By Alex Tarrant
Finance Minister Bill English has warned that large corporate losses over the last 18 months have softened tax receipts and the government may lower forecast revenues in the upcoming half year budget and economic forecast update in December.
Meanwhile, he defended the government's fiscal strategy and changes to the tax system, even if in the short-run those changes made the path to government surplus more challenging. He also moved to defend Prime Minister John Key's 'aggressive growth' comments made in early 2009 that have become the subject of a constant economic policy attack from the Labour party.
It was clear the economic recovery was patchy, both in New Zealand and overseas, English said.
"The tax receipts for the first two months of the year (July and August) were around NZ$750 million less than Treasury budget forecasts," he said.
"The September out-turn, I understand, will be a bit better, which has helped turn that situation around.
"So while it’s only a short period, we would expect that there may be some softening of the forecast tax revenue in the half year update."
“My own view is that as the export earning-season gets under way, which really is only just starting now, through to November, that you’ll start seeing, particularly in the export sector, improvements in their profitability and their confidence.
"I wouldn’t expect that a couple of rough months at the start of the year represent a significant shift, but Treasury do the forecasting and we’ll see what they come up with.”
Defending Key's 'aggressive growth' comments
Labour has for the past few weeks been constantly attacking Prime Minister John Key's comments in early 2009 that the economy should undergo aggressive growth out of the recession.
English moved to defend those comments at the committee, and later in the afternoon at question time in the House.
“With respect to the Prime Minister's comments, those comments were made in early 2009 and the economy did go from a 2.5% contraction to 12 months later 2% growth, which is the same pretty sharp turn around as most other countries had," English said.
"What’s been different this time for all developed economies, because of the financial drivers of the recession, has been that that recovery hasn’t continued at growth rates of 3, 4, 5, 6% that we’ve enjoyed in the past – it’s flattened out at around 2%."
Recessionary factors hitting tax take
FEC chair Craig Foss (National) asked English whether the lower-than-expected tax take was due to there not being such a strong consumption, property and construction impulse among spenders.
“Yeah, I think it is a combination of those things, plus larger losses from companies over the last 12 to 18 months. The way the provisional tax cycle works, it can take quite a while for those tax losses to flow through," English said.
He said unemployment, which is currently at 6.8%, was still having some impact.
"It’s a number of recessionary-type factors still influencing the tax take," he said.
Deficit could be bigger than NZ$13.3 bln forecast
English said there were certain risks that could mean the government's budget deficit would be bigger than the forecast NZ$13.3 billion for this financial year, although it was forecast to fall to NZ$10 billion next year.
He was asked by Foss which risks, such as any surrounding the Export Credit Office, he was worried about.
English said Treasury’s accounting and risk management systems generally worked in reflecting risks like any surrounding the Export Credit Office.
“My concern is more to do with the actual good stewardship of capital," he said.
Leaky schools
"Another significant contingent liability is leaky schools, where we’re starting to see some pretty large numbers for the Crown to pick up that risk.
"Hundreds of millions (of dollars), which we’ll have to divert to re-doing schools, some of which are becoming a health and safety issue, which of course means more pressure on the program for building new ones."
Extended deposit guarantee risks
English was also asked whether he was comfortable on risks surrounding the extended deposit guarantee scheme, and how Treasury was provisioning for the scheme.
“We’re reasonably confident," he said.
"There were 70 entities covered by the previous guarantee, the new one only covers seven. They’ve had to get credit ratings, and they’ve been subject to a great deal of scrutiny.
"So there’ll still be an issue of whether there’ll be further provisioning in the accounts from here on, but we would expect that the realisation of the risk around South Canterbury (Finance) means that the provisions would be significantly smaller in the future."
The road back up to zero and beyond...
Labour Finance spokesman David Cunliffe asked English whether the government’s fiscal strategy was failing, seeing as deficits were worsening.
“The thing about the fiscal strategy is it’s about the balance of objectives,” English said.
“The two things that balance that off: first, we’re sticking to a debt track, which is effectively our highest priority, followed by a net worth track.
"Secondly, that we can show a path to surplus. The choices we’ve taken there are, by comparison to a number of other countries, pretty moderate.
"Our path to surplus gets us there, just to zero, about 2015-16.
"You’d have to generate surplus beyond that to meet obligations to the Super Fund before there’s any excess available for spending.
English said the government could choose a "more robust path that could involve putting taxes up and cutting spending harder".
"Those policy choices are there, but we’ve chosen a reasonably moderate path which has enabled us to make some changes to the tax system which we believe will have a long-run benefit, even if in the short-run it makes the job of getting a fiscal surplus more challenging," he said.
GDP growth
Meanwhile, English wouldn’t be drawn on his expectation for GDP growth over the current quarter, telling Cunliffe he didn’t “really focus on quarter to quarter growth”, as there could be a number of factors that influence the figures in the short term.
“We would expect the economy to continue growing, probably quarter on quarter, but certainly over the next 12 or 18 months. With higher terms of trade and consumers getting their balance sheets in shape, the economy will continue to recover," English said.
Will have to rebuild EQC reserves
English said the Canterbury earthquake underscored the importance of maintaining buffers to absorb the impacts of natural disasters.
"In the case of EQC in some stage we’ll have to think about how to rebuild its reserves, should there be another event," he said.
“The EQC payout will clearly have an effect on the Crown’s net worth because we’re selling down NZ$1.5 billion worth of assets to fund the payout. So at some stage that’ll have to be rebuilt.
"The second effect will be operating expenditure the government incurs either through the wage subsidies for business or through the cost of the remediation of public land to help with the overall land remediation effort, where the Crown’s putting money in in addition to the insurance cover.
English said the government thought it could largely handle the operating expenditure with the contingencies set aside for an event like the Christchurch quake.
"I don’t expect that the operating spending will have much effect on the debt track," he said.
However, he said the run-down of the EQC assets would clearly have a significant impact on the government's fiscal situation in the short term.
Tight fiscal policy
English said that times were still uncertain and that government needed to maintain maintain "very tight discipline" with its spending in the next few years.
"I think where some people may have expected this time last year that, by now, there would be a significant improvement in the government’s fiscal position, that’s not actually the case," he said.
"We’re actually in a fairly lengthy period of constraint. It’s not a “V” shaped recovery, so we’re not going to get a “V” shaped recovery in the government’s books.
"The numbers are reasonably large – we ran a cash deficit last year of around NZ$9 billion, this year NZ$13 billion-plus, next year the forecast is around NZ$10 or $11 billion.
"So just over those three years you’re talking about NZ$35-36 billion in deficits.
"The constraint we have is pretty moderate by comparison with a number of other juristrictions. We are pumping a lot of money into the economy, maintaining entitlements, growing public services, investing in infrastructure.
"It’s a pretty stimulatory approach, but it can’t continue at that rate – we can’t continue to run NZ$10 or 11 billion cash deficits, or we start getting a pile-up of this stock of private debt, which we’d be leaving for someone else to pay.”
Significant changes to spending on public service to come
English said core government expenses were still growing and there would need to be significant changes to government spending in regard to the public service.
“In the case of all the major public entities of government there are significant restructuring programs underway," he said.
"In the last couple of years we’ve had the opportunity to re-prioritise a lot of cash, because the system was pretty loose. But over the next two or three years there will need to be significant restructuring in the way government does business and a pretty hard look at functions which the government thinks are not high priorities.
"So the pressure for change is building up, but I think our capacity to execute it is much greater now than it was a couple of years ago.
"Remember the (spending) forecasts depend on NZ$1.1 billion of new operating expenditure every year for the next five or six years, well in fact forever.
"That’s going to be quite a challenge, as wage demand has come back and public expectations grow," he said.
“We will need to see significant changes over the next few years, because under the current cost structures they (the public service) won’t be able to live within the revenue that the government’s providing."
(Updated with aggressive growth defence, public service comments, tight fiscal policy, further EQC comments, comments on fiscal strategy, extended deposit guarantee, leaky schools risk to govt balance sheet, tax take, EQC comments, more detail as the committee meeting progresses)
39 Comments
The teachers in NZ are no different from their public service bretheren in France or in Greece , in that they do not sully their high minded ideals by sordid realities such as where does the munny actually come from . As far as they are concerned , they are permanently under paid , entitled to more , always more , and you have no right to expect a performance review from them ............. Just know that the munny is being well spent ........ In the national good ................ Sir Humphrey Appleby never died , did he , the legend lives on !
Chairman Moa "Probably will make more by selling land to foreigners."
Another winner, sell your land to pay the grocery bill. Perhaps you'd like to give us a few examples of how that's worked out.
Any more where that came from? How about chewing your arm off to save yourself from going hungry. Let us know how that works out.
PS, you might need to get someone to type it out.
Off to Question time now, looks like there could be a few crackers (yeah right).
Have just updated with this:
The road back up to zero and beyond...
Labour Finance spokesman David Cunliffe asked English whether the government’s fiscal strategy was failing, seeing as deficits were worsening.
“The thing about the fiscal strategy is it’s about the balance of objectives,” English said.
“The two things that balance that off: first, we’re sticking to a debt track, which is effectively our highest priority, followed by a net worth track.
"Secondly, that we can show a path to surplus. The choices we’ve taken there are, by comparison to a number of other countries, pretty moderate.
"Our path to surplus gets us there, just to zero, about 2015-16.
"You’d have to generate surplus beyond that to meet obligations to the Super Fund before there’s any excess available for spending.
English said the government could choose a "more robust path that could involve putting taxes up and cutting spending harder".
"Those policy choices are there, but we’ve chosen a reasonably moderate path which has enabled us to make some changes to the tax system which we believe will have a long-run benefit, even if in the short-run it makes the job of getting a fiscal surplus more challenging," he said.
Gummy, Where does he say tax cuts boost productivity? wow we can look at the Bush tax cuts to see that effect eh?
um...no we cant....
re-balance the economy? what further over to the super rich?
You are living in fantasy land....the voter is getting upset carrying the risk and meeting the costs while the super-rich get tax breaks and huge bonuses....think that will continue?
The un-rest in Europe says no....
It might well be that, yes almost certianly the GOP will win in November in which case the tax cuts wil stay (or come back)....in which case un-empoyment will pass 10% and probably even 15%......in which case the pork barrel politics will continue at break neck pace while the US consumer crwals into a hole and stays there.....in which case we see the second long depression.....in which case we see deflation......
regards
Gummy Bear,
You are way out of date on the teachers. I have family who are teachers and the teachers have had Performance reviews for years now. All have goals set and performance indicators that are analysed. Educational Review Authority comes every 3 years, more if there are concerns .Every year BOT get someone in to review the Principal, the Principal holds preformance reviews of Deputy Principals and Heads of Department, who in turn have to appraise each teacher etc. If you have what it takes, why not have a crack at secondary teaching, it might give you some insights as to the real world there, dealing with the complete cross section of society, which is not the reality for civil servants in the Ministry of Education [you seem to be be getting confused with them and the teachers at the coal face].
fewer bureaucrats, more (and better paid) teachers please
I'd say teachers should earn 10-15% more than they do. And have incentives for high performers. Education is key to NZ's future performance. Keep paying teachers what they are getting now and you will struggle to attract top class people
Yer, I agree Matt, teachers are underpaid. There are incentives/allowances for high performers and those who take extra responsibilities- according to Ministry of Education, 48% of teachers are on extra pay for that. However the extra allowances have a finite amount and it doesn't matter how well everyone works, once the amount is awarded that's it. So, if 80% of the teachers in a school were performing really well they can't all get the extra pay anyway as the government works to a fixed budget- the irony is that it's actually scared of having full-on merit pay because it might turn around and cost far more than they allow for at present! Teachers know that and that's why they simply try to get the basic pay scale increased. The claim is not for 10-15% either, I think it's 4% over 3 years which seems very reasonable. Trouble seems to be that Tolley and Key actually don't like teachers, and they probably don't have that on their own.
My grandfather was a long serving teacher. When he taught teachers were highly respected, and commanded fairly good rewards.
the status of the teacher has fallen substantially, to the nation's detriment. We need to emulate Asia and our forebears and restore the position of teaching to its rightful place.
Muzza - I agree the teachers' request is totally reasonable - in fact not enough in my view.
Key is full of it - if he wants a future for this country, education is where we need to start (and the home)
Well the largess to Warner Bros will probably be yet another reason to shaft any payment to the teachers, unless they dress up as hobbits and promise to promote our schools as tourist attractions. My understanding is that the NCEA exams in Years 1,12 and 13 can only be marked by qualified secondary school teachers who take up individual voluntary contracts, over and above to their normal teaching Don't suppose they will refrain from doing this next year if push comes to shove??
Wow - this will be interesting - Matt McCarten contesting the Mana by-election as an independent. Reason: Labour isn't providing enough difference in ideas/actions/intents to National. So, he's planning on forcing them to put up real proposals for reform.
"We want to put a bit of pressure on Labour, to be honest, to front up in this campaign about what the alternatives are, and if they are against what is happening now, what are they?"
Good question! - and I love this further comment of his:
"We want to say the market response about a market solution to employment is over. The state needs to intervene. No-one gets the dole, everyone works."
Muzza, you would be right about the teachers, they'll get nothing more, government admits lots of schools are health risks with leaky home problems. so money goes there.
The situation could get problematic next year with the teachers if not settled, that's for sure
Government will play the teachers are' being unprofesiona' card which is code for we don't give you anything and we expect you to do nothing about it.
But isn't it amazing how government comes up with the money when it wants to, such as for the Hobbi film makers?
RE: Teachers unwilling to recognise the bigger (fiscal) picture.
They are forced to ignore current balance sheets because the answer from any Government is always the same, regardless of fiscal outlook: No lettuce. Back to work and by the way, here's some more paper to brighten your day.
Teachers have had significant pay (catch-up) increases under Labour governments but only as a result of arbitration after normal bargaining has reached stalemate.
Any business knows that draining goodwill of staff will produce greater productivity in the short term...great if you're selling...let the the new guy get suckered into the belief that current workload is sustainable. But I don't see the NZ government selling any time soon.
Sooner or later, you end up in sewage.
In my mind, they are both equally important. However, lots of things can go wrong at secondary school age children if the teachers aren't up to scratch.. The student will find better things to do like selling dope! Despite some of the pathetic comments made here about teachers and their demands (typical tall poppy sydrome) - Teachers are doing a very important job in our society. If you pay peanuts you get monkeys.. but I don't have an answer where the govt can find more money...
By the way, before anyone starts accusing Chairman Moa of being pro-teacher (or pro-property investor) - I am neither but I am interseted in a fair view point - that's all.
Casual Observer, don't think secondary teachers are valued more than primary teachers, but they should be. Many years ago they were because there was a shortage of secondary teachers compared with primary, but the primary teachers won pay parity as they argued a teacher is a teacher etc. But teaching primary kids is not the same as teaching teenagers, which most parents of teenagers can relate to! Would you like to handle about 5 different groups of 30, often stroppy teenagers full of their own importance, at a time each day? That's why there are always shortages in secondary teaching, also secondary teaching overseas is usually higher paid than primary, and why it tends to be secondary teachers who leave for overseas positions more than in primary. Also, you need to have higher academic qualifications (and probably higher ability) to teach the likes of calculus or physics etc at Year 13 compared with a Standard class in primary. There's also national exams that secondary teachers need to prepare students for, and these days each teacher is usually reviewed by the Principal as to his class results in those exams, which probably makes for a greater degree of accountability. Suspect John Key really hasn't a clue what the real world is like at a secondary school, if he did I think he would be more supportive.
It is an occupation very few want to be in and from which a great many would like to escape but few manage to do so and those who remain are advised to book in the triple bypass or risk pushing up daisies soon after leaving in retirement.
At one time the 'Tolleys' on these islands were paid the same as the teachers but with plenty of extra perks and handouts on top...now they receive far larger amounts of taxpayer money and still they collect the perks...
The evidence is there for all to see....the product of the politicians after decades of promising this and that....and the graves of the teachers who tried to make a difference while always fighting to receive a salary on which they could raise a family and entice yet more fodder into the profession.
Wolly, I too once read that some years ago that secondary teachers and MP's had a similar salary rate, then the MP's got their scale to be decided by some Higher Salaries panel, hence the considerable difference now. There are those in the teaching force who remember that! From your comments, which reveal considerable insights, I suspect you may have/had family who are/were teachers?
Interesting support for secondary teachers. I would argue that they are both equal. For a significant number of kids in secondary school, they spend a significant amount of time learning subjects etc that are going to be completely irrelevant in their life.
Meanwhile at primary level, kids go in to school usually completely ignorant and by the time they leave for intermediate/secondary school have usually got some skills that will be useful to them in life. Their basic skill level does not change to the same degree in high school as it did from starting school to leaving primary skill. The knowledge they gain may change but their basic life relevant skill level doesn't change to the same degree. One could argue that if you start secondary school having literacy problems, you will leave secondary school with those same literacy problems.
Teenagers may have their issues, however teaching 30 new entrants of whom 20 speak 3 or 4 different languages and whom have little or no English is just as chellenging as anything a secondary teacher will have to face. A teacher friend said they would hate to teach the very young as they 'are always asking questions and you have to teach them routines, whereas you don't get that as they get older'.
It is always dangerous to value one sector of our society more than another. Society is like an eco-system. We need all parts of it to make it work. I have always considered it extreme arrogance for one group to consider themselves to have more value to society than another.
A recent survey of the top 20% of NZ income earners showed 35% had a tertiary qualification. Therefore 65% didn't. A school education is necessary, however it isn't the be all and end all of measuring how successful you will be.
It would be interesting to do a comparison of turnover of teachers v pollies. At the end of the day professionals become professionals because that is what they want to be. If they don't like they can always go over to the other side where the grass is always greener.
Casual Observer, according to your logic then you could say early childhood teachers should get more than anyone and university lecturers less than primary or secondary teachers.
But to enter into any such debate is rather pointless, the issue is that teachers are not given the recognition that the profession should have.
me: not at all. I am not commenting on early childhood teaching, but comparing two levels of compulsory education, both ECE and University are a willing seller of services/willing buyer. Primary and secondary teaching are funded entirely by the taxpayer, the other two are not.
teachers are not given the recognition that the profession should have.
They get the recognition society, not teachers, believe they deserve. And if there is a difference between what teachers believe they deserve and what society at large believe they deserve then as far as I am concerned that shows arrogance on the part of teachers.
Fair enough Casual O, society does give is teachers what they deserve, just as I suppose they give politicians what they deserve?
I think you might find that schools actually raise a considerable amount themselves for what they endeavour to deliver, I know of secondary schools in my area that fund raise more than $1 million over and above the core funding by government (I was on a Board of Trustees for 6 years). Universities fund raise also, mainly by charging student fees. I was a university lecturer for 15 years and our salaries were in effect funded by the government, akin to teachers. I think likewise Kindergarten teachers, who are part of NZEI with primary teachers.
I regularly read the comments on this site from that invisible sideline, but feel compelled enough to register to comment. I am a teacher. Secondary at a big South Island school. I believe that pay parity is equitable. I also think it should be across early childhood as well. Many of my colleagues believe adamantly that we have the higher skill set and that the Primary teachers ride our coat tails with regards to pay. This is a bit churlish.
Primary teachers face a range of equally important challenges, they may not have specialist knowledge to teach calculus, but neither do we posses the skills of teaching them to read, and contrary to what people think, its not easy. Early Childhood Education has again another range of skill sets, its a foundation point and has the potential to get children into good structured environments early, and out of learning bad habits at day dot. Making people pay is starting define our winners and losers from when they are 2 or 3, or younger!
All groups have challenges that the other group does not have and none is more or less important.
Who pays for it all... that's the million dollar question. You could approach it from a range of perspectives. Immediate dollar values, which are big on paper. Or longer term approaches looking at cumulative effects on society... from skilled participants through to prison populations. It all starts somewhere and is nurtured or destroyed early.
New Zealand is very good at talking about knowledge economies, entrepreneurs, smart technologies. But no one wants to cough up the investment to see it happen. Teaching wages are improving here, in fact they are actually quite good, but if we don't keep them attractive they will be gobbled quickly. If we roll over and say "Ok, the economy is crap we will wait till its better", we lose and we set a precedence for the next round. There has never been a wage round when we didn't have to fight hard to get it.
Over the last decade+ we fought to a standstill to get increases, and if we hadn't the wages would have been absolutely pathetic and embarrassing today. We would be looking at a calamity in terms of recruitment and retention rather than just the disaster it is now. If we don't get the increase then by the time the next round comes we will have reaped what we have sown, but by then its too late.
The sticking point this round is the loss of conditions that we fought for previously, pay is important, but the Govt. is using that as the a media tool as it tries to undo work conditions, and that is dangerous. Its not a case as some idiot presenters ... Mike Hoskings says " If you don't like it quit and let someone else do it." The problem ...No one else is, and its not selling burgers, its teaching our kids. Yours and mine.
Public perception takes a dip constantly as teachers have to fight tooth and nail to get a rise that tracks inflation. In Finland and Germany students say that when they leave school they want to be teachers, but if they cannot do that they will pick another trade like Doctors or Lawyers or Engineering. They don't have to beg in the street and they aren't treated like shit. Farmers throughout the ages knew that they had to save the best seeds for planting the following year, that was called investing in future crops. For an agricultural country we lost that skill.
Paying skilled teachers more has and always will be a problem. The reason is... you are not working with equal commodities. Teaching in NZ schools is not a factory line where you toss out the rejects... (barring private schools). Therefore value added is both hard to determine and is easily manipulable. You also don't have one- five item on every factory line that unless you spend extra time and attention (at the expense of the normal items) actually infect the normal items so they don't work either. Nor do factory line items behave equally with all of the handlers on the line. Some work well one day and bad the next because of what happens off the line... (and items on a factory line don't have to go through teenage years or puberty!!!) etc. etc. Nice in theory... Crap in reality
My idea is to pay teachers that work at low decile schools more. Deciles 1-5 Schools have a different but significantly better wage scale. then teachers that are good and have been bought by private schools and decile 10 schools can be rewarded for working with the lowest common denominators, the ones who need it most. Teachers that are incompetent are found out very quickly in these environments. Imagine a flood of experienced, competent, and capable teachers moving back into these classrooms!
Apologies for the essay!
Monteiths, I'd be interested to know the decile of the school you teach at. Although I'm not a teacher myself, I live with one, who down-loads every night with the tales of day. As she's female, this can go on for hours.
They major flaw in your thinking, is in my view, as the decile goes up, the issues move from problem children to problem parents.
By the time you get to Decile 10, some of the parents are absolute nutters, who expect private type education from the taxpayer purse. This is where the real stess is put on. Some parents can be unreasonable and demanding. Unlike the private sector, you can't either tell them to piss off, or price them out.
The main theme I get from my daily evening barrage, is: you can deal with any of the kids' issues, but the parents' issues need lot more time to sort.
Decile 8. I'm HOD (Head of Department). I know what you are saying. It relates back to that issue of its not an equal playing field... and then when you make statements the inevitable flaws appear. However as nutty as those parents are its always the kids that are most important. My problem is the stratification that is happening in schools, and the problems it will really cause soon.
Good on you Monteiths, and keep up the good work I realise you guys do. I said it before and I know it is debateable but the problem is not lack of money, because as someone pointed out, the government invariably comes up with the money it deems important. The problem seems to be a mindset by Tolley and Key that they don't really like teachers and dare I say, that is a fairly common mindset in NZ - presumably not the mindset in Finland or Germany. Casual Observer is right when he says society gives teachers what they think they are worth and because the mindset in NZ tends to give lip-service to the value of education, that's why you guys have a battle on your hands to get a better deal.
Yes, it's quite an eye opener if you have a teacher in the family or a parent who was teaching.
And then you get the odd clown in the public who says teachers need to get into the real world or something inane like that.
Think the students sum it up, most who leave secondary school wanting to go into the professions know which one will be the hardest and they want to avoid being a secondary teacher, some are however positive about going into primary.
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