Quiet revolution in Budgeting process

January 30, 2015

Trans Tasman notes Finance Minister Bill English is driving a quiet revolution in the Budgeting process:

Cabinet Ministers are getting to grips with the new spending processes Finance Minister Bill English is introducing in this year’s budget. Where departments previously put in bids for the amount they thought would be needed to finance particular programmes, they will now be expected to match the bid with an assessment of the return on the investment. This follows the changes initiated in delivering better public services, when departments were instructed to publish results their programmes were achieving. In effect the Govt is seeking to revolutionise the way ministries operate.

It requires different departments to work together, rather than in isolation, particularly in the field of health and community services. The Govt accepts the new processes will have to resolve complex problems such as privacy issues but the objective is to push Ministries towards targeting the money available to achieve tangible results. The Govt argues it has a duty to ensure funds raised from taxpayers are applied to maximise outcomes, rather than just for “nice-to-haves” Ministers or bureaucrats advanced in competition with each other.

The duty becomes more onerous as the Govt strives to bring the Crown accounts back into long-term surplus, without any nasty spending blow-outs from programmes initiated in earlier years. An example where unintended consequences can spring out of the woodwork to damage spending projections lies in Employment Court decisions related to the care of aged people and the definition of work, as well as in pay equity. One decision concerned the definition of work as including driving to and from the places where aged-care providers are working, and another involves the principle of equal pay, with the concept aged care workers should be entitled to the same hourly rates as those in the Corrections Department. How the Govt deals with these complex issues will have long-term budgetary impacts.

National is often criticised for having no plan by people who don’t understand that a lot of what it is doing is being done quietly, like this requirement for a return on taxpayer investment.

 


Radical incrementalism is working for NZ

December 12, 2014

Quote  of the day from Trans Tasman:

. . . The trust voters have in the Govt has been built up over six years of patient delivery of what National promised. And the trust will only be eroded when the Govt stops delivering on what voters expect of it.

This is why many commentators are missing the stand-out element in the political equation. The policy the Govt is following of “radical incrementalism” is what NZers want, and is delivering the rising prosperity most NZers seek. The new normal is low inflation, low interest rates and stable growth which is sustainable. It’s an economic environment unfamiliar to many NZers, but so attractive it is drawing many expatriates back to their homeland. NZ’s performance has been in sharp contrast with Aust’s, and the big challenge for the country will be to keep winning against its neighbour (and we’re talking not just about the Rugby World Cup in 2015). . .

Sustainable growth is something New Zealand hasn’t seen for decades.

It doesn’t mean there are not still problems to address and there are too many people who have yet to benefit from the growth.

But it does mean that radical incrementalism is working for New Zealand.


On the cusp

November 14, 2014

Transfer Tasman asks is economic transformation finally being delivered?

During the election campaign John Key said he believes “NZ is on the cusp of something special” (as Trans-Tasman reported September 18). He was ridiculed by Labour (look what happened to them), by NZ First leader Winston Peters (who was predicting to his suck-it-up audiences the economy would crash in November) and by various “woe-is-me” pundits like Rod Oram. But now some hard data is emerging to suggest Key has a better sense of the way the economy is moving than his critics. Job statistics last week showed NZ’s unemployment rate is now lower than Aust’s, despite inwards migration reaching new highs. Canterbury is driving jobs growth, up 11% over the past year, and reporting the lowest unemployment across the regions at 3.2%.

This week the share market NZX top 50 index punched up to the 5500-mark, a new record high. Investors are chasing high dividend yields, and some of the big companies sitting on cash mountains are obliging them: witness Wellington-based Infratil this week paying a special dividend of 15c a share worth $84m on top of its interim dividend of 4.5c. Other evidence came from the ANZ Bank which headed up its latest Truckometer readings “High speed zone.” The two traffic indices, one concurrent with GDP, and the other providing a 6-month lead on GDP growth, both rose strongly in October, suggesting solid momentum over the second half of the year and into next.

