PM John Key warns budget worse than forecast and 'at outer limits of what we'd regard as acceptable'

PM John Key warns budget worse than forecast and 'at outer limits of what we'd regard as acceptable'

Prime Minister John Key has told a post cabinet news conference that the government accounts show the budget is in a worse position than previously forecast and was "at the outer limits of what we would regard as acceptable."

Key said a lower than expected tax take as well as factors such as the Canterbury earthquake would lead to a deficit "you would not like to see repeated" and which left little room for government to move. However he said he thought the credit rating agencies would be expecting such a figure and did not think the figures would lead to a downgrade. He would not speculate on what the deficit would be.

Key's comments came on the eve of the Government's Mid Year Budget Update due at 1pm on Tuesday.

They also come after Finance Minister Bill English foreshadowed a New Year review of government spending in the wake of figures showing the budget deficit running at NZ$4.4 billion just four months into the fiscal year, which was NZ$1.9 billion worse than expected. See more here.

Late last month Standard and Poor's put New Zealand's AA+ sovereign credit rating on review for possible downgrade after the deterioration in the government's outlook. See more here.

Lower and slower

The figures from Treasury tomorrow would show both economic growth and the government’s fiscal performance for the current year "a bit below forecasts in Budget 2010 before improving over the subsequent few years," Key said on Monday afternoon.

"The data will also show the effects of the events of the past six, months, particularly the Canterbury earthquake and the more subdued than expected domestic recovery [which] have taken our fiscal position to the outer limit of what we would regard as acceptable," Key said.

"Some of this is due to New Zealanders saving and investing more, and borrowing and spending a bit less, which is obviously a good thing. But it does reinforce the need for the government to press on with its six-point economic program to build faster and more sustainable economic growth," he said.

The deficit figure was a "significant number".

"It’s not a number you would like to see repeated but I think we need to acknowledge there’s a number of factors that have been a little beyond our control," Key said.

"[The} tax take is has been slightly less than we anticipated, although the expectations are that will come back into line next year, and so while growth’s slightly lower this year, it’s actually anticipated to be slightly higher in the next fiscal period. And the Canterbury earthquake’s had an impact on the books,” he said.

Would it worry the credit rating agencies?

"No I don’t think so, they’d be expecting it," Key said.

"There’s no great surprise there. When you look at the numbers over the medium term it’s a little worse this year, expectations are it’ll be better the following year, but there’s no getting away from the fact that they recognise there isn’t a lot of room to move," he said.

"In fact if you look at what we’ve done over the last 12 months, there’s a lot of areas where we’ve either saved money, saved a bit less, had significant lower new budget spend than previous governments.

"But the reality is New Zealanders have been saving at quite a significant rate, as opposed to dis-saving that we saw take place between 2000-2008, so tax revenue’s been lower and on that basis there’s a slightly bigger hole," Key said.

Will you have to cut govt spending?

The issue of cutting government spending was all for another date, Key said.

"But it just shows you there’s not a lot of room for any government to move, and if you go into the 2011 election, I’ve made it quite clear there will be no lolly scramble going into 2011. We can’t afford it. It’s as simple as that,” he said.

When asked whether the government would look to get back to surplus faster than expected (2015/16), Key said: “We might do but if we do that we’d be signalling that in early 2011.”

Treasury Secretary John Whitehead signaled government should look to return to surplus faster than it was looking to in a speech last month

'Might be saving and not spending for some time yet'

Key said Finance Minister Bill English had been surprised by the extent of household savings over the year.

“I think that’s a reflection of the international environment that people see. When you see pictures of the austerity packages, the cut-backs, the unemployment rates in the United States, Ireland, Greece and Portugal, then people rightfully so are cautions," Key said. "We’ve seen a great deal of cautious behaviour this year.

"How quickly we revert to type [to more spending] I don’t really know because it will depend on what the economic outlook is like globally over the next few years," he said.

