By Bernard Hickey
Labour Finance Spokesman David Cunliffe has argued the Double-Downgrade of New Zealand's sovereign credit rating on Friday was a response to the National government's failure to manage New Zealand's foreign debt and its current account deficit.
Speaking in a Double Shot interview with Bernard Hickey on Friday afternoon, Cunliffe rejected the government's argument that the ratings agencies had shifted the goalposts on foreign debt.
"This is chickens coming home to roost. This was the government's primary objective in Budget 2009 onwards to avoid, that it would add 1-2% to interest rates and NZ$600 million to debt servicing costs. The worst has happened," Cunliffe said.
"It has happened because of a range of factors, including a lack of confidence in the government's response to the net international debt, largely private debt, and the growing current account deficit," he said.
Cunliffe rejected the accusation that National had inherited a structural budget deficit and high current account deficit from the Labour government in 2008.
He advocated a capital gains tax to "kick the tax incentive out of the property market to get capital going where it does the most good. Secondly we need a strong savings policy," he said.
Cunliffe said the government needed spending restraint rather than spending cuts.
He agreed in hindsight that the Labour government should have moved quicker to slow down the housing market and reform the finance company sector.
"We weren't perfect. Fair's fair. We've learnt some stuff, but that doesn't absolve the current government from the responsibility to knock over the savings policy issue, the capital gains tax that they've shied away from, and knuckle down and address the export gap, because people are getting sick to death of spin and photo opportunities."
Cunliffe rejected suggestions of a slash and burn approach to spending.
'Trickledown economics'
He said the government had made NZ$22 billion of income tax cuts while running up NZ$37 billion of debt.
"They've been relying on something that's been tried and failed over decades which is trickle-down economics," he said, adding some of those tax cuts had been used to buy luxury imports rather than invest in productive activity, worsening the current account deficit.
Cunliffe said Labour would get public debt to zero faster than National, "although there'll be a slight timing change under plan," pointing to stronger Capital Gains Tax revenues in later years.
See Alex Tarrant's article on the government's response to the Double Downgrade here.
See Bernard Hickey's opinion piece on the Double Downgrade here.
29 Comments
But Cunny , NZ Labour is planning to borrow even more than those fools in National currently are .
And that structural deficit , yup , Cullenomics have led to a massive welfare state ... and National are still upholding the seriously dopey policies that your lot introduced , all those vote buying bribes .
Who're the bigger idiots Cunny , your lot for bribing a gullible public , and bringing welfare into the middleclass .... or National for not dumping your stupid old policies ?
..... one more thing Cunny , doesn't it strike you as odd that two supposedly independent ratings agencies downgrade NZ's debt rating , within hours of each other ? .. Not weeks nor months apart , but just several hours ... hmmmmm ?
We should of course look at some facts here, Mr Bear Hero. Labour probably would borrow more, but is unlikely to have borrowed to support 22 million of tax cuts. As usual these were promised to 'be neutral', but have actually redistributed money upwards. This has not resulted in economic growth in New Zealand this time, and it has not resulted in economic growth any other time these policies have been applied. In fact when George W Bush implemented similar policies, claiming that a treasury increase would come later, his own economists dismissed this idea,
"The tax cuts had been largely opposed by American economists, including the Bush administration's own Economic Advisement Council."
http://en.wikipedia.org/wiki/Economic_policy_of_the_George_W._Bush_administration
New Zealand has a low level of government debt compared to most other countries and government debt is cheaper than private sector debt. This combination of factors means that a sensible economic policy, within the current policy framework, would be to continue as much government spending as possible. Every other country has stated that the application of austerity measures could result in a double dip recession (meaning a really bad depression) so I think we can assume that less government expenditure is bad for the economy without having to make any leaps of faith there. Thats right, Labours economic policy might be optimistic, but it is better than Nationals which will only make things worse.
Having said this I would prefer monetary reform, 100% money. This would succeed because the government would get a massive windfall from taking back the power to create money. This could easily be used to implement tax cuts and other government work initiatives without increasing taxs at all. It would also isolate the New Zealand economy from other countries economic collapse. Also a pleasant thought would be that after such a reform New Zealand could happily give the rating agencies the finger, their opinion would become irrelivant.
Unfortunately after the 1934 great depression the solution which was developed by then main-stream economists never got to be implemented. Instead we got these supply side, neo-liberal, neo-classical crazies with their unscientific ideas.
Waste of effort yelling at that idiot Gummy...a bloke would have to use a cricket bat on his head before he would say "sorry" for the shit Labour left the country wallowing in.
He has never had a real job in his life. He is just a mouth spewing promises and spreading blame on others.
You know your not supposed to call him Cunny...we were told not to call him Cunny and there you go calling him Cunny again....what are we to do with you GBH.....Kun Li also known as the Running Kun.wil be disappointed.....
Probably the question Bernard should have asked was that in the inevitable event of Phill not being elected will you be seeking nomination to the vacated post.
To wit some gobbledegook would have been the initial answer,,,,,,, but that's when you pressure them...the arrogant will always give it up ...just cant help themselves can they Cunny....oooops!