ANZ economist Sharon Zollner in her commentary says “it is going to take more than a halving in global dairy prices to stop this juggernaut.” She sees the NZ economy continuing to vie for the lead in the OECD growth race. But the real kicker in all this is with annual CPI inflation running at just 1%, there is no sign of the engine overheating. This is why NZ might be on the cusp of something special – sustainable growth over the cycle above the long-term trend, without the Governor of the Reserve Bank having to slam on the brakes, and bring the economy to a shuddering halt. So this may be the economic transformation, long heralded, but at last being delivered.

The cycle of boom and bust is all too familiar in New Zealand.

The challenge of sustainable growth without inflation has proved too difficult in the past.

This time there are encouraging signs it could be achieved.

 


Helping to help selves

September 29, 2014

Prime Minister John Key has asked officials to come up with fresh ideas to tackle the issue of child poverty.

. . . Key’s genius is to sense developing problems, define what needs to be done and then act decisively to cauterise them. No better example is the call he has made this week for the DPMC, Treasury and other departments to delve into the issue of child poverty, and come up with fresh advice on how to wrap services into meeting the needs of those families who are struggling.

Left to its own, child poverty could lead to the evolution of a frustrated under-class and long-term a divided society. Key is going to make sure the issue is dealt to and doesn’t become a political headache. He doesn’t belong to the school which believes throwing more money at the problem is the solution. There’s a fundamental tension between ensuring sufficient welfare assistance is available and ensuring incentives to get into work are strong enough. Two out of five children said to be in poverty are in homes where one parent at least is in work.

Working for Families and other welfare measures are tactical measures: the overall strategy lies in more jobs, and, as Key sees it, in upskilling those who lack the skills for the opportunities opening up. Key argues the million NZers who voted for National on Saturday are caring people who will want to see the Govt understands the issue and is working its way through it. But he says those million people will also want to see those to whom assistance is targeted helping themselves. . .

Children shouldn’t be punished for poor decisions their parents make but nor should parents be paid, or compensated, for abrogating their responsibilities.

Only the hardest of hearts would begrudge assistance to the most vulnerable.

But most people work hard for their money and expect that those their taxes help, help themselves if and when they are able to.

Simply throwing money at the problem would entrench dependency and the social and economic issues that follow.


Only National can provide stability

September 12, 2014

Trans Tasman:

Polls midway through the campaign are continuing to point to a win for the incumbents on September 20, but Ministers reckon it will be a “tight finish.” On current polling, the Centre-Right parties appear to be about 15 points ahead of those on the Centre-Left. So is NZ becoming more conservative? Or is the Centre-Right domination of the political landscape due to John Key shifting National to the centre? The answers to those questions may only emerge in time, but after the hard slog through the global financial crisis and the Christchurch earthquakes, NZers have a clear and pressing priority. They overwhelmingly want a stable Govt to deliver steady, if not spectacular, progress.

They are averse to radical, dislocating change, or of “reformers” who want to re-shape their world. . . .

Only National can provide stable government.

The internal divisions in Labour  have been overshadowed by other events and issues in the election campaign.

But they haven’t gone away and are one of the reasons the party is polling so poorly.

The unions and members lumbered caucus with a leader they didn’t want and who some still don’t support.

Throw in the Green Party wanting around half the cabinet positions plus Winston Peters, Hone Harawira, Laila Harre . . .  and you get a recipe for instability and no progress.

