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.

 


Education the key

December 11, 2014

A new OECD report appears to show inequality is growing in New Zealand.

But NBR editor Nevil Gibson discusses what it really shows:

. . . The four-page summary report based on a working paper, Trends in income inequality and its impact on economic growth (See report here), and statistical tables, has been seized on by the media the opposition as a “failure of trickle down economics” and a case for higher taxes on the rich and more redistribution to the poor.

In fact, this is not the case. The main reason is the dated nature of statistical material, while the policy suggestions carry a heavy caveat that “Redistribution policies that are poorly targeted and do not focus on the most effective tools can lead to a waste of resources and generate inefficiencies.”

The figures that show New Zealand’s growth was inhibited by increased income inequality are based on the period 1990-2010. The figures show “real disposable household income” in New Zealand from 1985 to the GFC (2008) was around the OECD average and well below countries such as Australia.

In the five years post the GFC, New Zealand disposable incomes among the top 10% fell 2.2% (OECD average 0.7%) while those in the bottom 10% fell the least, 0.5% (also the OECD average). Average New Zealand incomes fell  0.9% compared with the OECD average of 1.8%. . .

The GFC hit the richest but National’s policies to look after the most vulnerable during the GFC gave them some protection.

. . . But the main interest in the paper is the evidence it offers on the main mechanism through which inequality affects growth.

This is that the wider income gap between the lower middle class and poor households compared to the rest of society undermines education opportunities for children from poor socio-economic backgrounds, lowering social mobility and hampering skills development.

In other words, it is education rather than taxation that is the key: “a lack of investment in education by the poor is the main factor behind inequality hurting growth,” the report says.

“This compelling evidence proves that addressing high and growing inequality is critical to promote strong and sustained growth and needs to be at the centre of the policy debate,” says OECD Secretary-General Angel Gurría:

“Countries that promote equal opportunity for all from an early age are those that will grow and prosper.”

Few would argue that successive governments in New Zealand are seriously deficient in this area and the biggest deniers would be the Labour government of 1999-2008.

The OECD handout summarising the report observes:

“People whose parents have low levels of education see their educational outcomes deteriorate as income inequality rises. By contrast, there is little or no effect on people with middle or high levels of parental educational background.

“The impact of inequality on growth stems from the gap between the bottom 40% with the rest of society, not just the poorest 10%. Anti-poverty programmes will not be enough, says the OECD.

“Cash transfers and increasing access to public services, such as high-quality education, training and healthcare, are an essential social investment to create greater equality of opportunities in the long run.”

As mentioned, the paper also finds no evidence that redistributive policies, such as taxes and social benefits, harm economic growth, provided these policies are well designed, targeted and implemented.

Well-off New Zealanders already carry a high tax burden – more than half of the population pays no tax except GST – so I don’t think any party can justify higher taxes on the basis of this report.

As the report itself warns,” not all redistributive measures are equally good for growth.”

Inequality increased under Labour’s high tax, high spending policies of the noughties.

It has improved under National which has reduced taxes and taken a much more careful approach to targeting spending where it is needed most needed.

One of those areas is education:

The key message of the OECD’s report on inequality, released today, is investment in education and is not a prescription for higher taxes, says the Taxpayers’ Union.

The Union’s Executive Director, Jordan Williams, reacting to the OECD report and interviews with Grant Robertson and Russel Norman on this morning’s Morning Report says:

“Grant Robertson and Russel Norman want to use the report as justification to tax high incomes more, even though the top 6% of income earners already pay 37% of everyone’s income tax. They are trying to use the OECD report to frame small efficient government and incentives to work as a bad thing.”

“We’re disappointed that Mr Robertson continues to refer to the made up economic theory of ‘trickle down economics’. Mr Robertson must know that no such economic theory exists. No economist has ever argued that in order to make a poor person richer you should make a rich person richer first. Economists have, however, argued that economic growth and freedom makes us all, rich or poor, better off.”

“The biggest cost of living is people’s tax bills. Instead of wanting to solve inequality by cutting government waste and taxes at the low end, politicians immediately want to tax more so they can distribute it to constituencies.”

The background to the oxymoronic ‘trickle-down economics’ argument Messrs Robertson and Norman referred to on radio this morning to is available in a piece by New Zealand Initiative Researcher Jenesa Jeram republished with permission.

“Mr Robertson is now shadow Minister of Finance. He should be focused on arguing real economic data, not taking on his own straw men arguments,” concludes Mr Williams.

The poor won’t get richer by making the rich richer first. But nor will taking more than is fair and reasonable from anyone help those most in need.

Higher taxes and poor spending don’t help the poor and harm the wider economy.

