital gains tax, if not dead, is buried while Ardern is Prime Minister, but the threat of other niche taxes is still live.

 


Poverty stats government’s shame

April 3, 2019

The nine child poverty statistics that will be used as the baseline for improvement show released yesterday by Stats NZ show all but one have got worse under the current government:

David Farrar compares the stats under National and Labour:

  1. Percentage of children in households with income under 50% of median, before housing costs. 156,000 in June 2008 and 156,000 in June 2017 so no increase under National (rate dropped 0.3%). In June 2018 increased by 27,000 and rate increased 2.3% for Labour’s first year.
  2. Percentage of children in households with income under 50% of median, after housing costs. 329,000 in June 2009 (no data for 2008) and 247,000 in June 2017 so a drop of 82,000 under National (rate dropped 8.1%). In June 2018 increased by 7,000 and rate increased 0.4% for Labour’s first year.
  3. Percentage of children in households in material hardship. 196,000 in June 2013 (no data before that) and 140,000 in June 2017 so dropped 56,000 under National (rate dropped 5.4%). In June 2018 increased by 8,000 and rate increased 0.6% for Labour’s first year.
  4. Percentage of children in households with income under 60% of median, before housing costs. 252,000 in June 2008 and 243,000 in June 2017 so a drop of 9,000 under National (rate dropped 1.3%). In June 2018 increased by 38,000 and rate increased 3.2% for Labour’s first year.
  5. Percentage of children in households with income under 60% of median, after housing costs. 355,000 in June 2008 and 314,000 in June 2017 so a drop of 41,000 under National (rate dropped 4.6%). In June 2018 increased by 27,000 and rate increased 2.2% for Labour’s first year.
  6. Percentage of children in households with income under 50% housing costs for the base financial year. 258,000 in June 2008 and 236,000 in June 2017 so a drop of 22,000 under National (rate dropped 2.5%). In June 2018 increased by 18,000 and rate increased 1.4% for Labour’s first year.
  7. Percentage of children in households with income under 40% housing costs for the base financial year. 156,000 in June 2008 and 178,000 in June 2017 so an increase of 22,000 under National (rate increased 1.6%). In June 2018 dropped by 4,000 and rate dropped 0.4% for Labour’s first year.
  8. Percentage of children in households in severe material hardship. 84,000 in June 2013 (no data before that) and 74,000 in June 2017 so dropped 10,000 under National (rate dropped 1.0%). In June 2018 dropped by 9,000 and rate dropped 0.9% for Labour’s first year.
  9. Percentage of children in households in material hardship and under 60% median income after housing costs. 96,000 in June 2013 (no data before that) and 86,000 in June 2017 so dropped 10,000 under National (rate dropped 1.1%). In June 2018 increased by 12,000 and rate increased 1.0% for Labour’s first year. . .

Who would have thought it? Seven of the child poverty measures dropped under National, one was static and one went up.

And under the Labour/NZ First/Green government that purports to be compassionate and set reducing child poverty as a priority?

Seven of the child poverty measures worsened and only two improved.

What’s behind the difference?

Former Prime Minister and Finance Minister Bill English was determined to search out the risk factors which lead to poverty and the disastrous social outcomes that usually accompany it.

Having found them he used the social investment approach – spending more upfront on helping those most at risk. The higher short-term cost was justified by the expected reduction in the long-term human, social and financial costs should those at risk not be helped.

The compassionate and intelligent response of the Labour/NZ First/Green government would have been to continue and build on what was working.

The failure to do so is this government’s shame.

Instead it sabotaged business confidence, wasted money on policies including fee-free tertiary education and winter heating subsidies for people who don’t need them, and got soft on policies that used both carrot and stick for those who could be working but don’t.

Early days is no excuse, this government is almost half way through it’s first term.

It can’t blame National for what’s going wrong when under it, seven of the measures were improving, one was static and just one was going the wrong way.

The government has only itself and its ideological blindness to blame which will be no comfort at all to the families whose situation has worsened.

Lindsay Mitchell blogs on the causes of poverty:

The Canadian think-tank, the Fraser Institute has just released a paper which suggests an elegantly simple framework in finding three causes of poverty: bad luck, bad choices and enablement. The first two need no explanation. The third is described thus:

We can say that poverty is “enabled” when systems and structures are in place to discourage the kinds of efforts that people would normally make to avoid poverty, i.e., find employment, find a partner (especially if children are present), improve one’s education and skill set, have a positive outlook, and take personal responsibility for your own actions. Ironically, it is government programs (welfare, in particular) that are intended to help the poor but end up actually enabling poverty.

In NZ, many of our current influencers (MPs and media) pooh,pooh the idea that bad choices are responsible for poverty despite this being self-evident. They base their disdain for the idea on a belief that greater systems, for example institutional racism, drive bad choices. Of course when they do this they excuse bad choices and even compensate the person making them. Undoubtedly, most of those sitting on the Welfare Expert Advisory Group would hold views of his nature. . . 

The soft bigotry of low expectations is not a cliche, it’s a fact.

This government’s low expectations are enabling poverty and turning around the improvements that National’s policy of social investment were making.


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