Surplus challenges

May 16, 2016

The government is facing challenges, Finance Minister Bill English told the National Party’s Mainland conference at the weekend.

The prospect of economic growth is good but brings with it the challenge of dealing with ongoing surpluses.

The government books scraped into surplus last year but few would have been surprised if they slipped back into deficit given low dairy prices and the various problems facing many of our trading partners.

However, the government is now looking ahead to multi-billion dollar surpluses in the short to medium term which provides the challenge of how best to use that money.

The opposition and the usual other suspects who think the quantity of spending matters more than quality have been calling for increased spending in all sorts of areas. Over at Kiwiblog, David Farrar has calculated that meeting the demands would require a top tax rate of 100%.

But this government has a much better focus than the quantity of spending.As the Finance Minister saidWe measure spending by results rather than the level of spending.

Some issues do require more money now in order to reduce future costs and that is why the government has taken an investment approach to social spending with a whole-of-government approach.

At the conference, Justice Minister Amy Adams spoke about this and explained that getting better results in her portfolio didn’t require more money for it. What was needed was spending that addressed the drivers of crime – welfare dependency and poor education and health.

Few would argue with that, but increased surpluses don’t only give the government the ability to spend more, it also has room to take less.

Last week’s announcement that there won’t be tax cuts in this year’s budget disappointed some, but I think most people accept Prime Minister John Key’s view hat there are other priorities this year.

National had looked at around $1 billion for tax cuts in the Budget the year but it was discarded because it would have delivered $7 or $8 a week to many households, Key told Newstalk ZB.

He said the choice they were faced with in the short term was either a billion dollars worth of tax cuts which would deliver a small amount of money to New Zealanders, or spend the money on other things such as cancer drugs.

Labour was, rightly, pilloried for its chewing gum tax cut and this government wouldn’t get any thanks for offering something similar.

However, people won’t be so patient when there’s a prospect of on-going billion dollar surpluses which give the potential for meaningful cuts and the PM gives room for hope:

“Philosophically we believe in lower taxes and smaller government, and government’s definitely getting smaller,” he said.

“The point is if we’re going to have a tax programme – we’re not ruling that out in for 2017 or campaigning on it for a fourth term. But having probably a bigger one, to be blunt.”

When asked how much was needed for meaningful tax cut, Key responded: “$3 billion I reckon.”

He wouldn’t reveal the budget surplus forecast for next year, but it was nowhere near enough for that.

He said it was realistic to forecast the tax cuts without voters considering it a ploy to be re-elected. 

Tax thresholds would probably change because of the increase in wages, he explained.

“The average income is going up and we think in a few years time the average income will be say $68,000, well the top rate cuts in at $70,000. If you don’t adjust thresholds over time you get to a point where the average income earner is paying the top personal rate of tax. That can’t be right.” . . 

Bracket creep erodes the value of wage rises and needs to be addressed.

Tax cuts  also help retirees. Superannuation is linked to after-tax wages. When taxes drop, after-tax wages increase and so do superannuation payments.

A party conference mid-way through a government’s third term could have been subdued. Confidence that the government will rise to the challenges of growth, continue to focus on the quality of its spending and results helped contribute to a buoyant mood.

It’s far better to be dealing with the challenges of growth than those of recession facing many other countries.


Rural round-up

May 5, 2016

Cheese-maker happy with the blues – Shannon Gillies:

Pursuing her goal of becoming a businesswoman in the highly competitive world of cheese-making has led Frenchwoman Pauline Treillard to Oamaru.

Originally trained as a sommelier, Ms Treillard (25) left that job to pursue her interest in cheese and became a cheese-maker in her home province of Bordeaux.

After years of trying to get further in the male-dominated industry, she decided to take a chance on the southern hemisphere and left France in 2013.

She arrived in Oamaru in March 2016, after her visa application to stay in Australia with her partner was declined. . . 

China Links paying dividends – Hugh Stringleman:

A week-long trip to China with Prime Minister John Key’s recent government and business delegation enabled Fonterra chairman John Wilson to view first-hand his co-operative’s engagement with its biggest and most-important market. Hugh Stringleman got a debriefing.

