Well, fiscal responsibility was sooooo last year. Once you start that (Finance Minister) Grant Robertson off, you can't stop him.
The Government is absolutely throwing money at the coronavirus, Covid-19, call it what you will, crisis. At time of writing somewhere north of $50 billion has been committed.
We'll have to pay that back people.
But that's for worrying about in the future.
For now let's just appreciate that the Government is acting very decisively to keep things somewhat afloat for now. (Mind you, I suppose it's the least they could do, they helped to 'break' the economy in the first place by closing the borders and then locking us all up!)
This unprecedented-in-our-time splashing of cash has come at such speed amid a blizzard of announcements.
I know I've struggled to keep up with all the developments and what they mean.
Right now it's important we all know what the situation is - and for those of us who might need a handout then we need to know exactly what has been promised by the Government so far.
So, ever the helpful types that we are at interest.co.nz, we are going to keep a list of the major Government initiatives (in chronological order) in order for us all to keep track of what's what.
We hope you find it useful and beneficial and please, if you think there's more that can be added or there's ways we might usefully tweak the information here, let us know. You are not normally shy.
Please, have a look, you can find the list by clicking on this bold bit here.
Happy reading and comprehending.
57 Comments
Pretty sad situation and throwing cash at it is going to come back and bite us in the bum in the future. Like was pointed out above, this all has to be repaid in the future. Funny how in the past when I lost a job all the government would give me was $200 a week and they didn't care what your financial situation was and any extra allowance was a token gesture towards your mortgage. All of a sudden losing your job is like going on ACC, you get 80% of your wage and from personal experience (3 cases), those going on ACC never want to go back to work for as long as possible.
Sounding a bit negative there Carlos...wheres your Dunkirk spirit? I wouldn't pick on ACC recipients if I was you, I happen to know that the corporation runs a very effective fraud minimisation programme. I would also imagine that most people on ACC longterm would much rather be back at work, doubt its much fun on 80% for the rest of your life.
The problem is under normal circumstances losing a job, and I've been there, is just a part of the normal economy. The current situation is not. Throwing money at it is a part of the current economic thinking and is essentially rooted in a resistance to change, and inability to identify the fundamental flaws in the current economic policies and charting a path into something that can work for the future. This is hugely complex.
Many of the people who make or advise on policy are invested in the status quo, and to actually suggest something different would effectively be shooting themselves in the foot. A lot will have limited imagination too, and will not be able to see outside of the theory they were taught at university, so they are having nightmares at the moment!
Milton Friedman's 'free market' policies have essentially ruled the world for over a generation (40 years). It looks like no one knows how to change the theoretical basis of those policies to something that is fairer, and more equitable across society without risking significant revolt from some part of it. But history teaches us that a revolt by the masses will be extremely painful and bloody. No one really knows the reality of a revolt by the rich and powerful, as I don't think it has happened unless the odd coup somewhere could equate to one? (Possibly what happened to Salvadore Allende in Chile, at the hands of the CIA?) Perhaps it is time for Governments the world over to understand that a revolt by the masses is less desirable and actually start to work on their behalf?
"Milton Friedman's 'free market' policies have essentially ruled the world for over a generation (40 years). It looks like no one knows how to change the theoretical basis of those policies to something that is fairer, and more equitable across society without risking significant revolt from some part of it."
I think a large part/the majority of the unfairness has come about due to market interference from successive governments and the RBNZ. Just look at how they made housing a winning bet. Since the early 80's - housing up 2,062.4% while wages only up 550.7% since Q1 of 1980 due to their policies and directives. This is a massive cause of inequality in general and particularly intergenerational inequality and a big driver of increasing the wealth of the 1%. Government regulation is important, government interference once the regulations are set (provided the regulations are solid) is counterproductive.
Now that interest rates have been driven to zero over the last 30 years, that trend is going to end (house prices vs wages). Its just that most people don't realise it yet. Assuming prices will continue to rise because new entrants/investors can service more debt with lower rates - as Badgrie points out, were looking at higher rates in the future (next 5 years) as our credit rating lowers.
You are looking at the problem in isolation. If your economy goes south and you print a huge amount of money you will trash your dollar. You will be seen as risky and interest rates will move higher. What we have is across the world money printing and low interest rates. We are all sinking together, so it would seem unlikely that we will see higher interest rates. As for paying off the billions of dollars and the future generation's burden. When has this ever happened? The debt has always been inflated away. What costs $100 today will soon cost $1000, or perhaps $10,000.