Education is the key to helping the poor, along with carefully targeted investments in health and other services needed to provide equality of opportunity for them.


Rural round-up

September 16, 2014

Vigilance required with Winter Brassica Feeding:

Southland farmers are being advised to keep a close watch on cows that have been grazing or are grazing on swede crops after reports of illness, and in some cases death, on dairy farms.

“The mild winter and lush growth of leaf material on brassica crops, especially swedes, has caused problems where dairy cows have been introduced onto the late winter swedes after wintering on other types of crops,” David Green, PGG Wrightson Seeds (PGW Seeds) General Manager Seeds says.

PGW Seeds is the major supplier of forage brassica products in New Zealand.

“With extra swede leaf material available due to the unusually mild winter it appears some cows have consumed more leaf and less bulb than normal. Consuming more leaf, less bulb and less supplementary feeds during wet August conditions has combined to amplify risk factors that can cause liver disease. . .

 Police say poachers putting lives at risk:

Police in Alexandra say poachers caught on private property give a range of reasons for their offending, but many fail to realise they are putting lives at risk.

Senior Sergeant Ian Kerrisk said poaching was widespread in the lower half of the South Island, where there were large areas of farms and forests, and plenty of people who were interested in hunting.

Mr Kerrisk estimates they receive a call from a forestry worker or farmer once a week with concerns about poachers and have recently prosecuted four people for poaching.

He said it was not easy to say why people poach animals.

“Some of them have said that they hunt because they enjoy hunting, it’s a recreational thing for them, some people have said they believe they have the right to go hunting in the bush, some people have said they need food.”

Mr Kerrisk said the concern is that they are hunting on private property without permission. . .

Protein found on sheep’s back – Nevil Gibson:

University of Otago researchers have won $1 million in government funding for a two-year project that will extract food-safe digestible protein from natural wool. 

Sheep wool is 95% protein with no fat or carbohydrates. This makes it an extremely rich protein source but until now it has been difficult to access, says Associate Professor George Dias.

“Wool-derived protein (WDP) offers an exciting opportunity to add value to New Zealand’s low-valued medium to coarse wool clip,” he says. “WDP can be produced at less than $10 a kilogram, making it extremely cost competitive relative to the gold standard whey protein isolate at $25/kg.”  . . .

$90,000 for kea conservation:

The Government is providing $90,000 from the Community Conservation Partnership Fund to support the Kea Conservation Trust, Conservation Minister Dr Nick Smith announced today.

“The kea is the only alpine parrot in the world and a species endemic to our Southern Alps. The population of these inquisitive and nomadic birds is declining and it is estimated that fewer than 5000 remain. The tragedy of the kea is that over 150,000 birds were killed deliberately when there was a bounty on them for the perceived damage they caused to sheep. More recently, the biggest threat to kea survival is from pests – principally rats, stoats and possums,” Dr Smith says. . .

35-year affair with eucalypts – Alison Beckham:

Thirty-five years ago, Dipton sheep farmer Graham Milligan decided to plant a few eucalypt trees on stony ground next to the Oreti River, where his paddocks seemed to be always either flooded or burnt off.

Now he farms more trees than sheep – raising seedlings and exporting cool climate eucalypt seed all over the world. Reporter AllisonBeckham visited the man who says he loves trees so much he feels like every day on the job is a holiday.35-year affair with eucalypts

At first glance, the eucalpyt trees on Graham and Heather Milligan’s farm look similar. But as we bounce along the farm track Mr Milligan points out different varieties.

There are towering regnans grown for their timber, and nitens, now the world’s most favoured wood for biomass heating fuel. There’s baby blue, whose foliage is sought after by florists, and crenulata, with its delicate star-shaped buds, also popular at the flower markets. . . .

Farm Environment Awards Help Hort Newbies Climb Steep Learning Curve:

Horticultural newcomers Patrick and Rebecca Malley say entering the Northland Ballance Farm Environment Awards was a great way to build knowledge.

In 2011 the couple left jobs in Auckland to run Ararimu Orchard with Patrick’s parents Dermott and Linzi. Situated at Maungatapere near Whangarei, Ararimu grows 14ha of kiwifruit and 3.5ha of avocados.

While Patrick grew up on an apple orchard in the Hawke’s Bay, he and Rebecca knew very little about growing kiwifruit when they first arrived. So the learning curve was steep.

Rebecca says they decided to enter the 2014 Northland Ballance Farm Environment Awards (BFEA) after talking to other people who had been involved in the competition. . . .

Water NZ Annual Conference 17 – 19 September:

Implementing Reform

Water New Zealand’s annual conference is being held this week against a backdrop of the General Election.