Vertical integration of Fonterra’s activities in China position it well for dynamic markets, regulatory changes and government approval, Fonterra chairman John Wilson says.

President Xi Jinping commented on Fonterra’s $1 billion-plus investment in China and the creation of 1600 jobs, Prime Minister John Key had reported. . .

Hard times swell Gypsy Day moves – Hugh Stringleman:

Sharemilkers and other dairy farm staff will be moving in greater numbers this Gypsy Day because of tough times in the industry.

Federated Farmers sharemilkers’ section leaders said more of the annual end-of-season moves would be from necessity and were not improvements in jobs.

“Higher-order sharemilkers will be moving for financial and structural reasons while the lower-orders and contract milkers may be taking a step backwards, unfortunately,” section chairman Neil Filer of Dannevirke said. . . 

Genetics could help combat FE – Sudesh Kissun:

An outbreak of facial eczema (FE) on the West Coast is driving home the need for FE-tolerant genetics, according to a farmer.

Andrew Bruning and Tracey Herrick are first year dairy farming in Karamea, where the whole district has been hit hard with FE — unusual for the area, Bruning says.

They milk 180 cows, mainly Friesian with some crossbred; a quarter of the herd have clinical symptoms of FE. Bruning believes the rest of the herd is suffering with sub-clinical symptoms. . . 

 ‘Gutless’ thieves butcher cow in field – Liz Wylie:

Kaitoke farmer Tony Skews said thieves who shot and butchered his prize cow on Monday night are “gutless pieces of junk”.

Mr Skews, who keeps just 15 cows on his property near Lake Wiritoa, said the animal had been shot with a .22 rifle and badly butchered by “amateurs”.

“They have taken the back steak and four legs and just left the rest,” he said.

“She was the fattest cattle beast on the property and this loss has cost me about $1500.” . . 

 

John Key's photo.

I back our farmers, our manufacturers, our ICT companies and in fact all our export industries to succeed.

If we can get an equal crack at world markets, we’re up there with the best in the world. John Key.

John Key's photo.

This deal matters to individual businesses and workers ine very region of the country.

The orchardist in Hawkes Bay, the windegrower in Marlborough, the dairy farmer in Waikto, and the IT provider in Auckland all stand to benefit. – John Key.


Setting aside personal and political

April 5, 2016

Prime Minister John Key has announced that the government is nominating Helen Clark for the top bureaucratic job in the world – United Nations secretary-general:

Prime Minister John Key has today announced the New Zealand Government is nominating Helen Clark for the position of the United Nations Secretary-General.

“Having served as the Prime Minister of New Zealand for nine years and held one of the top jobs in the United Nations for the past seven, Helen Clark has the right mix of skills and experience for the job,” says Mr Key.

“There are major global challenges facing the world today and the United Nations needs a proven leader who can be pragmatic and effective.

“Coming from New Zealand, Helen Clark is well placed to bridge divisions and get results. She is the best person for the job.”

Helen Clark was the Prime Minister of New Zealand for three consecutive terms from 1999 to 2008 and has worked as the Administrator of the UN Development Programme for the past seven years.

“Helen Clark has a vast amount of experience in international affairs which will be hard for other candidates to match. She’s a great listener and communicator, and I know she will make a difference if elected.” . . .

There was no love lost between the former and current PM when they were political rivals.

But since she first announced her intention to seek a job in the UN he has backed her and both have put any political and personal differences aside.

The UN is good in theory but often fails to live up to its promise in practice.

The Development Programme (UNDP)’s official report, which Clark led, said much of its annual US$5.7 billion (NZ$6.8 billion) budget is only remotely connected to ending global poverty.

Whether or not the criticism is fair, it highlights the size of the challenge facing the UN and its agencies.

It and they are far from perfect.

But in spite of its failings and inadequacies, there are benefits in having the 193 member states together attempting to find solutions to many, often long-standing, problems.

And there could be benefits for New Zealand to have a New Zealander heading it.

That’s why personal and political differences should be set aside to help the former PM get the post.

I disagree with a lot of her political views but I think she is well qualified for the position of Secretary-General.