David Cunliffe
Under labour - where are new jobs coming from, when we are constantly importing things in the billions ?
Under labour - in what industries are Kiwis, particularly, NZyouths going to be employed, when the government constantly taking away interesting, skilful jobs to overseas workforces ?
Under labour - why do we have in this country youth education programs costing taxpayers money millions, when there are no decent jobs and our youngsters are forced to move overseas ?
Under labour how can we have a solid, more complex, better coordinated production sector, covering our needs, when you imported them in the billions ?
So labore did not create the problems (Tui ad). Yet Labour expanded the public sector, expanded welfare, crowded out private sector investment, increased taxes etc while seeking aspirational goals of the knowledge economy. They happily sat there and let the housing market rip along, but David now says they learn't some stuff, oh good and apparently what they learnt was that they need to put up taxes and spend more.
Get a grip David.
I am unhappy with National, they have not pushed reforms and are steering along the middle road. But there is a reason for that, it is what "we" in the majority will vote for.
Everytime I hear some one say tax the rich, I ask what do you define as rich?
When they say the govt needs to do this or that, I ask but what will you give up to pay for it?
The funny thing is I never seem to get a reply.
We get what the majority vote for and when about 45% dont pay any tax (and that is not the rich people) guess what they vote for, more handouts.
Use your nut AR..ask yourself where Cullen got the cash from to pay it down. It came from the rear end of the private sector property Debt Elephant that hid the unemployment and made things look good. Then the tide went out. Were it not for that Elephant, Cullen and Clark would have been booted out in 05 at the latest for failing to create real employment and for failing to manage real GDP growth. Why are you so wrapped up in a failed political party that wasted 9 years buggering the economy.?
Well judgiung by the frantic demands from national during labour's turn, it would have been worse in 23007-2008 if the nats had been in power because all the money that was used to pay down debt would have been used in tax cuts for the wealthy, again and again. And their voodoo economics practices continue today.
Re why I am so wrapped up in a failed political party there are two reasons (1) between labour and national (great choice -- not) labour is slightly better on economic management, and (2) I get pissed off with reading posts blaming everything wrong in the world on Cullen instead of acknowledging some things he did well, others badly (WFF e.g.).
Right you are AR...it's a bugger when people do that...Cullen did heaps of good stuff too..like...errr...arrmmm...errr...hey do you know any good he did AR.
And I agree with your comments re National...as evidenced by Brownlee's gift to Shipley and the pork distribution via SCF.
Neither has displayed financial foresight...both, put being in power, ahead of doing the right thing.
Labour will forever seek to buy power with promises of handouts of money.
Both will always drift into arrogance.
Do you think things for nz would be as bad today, had the entire population started this century determined to improve education levels and skills experience?
He advocated a capital gains tax to "kick the tax incentive out of the property market to get capital going where it does the most good. Secondly we need a strong savings policy," he said.
Mmm. Trouble is my savings are in my houses David, and looking at world sharemarkets at the moment, and what Marxist Morgan is doing to my aggressive Kiwisaver fund (hint, it ain't going up, and hasn't since I joined some two or more years ago), I'm bloody glad of not having the majority of my savings there. Plus as paper money is destroyed by the politicians over next five years, real assets are the only safe haven.
And say we agree that taxes on property will stop property investment, it therefore follows that taxes on business income must stop investment in business, so are you looking to stop taxing business income?
Yeah right. Your trouble is you've spent the last two years lauding Keynesian ideology, when the wise are finally starting to realise it's Keynesian socialism that is destroying western society, and as bad as National and their continued over-spending is, you would be much, much worse.
Mind you, it's a crazy old world. I have an IRD officer wasting my time and putting me through hoops when all I'm trying to do is pay more tax. Go figure ... :)
The supply-side economics theory that you are claiming to be obvious has never even been accepted by economists.
'Before Reagan's election, supply side policy was considered unconventional by the moderate wing of the Republican Party. While running against Reagan for the Presidential nomination in 1980, George H. W. Bush had derided Reaganomics as "voodoo economics"'.
http://en.wikipedia.org/wiki/Reaganomics
Unfortunately George Bush senior does not appear to believe in education, or maybe George Bush Jr was just not that bright.
"In 2003, 450 economists, including ten Nobel Prize laureate, signed the Economists' statement opposing the Bush tax cuts, sent to President Bush stating that 'these tax cuts will worsen the long-term budget outlook... will reduce the capacity of the government to finance Social Security and Medicare benefits as well as investments in schools, health, infrastructure, and basic research... [and] generate further inequalities in after-tax income.'"
http://en.wikipedia.org/wiki/Economic_policy_of_the_George_W._Bush_administration
It's long since time this idea was euthanised. The wealthy don't create jobs any more than anybody else. It would probably be sensible for the National party to reverse their most recent tax policy and not make cuts to public expenditure if they are going to persist with this dumb monetary system, especially as the policy they have followed is obviously not working. In fact a really good policy would probably be to increase social spending for Medical, Education and Public Transport Infrustructure but good luck suggesting that to anybody with a National Party Ideology or to their political right.
