Economy archive at Grant Robertson

Archive for the 'Economy' Category

Plans for the economy: an answer and a question

August 8th, 2011

A couple of things came up in discussions I had this weekend about Labour’s economic plan that I thought were worth a reminder.

First, among developed countries we stand with only Switzerland and Turkey in not having a capital gains tax. That’s it. Australia’s got one, so has Canada, Norway, Germany, you name it. A lot of people don’t realise that this is not some radical tax dreamed up on the left of politics in New Zealand, it is part of taxation regimes around the world, because it is fair and reasonable.

The other question is around exemptions. As far as I know (and David C will correct me if I am wrong) that Japan is the only developed country who include the family home in the CGT. Exemptions are part of the CGT picture around the world. Tax accountants look at every tax and try to find ways through them. But that is not a reason to avoid putting them in place. We believe that CGT, along with the other initiatives Clare highlighted earlier today are the basis of a plan to bring some fairness and long term sustainable growth into our economy.

One final thought. Labour was rightly asked for detailed policy on the economy. We have provided that. What is National’s policy? Serious question. Can we expect something different? Or Is it just a continuation of the drifting and short term thinking of the last three years? It would be good to know. As the ad says, now’s good.

Posted in CGT, Capital Gains and Economy. | 0 Comments

Not news

July 5th, 2011

The National Party did a bit of prep work on their great infrastructure announcement yesterday. The morning papers had the preview story, so the press secretaries must have been doing their jobs well in the weekend. The big announcement came last night, and well, it was not really an announcement at all as summed up by the NBR story

Bill English has admitted the government infrastructure plan released today does not contain detail on any infrastructure project that had not already been announced over the past 2-3 years.

That’s right this is actually a non-news story. The article goes on to say how there was little in the way of specifics or detail in the announcement. I am getting more and more feedback from all parts of the political spectrum of real concern that the National Party has no plan to lift the NZ economy out of its current state. This non-news announcement just adds to that.

Posted in Plan, Bill English, Media and Economy. | 0 Comments

When more means less

March 20th, 2011

Busy day today, so I only managed to catch up with John Key’s interview on Q and A just now. It seems the big story is that the (revised) new spending allowance in the Budget is gone.

GUYON Are you still going to spend $800 million more in the May Budget?

JOHN Well, I think the answer to that is no. What we are going to do is spend more on health and education. That may well be in the order of 600, 700, 800 million, but we are asking ministers and what they are working on is looking to reduce expenditure in other areas so that can be reprioritised to pay for the more in health and education we want and ultimately the Christchurch earthquake.

Leaving aside, for a moment, the thought of what is going to be cut in other areas (think housing, social development, Police etv) it could be easy to say, thank goodness that health and education will get more money. But with the sums of money John Key is talking about this will effectively be a massive cut for both sectors.

Let’s take Health. Before last year’s Budget , the CTU calculated just for spending to stand still it would take at least $555 million a year of new spending. The Budget fell at least short on that figure by more than $150 million a year, and that has delivered health cuts across the sector.

Add that investment deficit to what is required for this year just to stand still and John Key’s delightfully vague numbers above indicate that there is no chance of health getting anything like the money it needs. And remember that is not for any new services, wage increases etc. It is just to stand still.

We are going to hear a lot of spin in the next month or two about money going to health and education, but on the PMs words today it is cuts on the way. There will also be spin that anyone who proposes government spending is somehow committing economic heresy.

Of course we need to adjust to the new reality of the economy post-earthquake. It does require careful economic management, which might actually include sensible investments (spending) in our future. It needs to include support for innovation and job growth, and to give opportunities to future generations. What it does not need is a slash and burn mentality.

Posted in Economy, Health, Budget and Education. | 0 Comments

A clear dividing line

January 26th, 2011

From time to time someone will ask me if there is any real difference between Labour and National. For me the answer has been, and is, obvious. But the last two days should leave no one in any doubt.

From Phil, on behalf of Labour we saw yesterday a vision for an economy where we all pay our fair share, combined with a plan to actually grow the economy through a focus on R and D, skills, savings and protecting our assets and where government works as a partner with businesses.

Today from John Key we have seen a retro 90s style recipe of asset sales and slashing government spending. As my colleague Moana Mackey said if a definition of madness is doing the same thing over again but expecting different results, then John Key and National are positively bonkers. As another colleague Charles Chauvel said this morning, there is no plan for increasing Kiwi wealth, just for selling off what we already own.

It was interesting today another leader gave his State of the Union Address. There were lots of interesting lines in the Obama speech. His call to respect the teaching profession being one. But I was also struck by this

Cutting the deficit by gutting our investments in innovation and education is like lightening an overloaded airplane by removing its engine. It may feel like you’re flying high at first, but it won’t take long before you’ll feel the impact.

To extend the metaphor further than it probably should be, John Key’s plan is to remove the engine and sell off a wing and half the seats and hope that the plane keeps going, ours is to fix the engine, make the plane fly higher and faster and make sure there are seats on it for everyone. That’s the difference.

The test is how the public will view these different visions. Interesting to see that as at early this afternoon the (obviously highly unscientific) Herald and Stuff on-line polls which do not tend to favour Labour were 2/3rds against asset sales and 2/3 for first $5000 being tax free respectively. It’s sure going to be an interesting year.

Posted in Spending cuts, Asset sales and Economy. | 0 Comments

Who pays the price of recovery?

January 6th, 2011

When I was briefly in Ireland towards the end of last year the prescription being presented to deal with their economic meltdown was familiar. Massive public sector cutbacks, dropping the minimum wage, a reduction is subsidies for healthcare. Similiar austerity measures were being rolled out in the UK, with everything from cuts to school sport and education grants to students from poorer families.

It got me thinking about who is paying the price for recovery from recession? The financial sector? The banks? Or is it down to the average person on the street?

Joseph Stiglitz has picked this up with an article, and edited version of which appeared in the Dom Post this week. As he puts it

It has become fashionable among politicians to preach the virtues of pain and suffering, no doubt because those bearing the brunt of it are those with little voice – the poor and future generations. To get the economy going, some people will, in fact, have to bear some pain, but the increasingly skewed income distribution gives clear guidance to whom this should be: Approximately a quarter of all income in the US now goes to the top 1%, while most Americans’ income is lower today than it was a dozen years ago. Simply put, most Americans didn’t share in what many called the Great Moderation, but was really the Mother of All Bubbles. So, should innocent victims and those who gained nothing from fake prosperity really be made to pay even more?

As Stiglitz also points out in the article the response to the economic crisis of public sector austerity will almost certainly lead to slower recovery, stubbornly high unemployment and a relative decline in competitiveness with those countries, like China who have chosen to invest in their economy rather than cut back.

In New Zealand the effects of the recession are less marked than in other countries, in large part because we went into it, courtesy of Michael Cullen and the fifth Labour government in a better state. But we still are being told that the answer is to cut back, and to accept a tax switch package that overwhelmingly favours the better off.

Of course we need to be prudent with spending, but real investment in skills, infrastructure and active economic development policies is the path to leading us out of recession.

Last word to Stiglitz, with his hope for the year

So this is my hope for the New Year: we stop paying attention to the so-called financial wizards who got us into this mess – and who are now calling for austerity and delayed restructuring – and start using a little common sense. If there is pain to be borne, the brunt of it should be felt by those responsible for the crisis, and those who benefited most from the bubble that preceded it.

Posted in Joseph Stiglitz, Recession, Global Financial Crisis and Economy. | 0 Comments