 


Too little and too much

April 5, 2016

Oh Dear.

Labour leader Andrew Little still wants to stiff-arm banks:

. . . ‘I stand by the stance I took, which is to get very heavy-handed with the banks. Because the truth is when the banks fail to follow the signal that the Reserve Bank is sending, that’s keeping money out of the back pockets of ordinary Kiwis, and I will always fight for their interests and for their rights. If the banks don’t want to play ball when it comes to the way we run our monetary policy, actually, there’s only one outfit that can really take them on, and that’s the government.’. . .

The Reserve Bank is independent because it’s not the government’s role to set interest rates.

Retail banks are independent businesses and it’s not the government’s role to tell them what interest rates they should charge.

Interest rates are at historically low levels. They are higher in New Zealand than in many other countries which is partly a reflection on overseas investors’ perception of our economic and political stability.

That would be threatened by any stiff-arming of banks by government.

State intervention would also make business more risky for banks, the lenders and their borrowers.

Little’s not the only politician on the left who wants the government to get involved in banking.

Green co-leader James Shaw wants it to give $100m to Kiwibank which Prime Minister John Key described as dangerous:

He told Morning Report he did not support the idea, as the bank would be asked to make “non-commercial loans” – putting it in a weak position.

He said the Greens were using a state-owned enterprise (SOE) to bring about a policy goal.

“But to do that would be highly dangerous, because what you will end up doing is being in a position where you’re effectively asking them to make non-commercial loans, and potentially non-commercial returns.”

Mr Key said that would be “very poor public policy” and could lead you to a situation where the bank had to be bailed out. . . 

Jim Rose at Utopia points out other flaws:

Note well that the $100 million capital injection is to expand in to commercial banking. More aggressive passing on of interest rate cuts may jeopardise credit ratings if this lowers the profitability of KiwiBank. KiwiBank has an A- rating. . .

KiwiBank is minnow in the mortgage market and a pimple in commercial lending. Rapid business expansion is risky in any market, much less in banking. . . 

The proposal to use KiwiBank to lower mortgage rates does not add up. KiwiBank does not pay much in the way of dividends to fund such a foray.  KiwiBank is already far more leveraged than any other New Zealand major bank. 

Rob Hosking points out that while the policy might have political appeal it is bad economics:

Somewhat lost in all this is the risk of a policy that will encourage New Zealanders to take on more debt. . . 

 

New Zealand’s current account deficit has been there since 1974 and although it is now lower than the peak it reached a decade ago, it is still firmly in the red.

The Scandinavian and North European countries might be running larger household debts on their balance sheets, but these are internally funded: Norway and the Netherlands, for example, are running current account surpluses of  around 10% of GDP as opposed to New Zealand’s 3% of GDP deficit.

So they can afford to run up those debts.

New Zealand cannot. And a drive to push interest rates down – a taxpayer-funded drive no less – sounds more than a little foolish given New Zealand’s long-standing economic and financial vulnerabilities. . . 

Shaw’s suggestion of $100m sounds like a lot of money and it is far too much for taxpayers but it wouldn’t be enough to help many people.

Besides, if people can’t borrow money at the current very low rates, it would be a dangerous move for them, the banks, any other creditors and the wider economy, to try to make it easier.

When Labour was in power in the 1980s interest rates were higher than 20%. When it was in power in the noughties, interest rates were in double figures, well above current rates.

There were several reasons for that and the big one which politicians could have influenced was high government spending and mismanagement of public money.

If Little and Shaw want to keep interest rates low they should be supporting the current government’s efforts to keep a tight rein on its spending and developing policies which would continue that.

That is far better policy than either stiff-arming banks or using more taxpayers’ money to prop up Kiwibank.


They’re from the Opposition & won’t help

March 18, 2016

If I’m from the government, I’m here to help,  is greeted with suspicion, the sudden enthusiasm Opposition MPs are showing for the regions in general and dairying in particular is being seen as nothing more than political opportunism.

The Chicken-Littleing from Labour, the Greens, New Zealand First and some media isn’t helping.

The sky isn’t falling.

