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May 13, 2011 1:46pm by David Farrar

A battered budget

My nzherald.co.nz column this week is called “A battered budget“

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Comment25

NZ Politics
Budget
NZ Herald

Comments (25)

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Adolf Fiinkensein

So, where are the political views statements from other Herald columnists?

Their lineup of closet lefties will hate you for this, David.
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May 13, 2011 1:52pm
YesWeDid

From the Herald article ‘The Government’s hope and strategy for the last couple of years………..’

How can you use ‘hope’ and ‘strategy’ in the same sentence? Strategy means you have a plan and therefore don’t rely on hope, hope is when you have no plan or the chance of your plan working is so small the only thing you have is hope.

So which is it? Either National’s economic plan is based on hope or they actually have a strategy.
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May 13, 2011 2:10pm
OTGO

I’d like to see the budget grilled by Roger Douglas or the Dononator rather than battered by you DPF.
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May 13, 2011 2:20pm
Manolo

The Government’s hope and strategy for the last couple of years was to reduce the cost of the bureaucracy and impose tight discipline on any new spending, but not to cut any significant current spending. This was projected to see a return to surplus in six years, and had pretty minimal political risk.

Crystal clear explanation of Labour-lite’s “hope and strategy” policy at work: the mantra of do-not-rock-the-boat, fingers-crossed, she’ll be right, do-not-scare-anyone, whatever-it-takes-to-stay-in-power.

Our country? Who cares!
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May 13, 2011 2:31pm
Doug

YesWeDid
So which is it? Either National’s economic plan is based on hope or they actually have a strategy.

We shall see if Labour performs after the Budget. Yes We Did there is a plan and Labour will squeal, just wait and see.
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May 13, 2011 2:52pm
Scott

Really good analysis DPF. I think it makes a lot of sense and although many people on this blog would like more of a chainsaw approach to government spending I believe that what the government is trying to achieve by trimming Kiwi saver and interest-free student loans and working for families is about all they can be expected to do in the current climate. I think politically if they did too much more they would go down like a sinking ship at the next election.

However at least they are moving in the right direction. The other team only knows one thing — tax the rich and redistribute to the “poor” and when in doubt borrow borrow borrow. Phil Goff never saw a government program that he didn’t like.

If National gets in for another term I would like to see them make bold steps to get this country back up on its feet economically.
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May 13, 2011 3:08pm
trout

It would be interesting to know how many Kiwisaver participants are actually wage earners ( beneficiaries of the Govt top up). Thousands of accounts have been opened for children to get the $1000 jump start;, likewise 60 yr old and older because for them (they can cash up after 5 yrs) it is free money.
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May 13, 2011 3:12pm
Pete George

If National gets in for another term I would like to see them make bold steps to get this country back up on its feet economically.

Next term will be very different anyway. This year we will have a big hit from the earthquakes, but from next year we should be seeing extra business from the rebuild getting under way, and we will hopefully be recovering more from the recession.

It’s even possible that by the election business (and voter) confidence will already be on a good rise.
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May 13, 2011 3:51pm
alwyn

Trout
I know at least 10, including myself, who joined when over 60 and retired.
We put in the $1043 each year and get matching contribution and we got the $1000 kickstart.
Even if the schemes we are in make no return we can withdraw about $11,000 after five years in return for putting in $5,000. When the scheme was announced I couldn’t believe how stupidly generous it was. Given the taxes I ws paying however I decided that it would only encourge the bastards to waste the money somewhere else if I didn’t take it.
Has it encouraged new savings? Of course not. The money is simply taken out of already existing savings and put into this.
My personal impression as to why already retired people approaching 65 were allowed into the scheme at all was that Michael Cullen was trapped in the nineteenth hole at his golf club and had a lot of booze poured into him by his age group peers. He probably agreed to do it there and then.
When Kiwisaver started I was asked by a number of people whether they should join. My answer was that for someone my age it was an absolute no-brainer. We only had to be in it for five years and there was little opportunity to change it very much in that time.
For younger people I had to tell them I was of two minds. I was quite sure it would not continue in the original form, regardless of the party in power. As long as the opportunity of a contributions holiday existed and they weren’t likely to be desperate for the money it would probably be worth while as the fees were unlikely to reduce the balance to zero. I also said there was always the last resort of emigrating and at least getting their own contributions out.
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May 13, 2011 3:58pm
labrator

@alwyn So you get the $1043 each year even though you’re putting money in from your savings account?
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May 13, 2011 4:16pm
Pete George

I was quite sure it would not continue in the original form, regardless of the party in power.