Thanks for tuning in tonight. If you want a National Government, party vote National. #Decision14 #Working4NZ


Foreign ownership boosts wages:

September 5, 2014

Trans Tasman on foreign ownership:

The proposed sale of the 13,800ha Lochinver Station, near Taupo to Shanghai Pengxin, which bought the Crafar Farms in a joint venture with Landcorp, reignited the political debate about foreign investment and purchases of Kiwi land. Labour has promised to block the sale if it is not approved before the September 20 election and stop land sales over 5ha except in rare circumstances. Finance spokesman David Parker says land sales to foreigners do not increase output and do not release capital to be reinvested by the NZ owner to create new jobs. Finance Minister Bill English, however, reckons the Govt has struck the right balance between attracting foreign investment and tightening the rules for overseas investment in sensitive land.
Public Disquiet. Chinese investors have been making other investments in the farm sector: they have a minority stake in Blue Sky Meats and the Overseas Investment Office is considering an application to buy Prime Range Meats. Farm leaders have become disquieted. Federated Farmers supports positive overseas investment in NZ’s farming system but is concerned there would be little benefit to NZ if the Lochinver deal is clinched. President William Rolleston says “NZ absolutely needs foreign investment” but only if it benefits the local and national economy. He wants a “substantial and identifiable” benefit test incorporated in overseas investment eligibility criteria. Public opinion survey results this week suggest a majority of voters similarly approve of farm sales to foreigners only when it brings a significant advantage over an NZ buyer such as jobs. Almost 33% want farm sales to foreigners banned.

National raised the already high hurdle foreign buyers have to jump before a purchase is approved and benefits above and beyond those sales to domestic buyers would provide is one of the criteria.

 Better For Workers. An upcoming working paper by Motu Economic and Public Policy Research economists throws some light on the economics by examining how employment in foreign-owned firms affects NZ workers’ earnings. Using data from Statistics NZ’s Integrated Data Infrastructure, which tracks workers as they move between firms, the researchers found workers in foreign firms tend to receive, on average, around 14% higher monthly starting earnings than workers in domestically-owned firms. Compositional differences are the main explanation: foreign firms tend to be bigger and employ workers who would have received relatively high wages regardless of where they worked. The authors also found under-25 year olds get greater gains from joining a foreign firm and smaller losses on exit than older groups, while more highly skilled workers attract a stronger wage premium while working in the foreign-firm sector. In short, foreign firms not only tend to hire more highly skilled workers; they also remunerate these workers more generously.

A very small percentage of land  – around 2% – is in foreign ownership now.

The problem is one of perception based on emotion taking no account of the facts and benefits which include better wages for staff employed by foreign owners.


What matters

August 31, 2014

Trans Tasman on what matters to voters:

The vital factor for NZers as they come to vote are issues which impact on their lives: the trajectory of the economy, jobs, living standards, inflation, house prices, education and health services. Voters’ assessments on the credibility, competency and leadership of the parties weigh equally heavily. And a primary concern is stability of the Govt to be elected under the MMP system. . .

Anyone who understands the issues, the policies, the parties has a clear choice.

A stable, National-led government will continue with the policies which are working in these important areas; a weak unstable Labour-led government propped up by the Green, New Zealand First and Internet Mana parties won’t.

There are major differences in policies too, not the least of which is tax:

Where Labour is talking of raising taxes, National is dropping broad hints it wants to lower taxes by revising tax thresholds to provide some relief for those on low and middle incomes.  . .

The PREFU supported the government’s claims that the books will be back in surplus.

There is no justification for increasing tax rates. If conditions allow, there could be a case for some reductions, if only to counter bracket creep.

The only justification for adding a new tax would be by taking away an existing one.

Labour and its left-wing cling-ons want to increase tax rates and introduce new ones as extras not replacements.

High tax and high spending under the last Labour-led government put New Zealand into recession long before the rest of the world. That they haven’t learned from that mistake shows they can’t be trusted with the public purse again.
In their last five years in government, Labour’s spending increased by 50%, pushing mortgage rates to 11%, causing inflation to exceed 5%, and putting the economy into recession well before the global financial crisis. Now they want to make the same mistakes all over again.

In stark contrast National has spent the last six years working for New Zealand with policies that are working for New Zealanders and this week announced more of its plan for the next three years:

We’re focused on the things that matter to New Zealanders. If you’ve missed any of our policy announcements this week, we’ve summed them up below. If you want more information on any of these announcements visit: www.national.org.nz/plan #Working4NZ


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