Dairy prices are lower in real terms than they have been for more than 20 years which is a challenge for farmers, sharemilkers, their staff and those who service and supply them.

There were a few forced farm sales and other business failures when the dairy price was over $8.

There will be some more in the coming months and that will be very difficult for everyone affected.

But most will hang on, with the support of their banks, and get through what is a temporary slump.

Labour leader Andrew Little’s attempt to demonise banks did nothing more than show he doesn’t understand what he’s talking about.

His calls for stiff arming banks and legislation to force them to pass on interest rate cuts has been greeted with the derision they deserve.

His response to the Reserve Banks’ explanation about its stress-testing of banks provided further evidence he doesn’t know what he’s talking about.

The media release made it clear the banking system was robust to a severe dairy stress test.

. . .Five banks that are the largest dairy sector lenders participated in a stress test run by the Reserve Bank in late 2015. Two scenarios were tested, with scenario one assuming that the dairy payout recovers to $5.25 per kilogram of milksolids by the 2017/18 season and a fall in dairy land prices of 20 percent. Under the second scenario, the dairy payout was assumed to fall to $3 in 2015/16 and remain below $5 until the 2019/20 season with a fall in land prices of 40 percent.

Head of Macro Financial Bernard Hodgetts said both scenarios assume the dairy payout remains lower for longer than was assumed in the economic projections contained in the Reserve Bank’s March Monetary Policy Statement.

“On average, banks reported losses under the two scenarios ranging between 3 to 8 percent of their total dairy sector exposures,” said Mr Hodgetts.

“Bank lending to the dairy sector stands at around $38 billion, which is approximately 10 percent of the banking system’s total lending. We would expect losses of the order seen in the stress scenarios to be absorbed largely through lower bank earnings rather than through an erosion of bank capital.”

The test results suggested that in the shorter term, banks would increase their dairy lending in order to support existing borrowers facing negative cash flow, before facing a longer term rise in loan losses if there were a prolonged dairy sector downturn. . . 

Anyone who understood this would have been pleased that banks were prepared to support existing borrowers and could cope with losses in a worst-case scenario.

That Little didn’t understand it became evident at Question Time on Wednesday:

Andrew Little: Is he at all concerned about the Reserve Bank’s projection that dairy land values will crash by between 25 and 40 percent, which will undermine the livelihoods of thousands of Kiwis?

Rt Hon JOHN KEY: That is the problem with the Leader of the Opposition—it is that you cannot take him seriously, when he actually misrepresents the Reserve Bank Governor. The Reserve Bank Governor is not saying there is a projection that land prices will drop by 25 to 40 percent; he is doing a stress test to say what would happen if land prices went down. There is quite a—

Grant Robertson: And that’s the scenario we’re in now.

Rt Hon JOHN KEY: Well, banks—reserve bankers do that all the time, because their prudential requirements require them to make sure the banking system is strong. And what he is saying is, even under a worst scenario like this, the banking system is very strong.

Andrew Little: Has the Prime Minister actually read the Reserve Bank’s report released at 2 p.m. today; if so, has he read it?

Rt Hon JOHN KEY: No, what I have read is the release—the press release—because it came out at 2 o’clock today, and I got this only 1 minute before I came here. But what the release says quite clearly is (a) the banking system is very strong, (b) under its worst-case scenarios—to quote—“The test results suggested that in the shorter term, banks would increase their dairy lending in order to support existing borrowers …”, and it is saying that even in the worst scenario, the losses could be between 3 percent and 8 percent of their total dairy exposure. Banks have considerably more exposure than just this, and, as the member was pointing out yesterday, banks have been making pretty good money. They can afford, if they have to—

Mr SPEAKER: Order! Bring the answer to a conclusion

Rt Hon JOHN KEY: —to take some losses in that sector.

Andrew Little: Does he agree with Mind Your Own Business that “approximately 100,000 businesses employing upwards of one million New Zealanders are facing reducing revenue because of the dairy downturn.”?

Rt Hon JOHN KEY: I do not have anything to back that up—I would need to see the analysis. But it could be as small as a business that is affected, from someone who sells sandwiches to someone who works in that area. There is a very large range of businesses in that sector.