So you're saying the Government's hands off attitude has led to the distortions? That doesn't make sense. The Government has not regulated housing per se and as you say that is up 2000+%. Because there is no regulation the banks could and would encourage anyone to borrow. Mortgages have always been cheap money. Now try to borrow for a business. when I did interest rates started at 10% and went up from there (at the time mortgages were circa 5%), and that was if my home went in for security. That is the free market. Banks saw less risk in property so stimulated that market, unregulated, while the Government was unable or unwilling because of established policy direction, to direct money flows. The free market combined with globalisation also saw much of our manufacturing industry exported, mostly to China, destroying lots of jobs.
The intergenerational inequity is largely because of those free market policies and attitudes IMHO.
You mention Government interference once policy is set, can you give an example?
"So you're saying the Government's hands-off attitude has led to the distortions?" - No, I'm saying the actions taken by governments and the RBNZ are causing the distortions. The liberalisation of the banks in the 1980s (reduced restrictions on money creation) and the initiation of inflation targeting by the gov and RBNZ ensured house prices would increase much more than what they would have if those things didn't happen. Since then, anytime housing look like it's taking a dip, the RBNZ swings into action and lowers LVR's etc. to help keep it pumped. Remembering that the RBNZ sets its mandate in conjunction with the Gov, they are both complicit in the consequences.
In short, the money creation system enabled by Gov has caused massive distortions. Whenever these distortions look like they will come to a head, the gov and RBNZ interfere to stop them correcting as we are reliant on inflation to keep this whole system going. Money creation and the corresponding asset inflation has forced out productive enterprises as why would a bank loan on a risky business when they can loan on houses which inflation targeting mandates that they must rise in price by 2% year after year and is backed by the power of the gov and co.
When you said, "that is the free market" above, it' not free at all. Perverse incentives and continuing interference. Just look at any historical graph and see where prices lift off from - the 80's (excluding the little bump in the early '70s where Nixon de-pegged the dollar from gold). For example:
https://www.interest.co.nz/sites/default/files/embedded_images/median-h…
Free markets inherently have to go down as well as up. That's not what we have had at all.
What you are describing is the Government stepping back from regulating the market. What I called "hands off". You're calling it interference. Effectively by doing nothing you are saying they interfered. And no the free market has never been free, it has always been manipulated. The dominant manipulation has been the big players and banks. Yes Governments have fiddle on the edges, but without significant effect.
The money creation system you refer to is the Government dropping the Gold Standard, along with the rest of the world and stepping back from regulating the market. essentially letting the private banks doing it! This is the so called free market at work! And finally the markets won't go down if the big players won't let them! They use every manipulative tool in their box to prevent it. COVID is just too big for them. They have lost control.
As I said in my earlier comment - "Government regulation is important, government interference once the regulations are set (provided the regulations are solid) is counterproductive." And yes I agree that no market is free however it should be as free as possible from government interference. The government liberalising the banking sector wasn't "doing nothing" otherwise it wouldn't have changed. I would disagree that the dominant manipulation has been the banks in that they are operating by the rules set by the gov, the banks only operate within those parameters. It's the gov which drove the manipulation and distortion.
Our system is such that banks play such a key part in our society that we have no other alternative to use them and just because they were liberalised doesn't mean that we have another option other than to use them. I can't get paid in gold for example, therefore, circumnavigating the banking system. That is not the free market at work as you say at all.
The big players as you say (I'm assuming central banks and Governments as no other "big players" can keep markets propped up) interfere in the markets to keep them up all the time, again just look at our housing. The Government is a big part of that as they set the RBNZ's mandate in conjunction with the RBNZ. Outside of that, there's the accommodation supplement, preferential tax treatment for housing even working for families qualifies as interference in my book so no, they don't just fiddle around the edges.
Manipulation, manipulation everywhere.
"And yes I agree that no market is free however it should be as free as possible from government interference. " And therein is where we differ. The markets will never be free because of manipulation by non-Government forces. That is why we are in the mess we are in. Can't you see that? That it is not Government involvement that has caused the mess, but a LACK of Government regulation that has led to it.
Carlos, could you elaborate on the "All of a sudden losing your job is like going on ACC, you get 80% of your wage and from personal experience" comment? I've been made redundant/ lost my job due to coronavirus and all I can see applicable to me is the job seekers benefit. 80% of my wage would be a hell of a lot nicer.
I get your point. If you get a serious illness you don't get much support from the government. I've been there. This time is a bit different though.
The government has basically taken away your ability to earn an income (in many cases). We all understand why (may not all agree). If you lose your job under normal circumstances, you can try to get another the next day. I've been made redundant 3 times and I've always been able to find a new job quickly and always before the redundancy money ran out. This time it is completely different. Entire sectors have been wiped out. Some of these will be virtually dead for a long time. You would hope that the government wouldn't say 'oh well tough luck' to those people affected. The other side of this is that you want people to keep spending as if they all stop, then everything stops and even more jobs are lost. The cost of not spending could be worse long term than what they are spending now due to the loss of tax revenue
The numbers here and in Australia (in particular) are simple unprecedented. Is this the start of MMT, will society ever be the same again? Just last night Australia allocated $130bn to underwrite wages for 6 months - that alone is equivalent to 25% of public debt.