Some how Don Brash thinks that creating profits for pot companies will be good for the economy. Hello Don, there are at least 20 other places this surplus spending could go without creating a new generation of carcenogenic pushing vested interests.
Are you mistaking me for someone else Nic? I don't want your police state. I don't want the welfare state - it just gets increasingly violent from this point, and it was always a fraud that could never be paid for. The only function of a government is to ensure you can't initiate force against me, or me against you. That's it. Outside that I just want to be left alone ... but you won't do that, will you?
Libertarianz are always apologists for corporate fascism. The whole argument is self defeating anyway. "The only function of a government is to ensure you can't initiate force against me, or me against you.", and you are about to add to this, you or your property, me or my property. Even taking it to this point the argument loses legitimacy because immediately the have's, the property owners, have coercive force over the have not's those without property and this is legitimized by the libertarian government.
I worked out some time ago the best way to deal with Beureacracy, and that is to snow it down unders its own systems. Don't ever let them take the short way. Make them put everything in writing, ask for clarification, ask for clarification again..... Anything you can do to slow them down and make it cost more. Am I making sense? If enough people do then the system breaks and we can build a better one:)
Your 100% correct Hugh. THIS is the elephant in the room Labour either try to pretend they don't notice cause they were all in on it themselves, or they just don't get it fall stop.
Until Labour can face the facts and OWN UP to the massive damage they did to our economy during their 9 years then they will fade into history as a party. Cunliffe, Goff, King are all just blowing in the wind hoping the electorate don't see any connection. They still think they can shift the blame to National and win this election by a hairs breath.
Well, they won't, cause the electorate wants something they just can't deliver, NONE of them. It's a little something called "honesty"
Amanda is referring to my answer to your post being accidentally repeated about 10 times. Opps
Problem with these 'sensitive souls' guests Bernard puts on here or anywhere in the NZ media is they hate hard questions, they hate being told the truth or anyone highlighting their own hypocrisy. If you do, you will never see that guest appear again. That's how pathetic and thinned skin our Political lot are. We need a media that has the balls to really ask the hard questions. Even National Radio has gone soft since Sean Plunkett left. No offence Bernard, but...........surely the likes of Cunliffe need to OWN up to 9 years of financial disillusionment? Including the like of Bollard, English etc. When will the NZ Media grow some balls?
Not his style of interview Hugh...your looking for a Guyon with the knowledge base of a Bernard...actually I think even Guyon 's gone a bit soft on it over the last wee while ...all protecting their right to the press boxes maybe......
I expect close to the election when Cambell has enough to make himself look good you'll see some skirmishes but always in that piss usless outcome way...why..? because they see him coming or more probably his ego ...and dont get me started on Shrewsbury the dopey ringmaster who left his hat at home.....
I think Guyon is very capable...not sure whether life's a little too comfortable......but that is what is missing in this and many other interviews...balls on the line stuff.....ready to challenge what you don't see backed up by facts or history..
Hey is it the first of October in an election year.....?....really...?..your shitting me ,are you not..?
Well you wouldn't bloody know it would you...!
Cunliffe: "Savings incentives"? LOL like what? more RWT? another RBG who refuses to put the OCR where it needs to be? more paper shuffling KS election bribes funded with borrowed money?
Does Cunliffe really believe the last 3 years is where all the mistake have been made?
http://www.youtube.com/watch?v=0fV0YjQQzYk&feature=related
Protests in US starting to look like Egypt
Here the link for more information. This movement is developing fast. When honest citizens get arrested in stead of greedy “Wall- street crooks”- something stinks.
FYI: https://occupywallst.org/
Iain, Perhaps you could be our Farage?
http://www.youtube.com/watch?v=-uPMRVENEPo
Im looking for someone to vote for, could it be you?
National could put time limits on welfare an statehouses,full training for the unemployable.
Working tax payers are sick off Labours pandering to the non performers.
The country can't survive on building statehouses for people who will never get a job an have no money.
The country needs to turn things around,support people an families who do get out off in the morning.
Sell them the statehouses ASAP
Stop pandering to people who will never change.
Start working on feeding the world,they reckon there is food shortage.
We have water,fish,meat,land,food,trees,an plenty off workers who have no work.
Just do what it takes an make it happen,now
Iain, here they go picking the best cuts from the carcas that was once greece
http://www.telegraph.co.uk/finance/newsbysector/industry/mining/8801304…
Some things are hard to believe,
Updated, 3:35 a.m. Sunday | In a tense showdown above the East River, the police arrested more than 700 demonstrators from the Occupy Wall Street protests who took to the roadway as they tried to cross the Brooklyn Bridge on Saturday afternoon.
But then JP Morgan gave the police a nice little incentive
http://www.jpmorganchase.com/corporate/Home/article/ny-13.htm?TB_iframe…
NEW YORK CITY POLICE FOUNDATION — NEW YORK
JPMorgan Chase recently donated an unprecedented $4.6 million to the New York City Police Foundation. The gift was the largest in the history of the foundation and will enable the New York City Police Department to strengthen security in the Big Apple.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.