Andrew Little: Is it fair that our dairy farmers go bankrupt and 100,000 small businesses face reduced revenue while overseas-owned banks continue to make $90 million a week and speculators circle over our farmland?

Rt Hon JOHN KEY: The member is, I think, terribly confused about what is happening. What you have got is a scenario where dairy prices are lower, and what we should be doing is supporting dairy farmers with the things that we can control. We cannot control the exchange rate and we cannot control commodity prices and we cannot control the weather. We can control free-trade agreements, planning laws, health and safety, Resource Management Act reform, and a variety of other things, and on this side of the House we support helping those farmers, actually, in good times and in bad.

With the exception of West Coast Tasman, Palmerston North and Winston Peter’s opportunistic enthusiasm for Northland, Opposition parties don’t even try to win regional seats.

Their MPs flit in for photo opportunities but their sudden faux support for dairy farmers merely shows how little they understand the people and the issues.

The dairying downturn is a passing car at which the Opposition is barking.

Farmers don’t want banks strong-armed, they don’t want bail-outs and they certainly don’t want a return to the any of the government-knows-best policies, the recovery from which necessitated the radical reforms of the 80s and 90s.

Those are mad ideas from the Opposition and they won’t help.


Stuck in anger

February 23, 2016

After our first son, Tom, died I found myself getting angry over all sorts of things that normally wouldn’t have worried me.

It was only at a Women in Agriculture day, entitled beyond aspirin for feelings that are a pain in the neck that I worked out why.

I didn’t blame anyone for Tom’s death. He had a degenerative brain disorder and we had both had the best possible care from the start of my pregnancy.

But what I learned that day made me realise that although I didn’t blame anyone and it was no-one’s fault, I was still very angry that the son we’d loved had died.

The facilitator taught us to name, claim and tame our feelings. Once I’d named the anger and claimed it – worked out what I was feeling, why and the effect it was having on me – I was able to tame it and pull myself away from it.

I was reminded of this while reading about the man who allegedly chucked the muck at Earthquake Recovery Minister Gerry Brownlee:

The man who allegedly tipped a chocolate and flour mixture over Earthquake Recovery Minister Gerry Brownlee lost his son in the February 2011 earthquake.

John Howland arrived at the Christchurch District Court on Tuesday on what would have been the 20th birthday of his son, Jayden Andrews-Howland.

He said he attacked Brownlee “to prove a point”. . . 

“The Government, they’re heartless.” Howland said.

“They don’t listen to people. They don’t care about us, don’t care about nobody.”

Howland said he had been planning the move on Brownlee “for a few years” and hoped his actions would make the Government “get their s… together and sort this blimmin city out and all the people that are suffering. It’s just bulls…. I’ve just had enough”. . . .

The only point he’s proved is that he’s stuck in anger.

Attacking the Minister at any time would be wrong. To do it after yesterday’s memorial service to quake victims was also insensitive and lacked respect for the others who were at the service to commemorate their own losses.

This is the third time a government minister has had something thrown at them by angry people in the last couple of weeks.

The first was the dildo that Steven Joyce copped at Waitangi, to which he responded in good humour.

The second was the glitter-bombing of Prime Minister John Key at the Big Gay Out.

And the muck chucked yesterday completes the shabby trifecta.

In an editorial, published before yesterday’s muck-chuck, the Listener opines:

Josie Butler wasn’t exactly breaking new ground when she hurled a rubber dildo at Cabinet minister Steven Joyce on Waitangi Day. Her choice of missile may have been novel, but the nature of the act was ­wearisomely familiar.

Elements of the protest movement clearly regard physical assaults on politicians as a legitimate tactic. Don Brash, then leader of the National Party, was struck hard in the face with a clod at Waitangi in 2004. More recently, brothers John and ­Wikitana Popata assaulted Prime Minister John Key at Te Tii Marae in 2009 – an act that their uncle, Hone Harawira, then a Maori Party MP, gave every ­impression of excusing.

