Kieth Ng makes fun of the Finance Minister’s panglossian view of the economy in the wake of the latest inflation figures. Looking at the actual statistics I was interested to note:
- Vegetable prices increased by 19.7%.
- Petrol prices fell 1.3 percent. Say, that reminds me – wasn’t the ETS supposed to have crippled our civilisation by now?
- On a similar note, I was surprised to see that rents only increased 0.5% this quarter. Weren’t the governments tax changes going to lead to massive increases and armies of homeless people?
- The most significant downward contribution came from a fall of 24.6 percent for audio-visual equipment, presumably caused by our strong exchange rate, caused by the US trying to devalue their currency, caused directly by New Zealand electing a National government and making Bill English our Finance Minister. Those cheaper plasma screens will make life easier for struggling families.
Key and English have taken a huge gamble that cutting payments into the super fund and borrowing to fund middle and high income tax cuts will stimulate us out of recession: so far it hasn’t worked – we were supposed to be in a ‘robust recovery’ phase by now – and if the latest round of cuts don’t work their magic the Finance Minister will be left in a position where the nation has large debts, a large super liability and a stagnant economy – at which point his only options are large spending cuts or more borrowing at a higher cost.
What, you saying that neo-liberal economics don’t work??? Get outta here!
Comment by Sanctuary — October 19, 2010 @ 12:33 pm
Gordon Campbell was moved in much the same way: http://gordoncampbell.scoop.co.nz/2010/10/19/gordon-campbell-bogus-victory-on-price-increases/
We might add that part of Bill’s increase in real-after-tax-wages is tax cuts, which won’t go on forever.
Comment by lyndon — October 19, 2010 @ 12:35 pm
I think you can file the petrol price under the insulating effect of exchange rate moves as well.
Comment by James Stephenson — October 19, 2010 @ 12:53 pm
What, no lollies in the election year Budget?
I don’t vote for this lot, but I still want my bribe, otherwise I won’t vote for this lot.
Comment by sammy — October 19, 2010 @ 12:57 pm
Yeah, market economics has been shown over hundreds of years to be a complete flop. All those academics with PhD’s and all the other brainy people who write on it, teach it and theorise it are numbskulls.
I prefer Sanctuary’s 12 words to any and all of them.
Comment by Nick K — October 19, 2010 @ 1:16 pm
Wow you really nailed that argument no-one was making there Nick.
Comment by greg — October 19, 2010 @ 1:26 pm
Pfft Nick. You’re just saying that ‘cos of your lack of “PhD’s”.
Theorise that, my friend!
Comment by Gregor W — October 19, 2010 @ 1:41 pm
Of course, everyone knows that there is a single, easily-identifiable, correct school of economics. That’s why Krugman, Mankiw, and Walter Block all agree on everything. After all, they all have doctorates.
Comment by derp de derp — October 19, 2010 @ 1:49 pm
“anarcho-libertarian” please tell me this a joke derp
Comment by k.jones — October 19, 2010 @ 2:24 pm
I have one word – stagflation. Coming soon to an economy near you.
Comment by Nick R — October 19, 2010 @ 2:34 pm
Walter Block is well known as a defender of slavery on anarcho-libertarian grounds.
Comment by derp de derp — October 19, 2010 @ 2:39 pm
“Of course, everyone knows that there is a single, easily-identifiable, correct school of economics”
the school of hard knocks?
Comment by nommopilot — October 19, 2010 @ 3:03 pm
Not to mention banking on a GST increasing brining in the money when people are deciding to save rather than spend….
Comment by max — October 19, 2010 @ 3:09 pm
ah, given that I buy lots of vegetables and very few electronics that explains why I feel poorer right now than I did a year ago.
Comment by LucyJH — October 19, 2010 @ 3:09 pm
LucyJH,
Then as a rational economic maximiser, you just need to shift your consumption patterns in line with these market signals. 5+ plasma TVs and mini-stereos a day should see you right …
Comment by Andrew Geddis — October 19, 2010 @ 3:24 pm
Unfortunately, I have to agree that stagflation is the most likely medium term outlook for the New Zealand economy.
Bill English can’t avoid responsibility for this. His tax cuts were recognised at the time as reckless in the extreme. Their only result will be spiralling government debt. Pundits like The Herald’s Armstrong tell us he has been taken by surprise by the hunkering down of the NZ consumer, yet the minister never fails to miss an opportunity to bad mouth New Zealand’s civil service in public.