“Our members are pleased that political parties have released policies on improving the management of freshwater as declining water quality is consistently rated by New Zealanders as being their number one environmental concern,” Murray Gibb, chief executive of Water New Zealand said.

“It is also pleasing to see the early results of the work that Water New Zealand has been closely involved with over the past five years through the Land and Water Forum and other initiatives.”

Therefore the theme of “Implementing Reform” is appropriate at the conference being held at Hamilton’s Claudelands convention this week over 17 – 19 September. . .


Self employment key to wealth

July 26, 2013

NBR editor in chief Nevil Gibson notes the characteristics of many on the Rich List:

. . . High incomes are not necessarily the main factor, either, as often this is accompanied by lavish spending habits.

Indeed, a key feature of these ordinary millionaires is their rejection of flashy cars.

Another is that most are economically self-sufficient: from the start of their adult lives they have had to support themselves.

But most critical is the way they earn their living.

Self-employment gives you a four-times greater chance of becoming rich.

The type of business does not matter, so long as it is successful. Many of them are mundane, providing everyday goods and services.

You will find all of these characteristics in the profiles of the Rich List 2013. Businesses that are built up over a lifetime, or those continued successfully through several generations, are the foundations for fortunes.

A focus on business success, careful investment decisions and identifying entrepreneurial opportunities complete the picture.

The value of property, shares and bonds may rise and fall – but first you have to acquire it.

Very few get rich through wages and salaries alone.

Self-employed or not, the wealthy invest in assets which provide yields which enable their capital to grow.

Few if any will have got it right all the time.

Most, if not all will have lost considerable sums at some time because they got it wrong. But the successful ones learn from their mistakes, pick themselves up, work hard and succeed again.

The usual suspects from the left have greeted the publication of the rich list with cries of inequality.

But Gibson points out:

The past year has been a good one financially and this has benefited the majority as well as the select few.  . .

Another feature of many of the people on the list is their willingness to help others either through charitable donations or other means. this includes giving people opportunities in their businesses.

It’s called the rich list but it’s not so much a celebration of wealth as of success through hard work, risk taking and shrewd investment.

I doubt if any of the people on the list will say that money doesn’t matter. But if my experience of wealthy people is anything to go by, they will say it’s not important in itself but for the choices and opportunities it provides for them and for others.

The full list is here.

Those who like to sneer at Prime Minister John Key and his success might take some satisfaction in the knowledge that running the country hasn’t made him wealthier, in fact, if the NBR’s calculations are accurate it has cost him.


Sporting success good, business success . . . ?

July 27, 2012

Tomorrow the Olympic Games open. We’ll all be hoping our athletes do well and celebrating their success.

Today the NBR publishes its Rich List and the success it represents is less likely to be celebrated.

After more than a quarter of a century, the NBR Rich List 2012 still draws a variety of strong reactions, many of them negative.

My description last year that we should treat those successful in business as “national treasures” was especially controversial.

It would appear many New Zealanders – probably even a majority – object to wealth, even though by world standards this country’s levels of prosperity are modest indeed…

Few are wealthy because of luck, most earn it. Financial fitness is at least as much a result of ability and hard work as physical fitness.

This year’s list shows that investments in property and natural resources have paid off:

Those who have invested in natural resources or high-growth companies have seen their wealth increase dramatically, while those in the more traditional sectors have found the value of their businesses drop or remain static in a world still in the grip of subdued consumer spending. . .

The list also introduces an international section in recognition of the globalisation of wealth:

These new members have invested parts of the their fortunes in New Zealand or have substantial assets that give them residency rights.

The assets are both for business and pleasure.

To these we have added some of the richer New Zealand-born expatriates, who have created billion-dollar fortunes overseas and do not have this country as their primary residence. . .

At least some of this will count as foreign investment to which the xenophobes show such antipathy.

But New Zealand is richer because of the inward investment and also through the philanthropic activities of the investors.

These people don’t seek medals. But just as watching elite athletes might encourage the less active amongst us to exercise more,  financially successfully people can be role models who provide positive examples and their achievements should be celebrated.

 

 

 


Last word on that passage to India

April 2, 2009

NBR editor Nevil Gibson provides more light and less heat on Mr Worth’s rocky passage to India.

At worst, Mr Worth, a specialist in the niceties of constitutional law, would be naïve to pretend his role as Internal Affairs Minister would not give him VIP treatment in India – a country where business and politics go together like curry and rice.

Gibson gives background and analysis which can only be appreciated by reading the unabridged version of his comments so I’ll leave it there.


%d bloggers like this: