NZ Institute is awesome. When Rudd released his stimulus package the other day and told Aussies to go spend it, I thought that if I was the average Australian I would be concentrating on reducing my debt. Does paying back debt still have some sort of multiplier effect?

This may be a simplistic approach, but my understanding of a Keynesian stimulus is based on the idea that you save during the good times to boost the bad times, but it seems Western economies didn't save, and are now attempting a debt-fuelled stimulus which will inevitably lead to higher taxes - and high inflation. Am I missing something?

nz institute is a privately funded think tank with talented US educated frontpersons and they produce papers about increasing productivity and increasing age related costs etc; for their business donors.they dont say outright but it is all code about cutting pensions and screwing workers.

From my reading, the unique factor about NZ over the past decade is that Government debt as a percentage of GDP significantly lowered - whereas private debt ballooned.

So, in saying, "The key is to use the fiscal position and the Government's balance sheet to support policies that ultimately enhance productivity..." are they actually suggesting we incur more Government debt as a means to enhance productivity?

And if so, don't we have to attract foreign investment to fund that - which therefore erodes the balance sheet and hence discourages foreign investment?

Chris, right on. Matt G., even better.

Keynesian policies are cash-flow oriented, and don't seem to give a damn about balance sheets. Here in NZ, the government is actually in a good position to do a classical Keynesian spend (whereas the US is not) due to our balance sheet. However, enhancing productivity is the bottom line, and while the rest of the world catches their breath, this is our chance to dash past them.

Spending on "think big" projects that aren't needed, or "bridges to nowhere" doesn't do diddly squat to enhance productivity. The spend has to be directed by everybody... by all people. When people decide what they want, and they are wiling to put their money where their mouth is, they go shopping. And the money gets directed towards whatever New Zealand decides it wants to buy today.

It is very difficult for government to figure out what society wants more of right now. Do we need more cars? Do we want cheaper electricity? More Speights? Who the hell knows... from Wellington, the blinders are on.

But the economy, the distributed mind of the market, it does know what it wants, and it communicates by opening up it's pocketbook. Businesses, by focusing on the bottom line, are listening to their customers, and making more of whatever we demand. And the more we buy, the more they make it better, faster, and cheaper (efficiency! productivity!). They do whatever brings in the revenue, and we control them by choosing which products we prefer.

I think tax cuts are the best way to make this happen. It leaves more money in your pocket every paycheck, so people can handle their debt burdens better. It puts more money in the economy so people who don't have onerous debt burdens can spend and keep the economy on it's feet. And it doesn't give money to people who don't earn money, but rather leaves money with people according to how much they earned it... thus strongly maintaining the incentives to work hard, and smart, and keep productivity up.

BTW: I pay very little taxes in my semi-retired state, taking huge losses in the markets. So such a policy would hardly help me personally. I suggest it not for my benefit, but for New Zealand's.

"Yep, unbelievable figures - in the last quarter US households lost $2.8 Trillion in household wealth - in the last 12 months they have lost a staggering $7 TRILLION! These are US govt/Fed stats."

I some how question how the concept of wealth is perceived.
We have taken a 20% hit on our net wealth in the last 12 months... Thats a big hit
Yet.
Income remains basically the same, expenses are up, but in proportion of our remaining "wealth" the increase is tiny.
Althu we are not as "wealthy", we are just as, if not a bit better off....
Due to a reduction in our nett wealth, our debit % on assets has only increased about 1.5 to 2%
But if we had got sucked into the borrow, borrow, boom and greed of the last few yrs, threw away the old tried and true max 30% debit of asset value, yes we could be in a -ve wealth situation.

So if household, business's etc have run their budgets/spending/debit in a sensible manner "wealth " really doesnt mean anything
If they Didnt run their debit/budgets in a sensible manner, they didnt own anything they possessed in the 1st place, so how can they be less wealthy or loose wealth???

Is not wealth a measure of your net worth, not what one is in possession of?

Chris, The computer game industry is still doing very well in US. A good section of the public do like to forget the reality, and live in a dream world from time to time, right? I also read a news report on dating sites becoming very active lately. Recession time does lead to some cheap amusements. Key is partly right, jokes. :)

I've been looking for Green technology to export to China. Easier said than done. I'd be much happier to get to work in half the time and spend that time working.

Sam, Roughly one third of Kiwi's don't have a mortgage and own their own house., another third rent so have no mortgage but help pay someone else's mortgage. and the other third own a mortgage.
What no one measures and the banks do not want to measure nor know about is how many of the third that have a mortgage actually have that mortgage to fund their business activities. The overdraft rates for business are in the order of 13-14 % plus. Mortgages even at their highest only got to 10.5% and anyone in business will tell you that without property for collateral the banks just won't lend you any money,oh maybe a couple of thousand. ( and worse the finace companies that did have now closed shop)
Most small or medium sized businesses will have a property mortgage that secures their business funding, usually on their private home. The reason the banks don't record or want to know what the money is used for is that to record the mortgage as a business loan means that their ability to lend is decreased.
Now all this is bought about by the Basel convention which banks are ruled by. A convention that states housing is more bankable and less risk than business. Several years ago (about 4 or 5 ) the lending ratio was reduced to allow banks to lend more on housing according to their capital adequacy ratio and that is what feuled the so called housing boom.
What we actually need now is for people like Bernard to recognize the reality and start pushing for the banks to lend to businesses so we can get commerce moving again because anyone who thinks we can cure the problem by having mortgagee sales and destroying the present value of property needs to think again. The only way to fix all this is to make businesses productive and working. NZ is a but a speck on the ocean in world trade and we don't need much to keep all of us busy, so it will be a case of being smart,quick, clever and getting on with exporting. The dollar is going all in our favour, we just need to get moving and reward exporters real fast.
Not many things that I would agree with Winston Peters about but that is one and some of us have been around long enough to have been through this a few times. Some of us remember what a huge boost export incentives gave NZ commerce. Now I can hear all the purists throwing their hands up and wailing but life ain't for losers and if export incentives work for NZ then lets take it on the chin and get it done, today.

"With government spending, I believe the "too many layers" problem is ever-present."

Very much so, and these layers are very well ingrained in the system already

Computers in schools...sure get the technology in...but why spend 100s of 1000s..milions upgrading a simple workstations when it is already more than capable, nothing wrong with it ??
Why put in switches in access of $5000 when a $35 one does the job?
Why replace Older Cat 5 cable for 1/2 dozen basic workstations with optic?

Why? becuse like so many other feilds, the "Experts" contractors, project managers all take their cut.
If money is to spent on infrastucture, to kick start the economy, it ALSO NEEDS to be spent how and where will have future benfit and create more productivity spin off.
NOT where it simply feathers pockets.

Good read Iain Parker,if you were the PM JK. how would you handle,the so called financial crisiis,which seems to be with us anytime soon.

In terms of faster broadband, how much time is wasted by productive people on Aucklands roads (makes a 40 hour week closer to 50 hours with no increase in productivity). So how many of people working in an office could in theory work from home ? Faster broadband allows this in theory (VPN) so the next hurdle is management trust - but faster broadband is a really good idea.

The govt should hire the unemployed, solo mums, prison population etc to dig the trenches, pay NZ companies to develop the technology to fill the trenches (like US company JDSU), and finally have some incentive to help business try it once its built. This also gives jobs that will help people consume, and potentially reduce the need to buy more oil.

By the same logic, govt to sponsor solar tech r&D and installation - so the average family gets something back from their tax.

Ban local council rate increases. They can only spend what they have.

Make the tax rate flat for everyone.

Export the hard criminals (pay a poor country to look after them).

Make all irrelevant jobs (parking wardens, telephone sanitisers) into productive jobs - e.g. all parking wardens given tools to build a free parking building to solve the root problem, rather than just producing paperwork.

Jill Wellington - If I were primeminister I would return to the only viable systems that have ever been used in the past to fight the monopolisation of the monetary system by private elements, such as the Colonial Scrip that was used in the US until the lost their battle for independence from European bankers in 1812. Promissory notes issued by Govoner Fitzroy NZ(1845), Debt Free Based Public Money Systems used in NZ(1935-61) Canada(1935-74) these systems delivered those nations their greatest periods of equitable prosperity of any in recorded human history. If I were able this is what I would do to save this nation from being subversively liquidated and overun by the bogus loans of the private banking conglomerate;

In the current global economic conditions with those charged with the administration of the global money supply using phrases like "We came within a blinking of an eye of global financial catastrophe," many people have become reacquainted with the tried and tested Debt Free Based Public Money Systems that delivered this country its most prosperous years for wider society. Removal of the burden of foreign private central bank interest from the first step of our money supply chain, by us introducing our own money supply into circulation, just the same way as the foreign private central banking network does now, but without interest attached when we use it at the first step - emphasise first step only - for the building of and future maintenance of our vital national infrastructure, such as Health, Education, Environment Protection, Roading, Sustainable Energy Resources. Our own money supply would be backed by the value of the future utilisation of our own resources, not as current, backed only by our pledge to pay back the central bankers electronically created credit, with interest, out of the future taxes of the nation.

In excess of half of our taxes, rates, fees and levies now go to service our foreign debt obligations. As our own money supply comes into circulation and we pay down our massive foreign debts as they come due, this will reduce the requirements for the taxes currently needed to service those loans, thus true tax reductions can be given across the board, not just given in one area and taken from another.

What is then possible

The rebuilding of our currently crumbling vital infrastructure would see immediate standard of living benefits to all, by way of stable jobs for many and truly free public services. Many of those jobs would be located back in regional areas, coordinated to compliment seasonal industries, to assist with the issue of year round continuity of stable employment. A National Noxious Weed Eradication Program, a National Waterways Restoration Program, a National Noxious Pest Eradication Program would supply stable employment to the regions, giving true cost reductions to the farming sector. A return to regional roading gangs would compliment seasonal orchard work areas etc.

Funding our own environment protection will allow us to meet our global obligations without the very dubious Emissions Trading Scheme that is estimated to add $9000 per annum to the cost of living of every New Zealand citizen and the United Nations recently estimated would cost the world $45 Trillion in the next 50 years.

We are of the view that free education is a pillar of equal opportunity in this nation and putting an end to the massive debt burden that is being imposed upon our young people, as student loans now exceed $10 billion dollars. We will abolish the students loan scheme and refund any interest already paid.

We view as another pillar of equal opportunity, that if you work hard enough, by the age of retirement the system should allow you to be freehold. Our reclaimed Reserve Bank would issue 1% loans for houses in which the borrowers permanently reside, meaning those that buy homes to live in and raise families in, will pay for them only once, not 2-3 times over. The current Capital Gains Tax Laws that apply to the buying and selling of rental properties for profit will be removed from the status of ignorance they are now and actually enforced.

Our reclaimed reserve bank would issue 1% interest loans for worthy local government projects. Removing the absurd situation of projects costing 2-3 times true value. Our RBNZ would assist local governments to pay down there currently ever mounting foreign debt. Allowing local body rates to be reduced the same way national taxes would be.

We will put in place measures such as stipulating that foreign investors in our economy must remain invested for a minimum period of time or face a higher speculators tax upon withdrawal. This will reduce the destabilising impact upon the Real Sector by those who seek only capital gain from the movement of money alone.

The internal commercial trading bank system will work pretty much as it does now, making the same margins, but at a far less burdensome rate, due to the core cost of money being dramatically reduced.

Perhaps the Democrats for Social Credits greatest assistance to the people of this nation has already been delivered before they pulled out of the Alliance Party in 2001 to pursue their push for economic reform which the movers and shakers of the Alliance had given up on. DSC were the joint driving force behind the implementation of KiwiBank, which in the current economic climate may well become our lifeline allowing us a means of distribution for our own money supply if the international monetary system fails.

So, as the international regulations that govern our financial system, have once again seen the same suspects walk away with the loot by trickery and the Real Sector expected to accept their life savings disappearing into fresh-air, neither Labour or National are prepared to reform those regulations because they would first have to admit to both their parts in what they have subjected the Real Sector of this country to since 1961. Please give consideration and due diligence to any party that is looking to return to using our legal right public credit facilities to reduce the burden of foreign interest upon our society.

maybe it isnt a recession but a great leap forward,pasty faced office workers will be driven from their airconditioned offices to till the land.haggis shaped women will become slim again and religious and mystic beliefs crushed.an end to workplace blogging and thinktanks and all other registered charities.

Guess you better find a good rope and a solid branch to tie it to

Hey nice post! Found this on google - glad to see someone thinking the same.