Comment by Sanctuary — October 19, 2010 @ 3:34 pm
stagflation – havnt westpac picked 7% by June 2011?
Comment by k.jones — October 19, 2010 @ 3:37 pm
ah, given that I buy lots of vegetables and very few electronics that explains why I feel poorer right now than I did a year ago.
On the other hand, someone who is not such a fan of vegetables but loves DVD’s will, in all probability, feel a lot better off.
You need to keep in mind that the CPI will never be directly comparable to your consumption/spending pattern alone, or me alone, or anyone else alone, but instead is designed to measure all consumers in totality.
Comment by Phil — October 19, 2010 @ 4:39 pm
Large spending cuts is good with me. Check out what’s happening in the UK.
New Zealand Politicians usual copy what happens in the UK anyway so there’s something to look forward to,
Comment by OECD rank 22 kiwi — October 19, 2010 @ 5:16 pm
Key and English have taken a huge gamble that cutting payments into the super fund and borrowing to fund middle and high income tax cuts will stimulate us out of recession: so far it hasn’t worked
To be fair, the tax cuts are three weeks old…
It’s not that bad a gamble. Tax cuts do stimulate the economy (though so does the government hiring more people), and jobs should be created unless the world economy is irrevocably screwed, in which case it’s out of Bill English’s hands anyway. Of course the stimulus could’ve been done more equally, more quickly, and probably more cost-effectively, but this is a Tory government.
Comment by bradluen — October 19, 2010 @ 6:39 pm
Tax cuts stimulate the economy IF people spend their tax cut money. That means concentrating on tax cuts to the lower and middle income brackets. That is the opposite of the strategy of this government to give excessive tax cuts to the top income bracket (well less than 20% of adults over 15 years). And as a bonus extra the government threw in a $1,085 billion cost to the tax cuts over four years, something that is called “broadly” fiscally neutral.
Comment by Andrew R — October 19, 2010 @ 7:01 pm
The Reserve Bank delivered an astonishing about-face in today’s
Monetary Policy Statement. Only weeks ago, it was anticipating
‘respectable’ economic growth, warning that interest rates
were still ‘extraordinarily’ supportive, and cautioning businesses
against raising prices under the cover of the upcoming GST hike.
Now, the RBNZ expects the economy to run below potential for
years to come,
Westpac Octber 2010
Comment by k.jones — October 19, 2010 @ 8:13 pm
The road to hell is paved with straight line projections. Tax cuts combined with deficit spending give a two-lane approach. Households have the option of saving or spending and the deficit spending by the Crown stimulates demand. Or you can just assume that, hey, those wise public servants are the best decision-makers, they should make all of the decisions. Those feckless households will just waste it. Sounds like the attitude the 19th century English elite had towards the Irish, eh what.
Comment by Tinakori — October 19, 2010 @ 8:21 pm
Watching this post it is easy to see why a certain GB Shaw wrote something along the lines of..
“If all the economists were laid end to end they would never reach a conclusion”.
Someone else (unkindly) wrote “economists are failed accountants, they lack enough personality”.
Someone else,again, I think it might have been Oscar Wilde, wrote about someone “They know the price of everything and the value of nothing”.
Bill English is an ex treasury policy wonk. What the hell would he know about the real world?
He does not know where he lives, and we trust him as finance minister?
The prime minister is a money market financial whiz kid.
Who exactly led the world into the current depression? Money market whiz kids.
With leaders like these two look forward to “borrow and hope” policies from here on out.
Neither Key nor English know what to do to keep this country secure, apart from playing to their National Party financial backers.
Comment by peterlepaysan — October 19, 2010 @ 8:38 pm
PLeP:
“If all the economists were laid…”
A bit improbable, perhaps, but I suspect that the world would be a much better place.
Comment by Dr Foster — October 19, 2010 @ 9:27 pm
Tinakori wrote: “Or you can just assume that, hey, those wise public servants are the best decision-makers, they should make all of the decisions. Those feckless households will just waste it.”
It could also be that everyone individually making the spending decision that is best for themselves won’t result in the result that is collectively best for all of them.