Same – it seemed obviously over-generous, so it surprises me that people sound surprised that it could be scaled back in the budget. I think it’s just self interest rules, whether it be for personal/financial or political reasons.
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May 13, 2011 4:16pm
berend

The summary: budget will do nothing to our borrowing of $380 million a week.

Typically John Key.
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May 13, 2011 4:18pm
Pete George

I’m sure there is some increase in savings due to KiwiSaver, but most will be diverted savings as per Alwyn, or diverted from mortgage repayments or similar like me. I’d rather have reduced tax in the first place but gotta take what’s on offer or you lose out.
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May 13, 2011 4:21pm
Hurf Durf

So which is it? Either National’s economic plan is based on hope or they actually have a strategy.

Funny how “hope” was good enough for you leftards when you went balls deep for the Sun God, wasn’t it, YesWeDid?
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May 13, 2011 4:39pm
georgebolwing

The recent Budget in Australia is an illustration of the risks governments face when they try to reduce middle-class welfare.

One small part of the budget was to remove the indexation of thresholds at which some parts of the Australian equivalent of Working for Families is clawed-back. The Government’s proposal is that a threshold of $A150,000 in combined earnings would in future not be indexed.

Note here that all is proposed is the the threshold not be automatically increased each year for the effects of inflation. The rate of claw-back is the same and the only people affected will be those whose incomes increase to more than $A150,000 but by less than the rate of inflation (if wages increased by more than inflation, then under the current rules, claw-back would apply).

This proposal impacted very few people and they were not objectively poor: hard to argue that a family on $A150,000 a year needs extra assistance from the Governmet.

However, this proposal has been latched on to by the Liberal Party and the media, with headlines about “class warfare”. The PM and the Treasurer have had to spend a lot of time explaining (and thus losing) that they are not lauching a new attack on struggling Aussies.

My point is that the poticical consequences is not limited to numbers affacted by any change. While there might be few students actually caught by the new student loan provisions, that is not the point. Other people will think “if the government can do that to them, what will they do to me next?”.

Not arguning that the Government should not be bold and actually take on middle-class welfare. Rthaer, they shoudl realise that “better hubg for a sheep than for a lamb” applies: there will be a large political cost for small changes and an equally large cost for big changes, so might as well make the big changes.
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May 13, 2011 5:11pm
Mick Mac

Lets pull out of afghanistan and iraq for starters, that’ll save hundreds of millions a year.
do away with wff and give tax cuts instead.
make retirement funding tax free both inputs and outputs.
cancel dpb after 3 year on it (should’ve studied whilst on it). make it max 3 yrs in lifetime or change it to a funded scheme whereby you get so many weeks for so much input.
stop all aid to countries that descriminate against any of it’s people and violate human rights.
Stop all funding to UN agencies that do the same.
living costs not allowed in govt uni loans.
all professional uni course free but if you don’t pass with a b you back pay.
all other uni courses you pay at end.
if you don’t pay uni loan your passport is not renewed (until you are up to date) and int debt collectors engaged.
no parole after first offence.
max sentencing on third and further offences.
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May 13, 2011 5:33pm
SPC

The government’s approach is based on obtaining a mandate – what the electorate will accept rather than what the party supporters might want.

Party supporters react in three ways – they want up front advocacy for right wing policy and a declared intent to implement it (and accept the electoral cost), they accept this tactic as a way to win elections – this group divides in two parts, those who would have their party in government betray the voters by going beyond any mandate and those who would operate within electoral support limits.

Some of the first will support ACT to build leverage for a right-wing tack by any coalition government (more so now Brash is involved) and of course some of the continuing National support will want them to succeed.

The government will use this to pose their centre-right government as centrist, but with concern that if the public see the ACT group gaining too much influence on actual government policy they will lose the following election. This is a one term pony trick and has consequences (given the shortage of housing in Auckland from lack of new house starts in the past 3 years and a future of rising rents etc and the upward impact on house prices and mortgage sourced private foreign debt) – this means the odds on a two term government are shortening.
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May 13, 2011 8:48pm
berend

SPC: The government’s approach is based on obtaining a mandate – what the electorate will accept rather than what the party supporters might want.

I always forget that National has a mandate to borrow 10% of GDP, $380 million a week!!
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May 13, 2011 9:03pm
SPC

They had a mandate not to change super, to keep student loans as they were, not change WFF and retain Kiwi Saver.

The public believed them that they could do this and afford tax cuts – because Labour said the same thing.

The only way to operate within the mandate and control the deficit was to reverse the tax cuts, but instead they brought in GST (they said they did not expect there to be any need to increase GST and sort of implied they would not icnrease it) to afford the tax cuts – except the GST take is down due to the recession so there is still no money for the tax cut.

PS They promised not to cut the public service employee numbers, just cap – they have broken this promise.
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May 13, 2011 9:22pm
Pete George

PS They promised not to cut the public service employee numbers, just cap – they have broken this promise.

I disagree with that – a cap is an upper limit, it isn’t a freeze.

I always forget that National has a mandate to borrow 10% of GDP, $380 million a week!!

They had more of a mandate to keep the country operating and not stall into a depression (they didn’t have that either but you would expect most people to support them doing what is necessary to minimise the damage).
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May 13, 2011 9:36pm
SPC

I don’t think either party talked about recession or rising budget deficits as a policy to counter an economic decline in the 2008 election campaign.

And no more than cap numbers implies no policy to cut numbers.
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May 13, 2011 9:43pm
magic bullet

“fingers-crossed, she’ll be right, do-not-scare-anyone, whatever-it-takes-to-stay-in-power”

Privatisation was always going to be second-term. That was the strategy when Brash was leader. The point is to “get the public to trust and view you as moderate”, then bring out the nasty. Some of you guys really just need to read The Hollow Men” then so much of what seems to confound you about the National Party will make sense. Brash wants to be there for any privatisation.. I’m picking he’ll be appointed the minister in charge of gutting ACC/making it an unworkable system so that further dismantling is able to be rationalised in the future. This way, Brash will take the criticisms, acting as the bad cop while Key gets to play good cop – much like was the case for Rodney with the super-city. The Teflon PM will keep smiling and waving. The World Bank will thank him for following their political agenda, and political management handbook.

See – a magician’s act is actually pretty simple and boring once you understand the formula, and know which tricks/distractions they use.
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May 14, 2011 8:02am
alwyn

@labrator at 4.16pm
Yes that’s right.
I’m retired you see so I don’t have any employer or any wage and salary income. There is no obligation to contribute any percentage of my income.
All I do is make a voluntary contribution to my Kiwisaver. Whetther you consider it as coming out of my savings account, my National superannuation or my other investment income really doesn’t matter. It’s going into a Kiwisaver account and that is all the system cares about. Certainly I can’t immediately withdraw it immediately but I don’t need the money and I get it all back 5 years after I joined the scheme. It’s not worth staying in after that as the Government contribution cuts out after 5 years membership if you are over 65.
Incidentally if you are close to 65 and thinking of doing this get in quick. You can’t join after 65.
On the other hand it would pay to see whether they will drop this stupid scheme in the budget.
Anyone can make voluntary contributions of course. There is a very good argument that if your salary contributions don’t reach $1043 you should round it up at the end of the year.
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May 14, 2011 9:30am
bchapman

Why is it that we obsess about trivialties like trying save a miniscule amount of money by lower WFF thresholds or reducing Public Service numbers by a dozen or two dozen here and there when the elephant staring us in the face is the chronically underperforming NZ economy. This is the reason we are borrowing $380 mill a day.

What is National doing about that? What in the budget is there to reverse the exodus of skills off shore? How are we going to become more productive? How can we encourage investment into NZ businesses?

In NZ governments love to re paint the deck chairs on the Titanic. All this obsession with trivialities simply hides the problems we are creating for ourselves
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May 14, 2011 2:54pm
grumpyoldhori

Mick Mac you a lefty ? why the desire for teenagers to be educated at the taxpayer expense ?
If they want an education it is easy, they go to the bank and borrow it at commercial rates.
No security, too bad no education.
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May 14, 2011 5:35pm

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