It doesn’t need to be Waitangi Day for the angry and dis­affected to justify hands-on attacks. Act MP John Boscawen was speaking in a debate during the Mt Roskill by-election campaign in 2009 when a rival candidate, campaigning on a “People Before Profit” ticket, smeared a lamington on his head. And when broadcaster Paul Henry tried to enter Auckland’s SkyCity Casino for a charity lunch – unconnected with politics – in May 2015, he was jostled, menaced, abused and spat on by a screaming mob purporting to be concerned about child poverty. . . 

Butler’s dildo attack prompted a commendably droll response from Joyce, who tweeted that someone should send a video to British comedian John Oliver – noted for his lampooning of New Zealand as a weird place – and “get it over with”. Sure enough, Oliver devoted more than four minutes of his HBO show Last Week Tonight to the item. But amid all the chortling, he made a serious point: “If you threw something at a politician in this country, you’d be dead before the dildo hit the ground.” That, at least, is a point of difference about which New ­Zealanders can be proud.

Levity aside, there’s another serious issue here. Physical attacks – whether with a dildo, a lump of earth, a lamington or a gob of spit – are not part of the repertoire of legitimate protest. They are an intrusion on the rights of others. They are also a sad admission that gestures of inarticulate rage are too often preferred over the skills of reasoned debate.

It matters not whether any serious harm is done in such incidents. In a civilised, liberal democracy, people engaging in politics are entitled to expect that basic rights, such as freedom of speech and movement, will be respected. It’s legitimate to ask what would have happened had the Waitangi attack been aimed at Jacinda Ardern, say – if she had been hit in the face by a big rubber teat thrown by a skinhead protesting about refugee immigration.

Some might consider it not to be funny if a woman gets hit. Yet a female journalist was in fact struck on the breast by Butler’s dildo after it bounced off Joyce.

There is no question that throwing a missile hard enough to hit two people constitutes assault, though Butler appears to have escaped prosecution. So what happens now if young people are punished for throwing rubber missiles at teachers or students with whom they disagree? Are they not entitled to cry “hypocrisy”?

The reality is that Brash, Key and Joyce were entitled to go to Waitangi to celebrate our national day without risk of assault. Similarly, Boscawen was entitled to take part in a political debate without being subjected to the humiliation of having a lamington planted on his head. The boundaries of reasonable protest will always be blurred but ­physical intimidation is never acceptable. It constitutes an assault on democracy itself.

It’s also counterproductive, since it conflicts with most New Zealanders’ views about how public life should be conducted. This may not bother hard-core protesters but it is a problem for the wider left, because as long as ideological zealots continue to parade their angry intolerance, the mainstream left will be tarnished by association. . . 

There is a place for righteous anger but there was nothing righteous about these protests.

The first two were political, the third partly political and partly what appears to be unresolved grief.

Regardless of the motivation, throwing toys, glitter bombing and chucking muck are not legitimate forms of protest.

Freedom of expression brings with it the responsibility to express it without infringing other people’s rights.

In New Zealand we have remarkably unfettered access to our Members of Parliament.

People who let their anger overcome them as these three protesters did, do nothing for their cause, potentially endanger their targets and innocent bystanders, and threaten the accessibility the rest of us have to politicians.

 

 

 

 


Christchurch five years on

February 22, 2016

Today is the fifth anniversary of the earthquake which struck Canterbury at 12:51 in the afternoon.

It’s a time to remember the 185 people who died, the many more who were injured and those who still carry the scars, whether they be mental or physical.

It’s a time to celebrate the courage of those who helped to save others, the compassion and support from people near and far, and to recognise that over-used but still appropriate word, resilience of Christchurch and it’s people.

Each time I go to the city I marvel at the positive changes and feel great sympathy for those still dealing with the challenges the earthquake and the many aftershocks, have left in their wake.

A lot has been achieved in the rebuild, there’s still a lot more to do.

John Key's photo.

Today is a day of reflection but it’s also a day of great hope and optimism.

Today we remember the events of five years ago in Christchurch and those who lost their lives. But we also reflect on how far we’ve come, what’s been achieved and look forward to the future with a renewed sense of optimism – John Key.


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