A few centuries ago, Adam Smith observed that people following enlightened self-interest results in a benefit for society as a whole, more often that you might instinctively expect it would. Some people have misinterpreted his observation as meaning that enlightened self-interest always results in the best result for everyone, but that’s not true and he never said it was. Economists even have a metaphor for the cases where it doesn’t – called the Prisoner’s Dilemma. Ever heard of it?
Comment by kahikatea — October 19, 2010 @ 9:33 pm
Dr Foster,
Why should they get so lucky?
Actually, if they were distracted enough we might be able to get on with our lives without idiot distractions.
Dunno what National Radio would do without some bank’s “economists” viewpoint to fill in some “air time”.
Yes you are right. The world would be a better place.
The worry is are there any willing partners?
Comment by peterlepaysan — October 19, 2010 @ 9:50 pm
“Vegetable prices increased by 19.7%”
Due to ‘unseasonal” bad weather. Oh well.. at least Global Warming has been knocked for six by the recession.
JC
Comment by JC — October 19, 2010 @ 11:12 pm
. . . the Finance Minister will be left in a position where the nation has large debts, a large super liability and a stagnant economy – at which point his only options are large spending cuts or more borrowing at a higher cost.
. .. reads like CUllen’s epitaph doesn’t it?
Comment by Monkey Boy — October 20, 2010 @ 7:11 am
Nope.
Comment by Guy Smiley — October 20, 2010 @ 7:32 am
Large debt: check
Large super liability: check
Stagnant economy: check
Yep its Cullen alright.
Comment by Simon — October 20, 2010 @ 8:02 am
. .. reads like CUllen’s epitaph doesn’t it?
Cullen ran massive surpluses, saved billions in the Cullen fund and oversaw a booming bubble economy, so that’s be a big ‘no’.
Comment by danylmc — October 20, 2010 @ 8:05 am
Kahikatea said “Some people have misinterpreted his observation as meaning that enlightened self-interest always results in the best result for everyone, but that’s not true and he never said it was.”
I guess that’s why you would apply the stimulus through both the household and the public sector rather than just one of them
Comment by Tinakori — October 20, 2010 @ 8:16 am
Petrol prices fell 1.3 percent. Say, that reminds me – wasn’t the ETS supposed to have crippled our civilisation by now?
Not sure if it was. Given everyone here still can afford the internet connection, perhaps the world wide recession didn’t affect anyone to any degree either?
Comment by ZenTiger — October 20, 2010 @ 8:38 am
“Large spending cuts is good with me. Check out what’s happening in the UK.”
Yes. It appears they now have two aircraft carriers with no planes to go on them for the next ten years.
For some reason, I am having trouble getting the Laurel and Hardy theme tune out of my head. Can’t think why.
Comment by Rich L — October 20, 2010 @ 9:10 am
Ever heard ‘Sunk Costs’ RichL?
(yeah, I get the irony too)
Comment by Phil — October 20, 2010 @ 1:08 pm
Weren’t the governments tax changes going to lead to massive increases and armies of homeless people?
Well I know you were joking, but according to this news article more people are having a hard time, and strangely, the baby boomers are surprisingly effected.
Comment by Sean — October 20, 2010 @ 4:26 pm
“Ever heard ‘Sunk Costs’ RichL?”
Yes, but they’re not relevant to the point I was making, which was a rebuttal of ‘aren’t cuts so friggin’ wonderful with absolutely no downside’.
But since you raised the issue: the UK needs to find an extra 80 billion or so pounds down the back of the sofa. It’s doing this by making cuts. One of the series of cuts they are making is to the Navy. So they’ll have two aircaft carriers, sans aircraft, sitting around for the next ten years or so generally being useless and gradually growing obsolete (they probably won’t actually be obsolete in 10 years, but it’s a long time….).
Meanwhile, the UK government is merrily going ahead with a 20 billion replacement for Trident, when they already have a perfectly adequately functioning ‘sunk cost’ system in place.
And that’s before we’ve even started mentioning all the police officers who are getting laid off because the regional police forces can’t afford to pay them any more.
Like I said, Laurel and Hardy.
Comment by Rich L — October 20, 2010 @ 4:58 pm
Except, you did’t actually rebutt anything in the first comment, you just pointed out two oversized tubs are sitting disused in a dock somewhere.
On a side note, I would argue the rate at which an Aircraft Carrier, in and of itself, becomes obsolete is completely separate to whether or not Biggle’s and his chums are onboard…
Comment by Phil — October 20, 2010 @ 5:39 pm