Our kids will never know what an interest rate is, they're now 0% for eternity.
That's never going to happen though, he has just torched his credibility if that's the case.
Central Banks have set the cash rate to 0%, are manipulating the yield curve to be flat and are buying and financing unlimited amounts of credit. Also, with so much central bank debt around in the future, you can be sure rates stay at 0%. Where MMT will be visible is through the currency.
QE should have happened a long time ago in this country, it would have helped sustain the economy post gfc, over the longterm instead of needing to resort to unregulated mass immigration and low value mass tourism to prop things up in absence of anything better. Regarding immigration, hows that figure going to look next quarter? Nett gain or nett loss?
Typical racist xenophobic. Always bringing the blame game back to migrants. Last I checked most were productive, contributing members of society. I fail to see how currency manipulation with QE (which is normally a desperate last resort) is better than having migration.
There seems to be quite a bit of mention of government debt - but what about private debt? Don't we have a lot of private debt to think about in conjunction to what the government is taking on?
Rising taxes to fund our public debt, with decreased wages and unemployment also attempting to pay for high private debt with higher interest rates = pain, a lot of pain for many. What were we thinking taking on so much private debt and driving interest rates to zero?
https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11…
As you suggest, money; keystrokes, was on the verge of making everything worthless.
Buyer: "I'll give you $1,000,000 - (debt; keystrokes if you like)- for your house?"
Seller: "No!"
Buyer: "Ok, $10,000,000 keystrokes" Still No! Why?
Seller: "Because what am I going to do with them! They're worthless"
Buyer: "Ok. I'll give you $100 for your house? "
Seller: "What! No! You offered me $10,000,000 before"
Buyer: "Yes I did. But that was last month; before money started to regain its purchasing power; before 1,000,000, 10,000,000 - 10 Billion people lost their jobs and who will now work for 1 keystroke a day, so as to go to Countdown to buy food to survive off ( 50cents, if you go to New World!). Unemployed Kiwis are going to start 'outbidding' each other at lower wages rates just to get a job of some sorts."
That's what's coming - the earning power; the purchasing power of money spread across millions of unemployed peoples'
Another word for it is, Deflation.
Worldwide we'd like to 'inflate' the baloon, keep the party merrier, the options just two: keep inflating it until it's pop, or other mercy force will be at work to stop it from popping out, deflating it..pssss... psss .. psssst..Covid20.. psss, Covid21.. psst, Covid22.. pfft (remember even Flu has it's own variant of vaccine .. every year)
It might be raining govt cash, but the river of private sector productive cash has evaporated. I note elsewhere we hear it referred to as a stimulus, but how wrong is that - all we have is borrowing (or is it printing..I have no idea)on on behalf of ourselves by govt to fill a bloody massive hole.
Govt is giving a bit of time for business to restructure and organise lay offs - Yet so many think we will be back to normal in a few weeks. Hard to believe how deluded so many are.
Fully agreed, I would have thought that black swan event, is like the one portrayed by the Bruce Willis movie where that chunk of big rock is sure about to hit the earth..thank goodness we're saved.. because his bravery. This Covid19 is not like that, since the central banks actors worldwide in unison try to do the same things. Means?.. this is a manageable event so far, but yea.. keep your night telescope recording.
What right does Grant have to indebt children? They will have their own pandemics to pay for going by past experience. Why not test the living daylights out of everyone, isolate the borders to quarantine only and isolate over 60's. Everyone else get back to work. Running up debts in your kids name is the lazy way out.
Correct, in this website I've advised strongly to do shock & awe by cutting it to 75% (..well?.. guess what.). Plenty more advised from me already posted, the next one/OCR: is the unusual 10-15 basis points, this is just to present temporary credibility to the market.. as we are still at double digit territory - after that? I suggest the RBNZ to rotate the graph into 180 degree rotation. Because the next one after this May? to maintain that double digit, is to cut further by: 20-25 points again - with this, the world shall follow NZ calm decision making process..it's just a number.. normalise the negative interest. What we projected to the market? is calm despite all those market adversaries..this is Psychological.
Please David, at the same parallel chronological order the other world countries response to it as well.. so our readers can be put into perspectives.. comparing it in term of world rebuilding effort/avoid the oblivion from WWI, WWII.. previous worlds recession/depression, GFC etc. - Let's see the stark contrast of advance/pre-emptive supplying infinite phantom numbers.. can actually buy into worldwide populations Psyche.
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