"We spent quite a long period of time where there was a consumption-led boom right through the back end of the 90s and right through the 2000s up to 2008. So it might be a period of time where we save. That’s a good thing by the way. Our external liabilities [are] by far our biggest issue that we worry about,” Key said.

Low credit growth a concern

Credit growth was one area of concern, Key said. "It’s on a very low level for business, it’s actually been low for households as well. That’s one of the reasons why retail’s been so soft, is that people are fundamentally saving money, not borrowing it," he said.

"In the end the bigger picture here for government is return the books to surplus as fast as we can, take the pressure off any impending rises that might otherwise occur in interest rates, and certainly try and take the pressure off the exchange rate.

"All I can tell you is the advice that we get from the Reserve Bank governor, and others, is that if we play our part and take the pressure off through better control of fiscal policy, then that will require less movement in terms of monetary policy," Key said.

"In other terms, we spend less, interest rates go up less.”

Key's comments on advice from the Reserve Bank come after RBNZ governor Alan Bollard took a swipe at the government's structural deficit, which was around 4% of GDP. This structural deficit would not go away as the effects of the recession faded, Bollard said last week. A lower deficit would mean interest rates could stay lower, and take pressure off the New Zealand dollar, Bollard said.

Borrowing program not sustainable

Key defended the government's borrowing program to take the "rough edges off the recession", but said it was not a sustainable position.

"The deficit that we’re running this year, and don’t forget this is the biggest year of the deficit, has always been at the outer edges of my level of comfort. I think we did the right thing doing it [borrowing] because in my view we had to take the rough edges off the recession," Key said.

"There were plenty of people who argued we didn’t go hard enough with a big stimulus package in 2009. I always thought we had. There are plenty of people who would argue that we should be doing less this year. I think we actually have got through the recession pretty well. It’s not great growth, but we’ve grown for five quarters in a row," he said.

"Our unemployment rate is considerably lower than the OECD average, and while things aren’t perfect, we’re starting to see a lift in confidence in the New Zealand economy.

"In my view for that, and a variety of reasons it’s been worth it in 2010, but it’s not a sustainable solution position, nor would anyone argue that case," Key said.

Investment statement

Key said the investment statement due to be released tomorrow was going to show a government balance sheet north of NZ$200 billion.

“It’s also going to point out where those assets sit. The largest amount of assets is in what’s called ‘social assets’ which is the definition they use for National parks and things like that," Key said.

"It will effectively try and define the categories of assets we own into financial assets – assets for instance the Reserve Bank holds – and government-controlled assets like the Super Fund, right through to these other assets like roading infrastructure and national parks," he said

"The purpose is really just to show New Zealanders the magnitude of government’s balance sheet."

SOE advice

Responding to whether Key had seen advice Treasury was ready to give ministers on who the best owners of State Owned Enterprises, Key said he had not seen any himself, "so given today was the last Cabinet of the year [I’m] clearly not going to see it before Christmas unless they give me some advice to take away just before Christmas," he said.

"But I’m sure we’ll see it very early in the new year, if they don’t give me something to take away with me," Key said..

(Updates with further quotes from Key on Investment statement and SOE advice)

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"at the outer limits of what we'd regard as acceptable."

Polly speak for   WE ARE REALLY  IN THE SHIT  !   and no one knows better than Key what this means.

Just time before S &P now wack us with a downgrade or two as the Crown deficit by definition decreases national savings and they are now the offender vs private sector.

RBNZ stats  show Crown foreign debt up by  ~  $ 20 Billion in 27 months.

Borrowed money on borrowed time !

There was always going to be a time when the can being kicked down the road, turned out to be a grenade!

Fiscal holes are to be filled not dug deeper.

But back to the real cause of our problems today...the bloody property bubbles in the rural and residential sectors. And what do we see happening...the banks are being encouraged to go after cheap longer term debt with covered bonds and to pump the credit into property once again. Go figure.

Meanwhile in wgtn at the Old Boys Club over the gin and tonics the salary bloated serpents discuss who is top dog...who owns what property....who is in line for a fat raise....and who has fired the most junior staff!

I think the only hope we have is for the ratings lot to put the boot in.

In fact if you look at what we’ve done over the last 12 months, there’s a lot of areas where we’ve either saved money, saved a bit less, had significant lower new budget spend than previous governments


Farcical: 'lower new budget spend' - that is, the overall government spend is still going up. The total state spend is already almost half the economy (46%) we're borrowing money and this government is still spending more.

And just in case you have Key in an interview, Kim Jong, and he states that there has been 500 or whatever layoffs in the state-sector, as puny as that is, make sure you ask him how many of such employees  are now doing their old jobs on contract, after taking redundancy. And how many that took redundancy since National took office are now already back on permanent staff again? Only the government knows how  to spend even more money reducing the state service, and then end up with a bigger state service. No attack whatsoever has been made on any State function, most certainly not middle class welfare, so of course the State spend is still increasing, no matter  what the spin.

Have updated with more quotes from press conf everyone. More to come.


BTW, if forecasts were wrong this year, and growth is forecast to be higher than expected next year (which is what Key is banking on), how can we be sure of that?

Take that comment with a grain of salt I reckon.

He's gambling like every other Polly because he's got no where else to go....

Forecasts were written by neo-classical economists the same twits who got us in this mess and the same twits in not being very accurate isnt a surprise......but I will add its so volitle Im not surprised.....

Grain of salt of bucket of?

So of the best explanations of why we are doing so poorly is that oil is around $80USD which is tipping us into recession long as we are there we wont ever recover....

Also some of Steve Keen's work his models seem to be amongst the most accurate....and thats a worry.



I have some great ideas to improve our economy: let's built a cycle way from Cape Reinga to Dunedin. Or perhaps let's become a financial powerhouse like Ireland.

Both should definitely do it.

Actually, got another idea. We can indefinitely borrow $275 million to continue to run our welfare state!!! That's $275 million a week, shouldn't be any issue getting that money from the Japanese or Chinese. 

Just put up the tax rate, problem solved.


B de B -

interesting the denial in some quarters.

Yes, Govt debt is mounting, and unsustainable.

But - the reason the debt is unsustainable is the fact that what we desire - whether public or private it's cumulative - is no longer deliverable.

We have peaked in many ways - the ability to consume, to pollute, to do - and you would be better addressing the underlying problem.

Quite seriously, even without any Govt whatever, this is a permanent recession.

Scrabble to make yourself better-off than others by all means (it's human nature, born of survival instincts) but don't pass that off as  the real problem.

Again , to Quote US President  Abraham Lincoln about 100  Years ago in something called the TEN CANNOTS  

Number one is 

"You cannot bring about prosperity by discouraging thrift"

Number 8 is 

" You cannot stay out of trouble by spending more than you earn "

Google it ... it is relevant today as when he said it 100 years ago.

I did, it was Boetecker who said it in 1916. The comment is vaild though,

  • You cannot bring about prosperity by discouraging thrift.
  • You cannot strengthen the weak by weakening the strong.
  • You cannot help little men by tearing down big men.
  • You cannot lift the wage earner by pulling down the wage payer.
  • You cannot help the poor by destroying the rich.
  • You cannot establish sound security on borrowed money.
  • You cannot further the brotherhood of man by inciting class hatred.
  • You cannot keep out of trouble by spending more than you earn.
  • You cannot build character and courage by destroying men's initiative and independence.
  • And you cannot help men permanently by doing for them what they can and should do for themselves.

Bring on the downgrade.The quicker it comes the better.Bring down the OCR as well.We can then take back our currency,out of the hands of foreign traders.The signal will go out that we are looking after our own interests!Then,perhaps,it will lead the way for our youngsters/young familes to get into cheaper housing.Which,in theory, might leave abit of spare cash to investin our country.

Well,I can dream! 

Those dreams are $275000000 a week!......that's million not thousand......long live the the bankers....stuff the peasants....let em eat BS and spin.

I'm not too sure a downgrade would lower the cost of mortgages, Ian in R, no matter what the OCR is set at. The OCR  may have a limited effect on overnight cash; that's about it ~ It's  really just a psychological crutch that mortgage holders clings to. We have far too much entrenched foreign debt that will be re-priced higher with any downgrade. The reason rates may fall is if, and only if, we reduce our demand for debt.

A downgrade would mean it costs us more to borrow our mortgage rates would rise hurting families....

Low OCR for too long is how we got into this mess.....we cant look after our own interests when so many of us have borrowed off shore......

This is a bed of our own our own interests  wouldnt have been taking money to speculate on houses rising in "value" for no actual work.....

Conclusion we suck at looking after our own interest.......


Another update in there now

Alex, google mortgage exit fees Australian news, The Australian Govt  starting to get the banks by the tail, not before time. The tax take is lower than expected, surprise ,surprise. How many farmers have made a surplus this last financial year? SFA ! how many farmers have been able to pay GST returns and are applying for IRD consideration of hardship. How many Banks have retained GST content of forced sales of properties (not mortgagee)and left farmers with a tax liability? What Keys is seeing is the decline of the rural sector and he has yet to make that connection that NZ's economy is so reliant on a fully functioning agricultural sector. The budget next year won't be any better.

Banning exit mortgage fees will hurt the smaller lenders, not the large banks. The banks have the Government by the tail and aren't about to let go! They, after all, are the ones that set the tone of the economy. The Governemnt can do very little about it in a scenario of huge; frightening private debt.


The abolition of home-loan exit fees, which banks use to discourage existing customers from shopping around, will apply only on loans taken out after July 1.


Delusional Economics Comment on that


...the housing market is already a massive government fed ponzi market, and this is plan is simply about directing even more money away from productive investments into that market, ...

this is not about helping the public, it is about funding the beast and getting more people

into the game.


Those already in the game don't get the mortgage change breaks...

I always have trouble accepting financial forecasts or projections that present a picture showing the current is the worst it is going to be, and things only improve from there. MAF and Treasury included.

This "a bit below forecasts in Budget 2010 before improving over the subsequent few years" fits that mould.

It rather implies that all the good financial news we have been spun over the six months was misleading.

Same here.

Key's government needs to start providing us with negative economic growth forecasts (and a plan for that).

This is the same guy that argued the income tax cut package was affordable during the hayday of  the GFC.  Then implemented it and a few months later raised GST.

What is it Bernard says of Obama, "a liar and a fool" - to me both Key and Obama fit in the same camps - but neither of them are fools.

Bread buttered on - more springs to mind.

Individually and collectively we are unlikely to make good decisions until we have sound information on which to base them.

I have some sympathy with John Key in that respect as his ministries are so conditioned to spinning that there must be questions as to the independence of their analysis and advice. The "before improving over the subsequent few years" being true to that form.

It does though present an opportunity for Key to demonstrate leadership by reducing the spin out of his ministries. A few hundred less communication advisors on the government payroll would do no harm either, and could set an example for banks, Fonterra and others.

Here's a GREAT opinion piece on owning property for you Bernard by Jessica Irvine

Hit's the nail on the head for many, including myself

"And as I've said before, and will say again, rent money is no more ''dead money'' than the interest paid to a bank during the life of a loan, which ends up being many times the initial loan amount."

My thoughts exactly.

It's well written, but not anything new. A lot of people have been saying those exact same things for quite a long time. The difference is that now the smug baby boomers and their disastrous ponzi scheme is on the brink of total financial annihilation and they don't have the time to treat tenants like dirt.

Well...I don't see a change from this new normal for many years to come because I think people have decided to look after themselves by getting out of debt and staying away from banks. The trend is causing a fall in revenue but and this is important....the total debt is massive....the trend at current rates will have to continue past 2020 for any real drop to show up.

Which means the fiscal hole will open wider and swallow this govt unless they slaughter some sacred cows and invite Ruth back to get some much needed advice. Revenue will stay where it is. Ten more years of deleveraging to go. 2020!

Ten years ! Ten years of deficits like that Mr Key does not want to tell us, will place us into a position that Ireland is finding itself into now. It's almost a comedy.

In economics - why are you real Kiwis always talk about the money, going around a circle and not about the people –  why the majority of Kiwis are working in rather low wage jobs ?

PM - for how much longer can we afford to export young, talented, educated Kiwis - our future - and import our quality infrastructure needs - neglecting the real economy - productivity ?


PM John Key warns budget worse than forecast and 'at outer limits of what we'd regard as acceptable'

PM - because of years of government failure and you and your minsters of not having the courage implementing a visionary approach. 

PM - how can NZs’ working class – the majority of the population afford significant price increases of basic needs like food, health, housing, education, transport etc. coming soon ?

 In the current worldwide environment, where events and development often are unpredictable - in some cases dangers - PM how can you carry on with the same old pattern of governing this country ? Isn’t time for profound changes ?


WFF's, DPB and other ridiculous welfare payments MUST END. Our solvency as a country depends on it. END IT KEY!, Show some  savy and balls for a change you gutless Labour wannabe!

WFF has ended in my household, just in time for xmas.

Been working long hours OT to keep up with living costs and IRD say I make too much now.

Wife at home looking after two littlies - bog standard starter mortgage payments - car payments - all the other bills - no luxuries (no Sky TV, no Xbox, no movies, no going out for meals, lots of rice and noodles.)

Already know what you're gonna say - 'Back in my day we lived like that and we didn't need WFF blah bla blah' - but you should go and compare living costs and prices from then with now.

WFF helped keep our heads above water but we'll just have to learn to be as tough and strong as all you BBers who never got handouts and inheritances and didn't buy houses back when they were 3 x the avg wage and then pushed the market into a bubble.

You guys are our heroes.

I thought you did all right magnum. Last time you saw you, whilst you had a cheesy moe, you also had a flash car some hot chicks and a cool pad in Hawaii. What went wrong?

Perhaps it is natural justice for stealing others rather witty log in names.

2007 quote from almost EVERY economist including the fools at the RBNZ

"NZ will have a Soft Landing" LOL, how about a slow drop to oblivion?

Who's going to look after The Precious?


NZ has reached a critical juncture, perhaps just as critical as we faced in the mid 80s.

Do we continue on, with only some minor tweaking at the edges, in the interests of short termism?

Or do we make some bold moves, that will have some shorter term pain, but longer term gain?

Unfortunately I do not believe this govt has the fortitude to make the necessary bold calls.  

i think what you mean to say is that the government are not allowed to make the calls. They obvioulsy do not have the kahunas for it either, and this will be illustrated all the more clearly to the lemmings when, should they stay in govt  the sell off will begin. This will be the Nats answer to rebalancing the economy, awesome stuff....

NZ is so grossly let down politically - Still the people allow this to happen via apathy, so really there is no cause for complaint.

The thing that makes me laugh is that those who constantly criticise the previous government for its decisions attempt to rationalise that the current one is somehow not responsible for the decisions it makes.

All the eggs of the property ponzi are now comnig home to roost.

It is quite clear that NZ cannot survive without the fake wealth of a property boom. The problem is, the fundamentals are stacked against one happening again

All these middle class welfare schemes like WFFs could work (only just) when the govt was creaming tax revenue, based on big spending by "wealthy" boomers, high tax rates  and full employment

Councils creamed it from rapidly growing rates bases with rapidly growing property prices

Now the coffers of both central and local govt are getting empty

the biggest property ponzi ever - China - could yet bring the world to its knees

Helen Clarke's Govt have much to answer for - it will be almost politically impossible to can WFF now  




WFF isnt a  middle class scheme, sure a scheme thats been over-extended to start to incl some....Cullen did that because it was his only way to counter Brash's tax bribes......lets not forget who started teh bidding war.

Of course NZ can survive....taxes will have to rise....but that will be a world wide thing...the UK is seeing that happen now.....the only Q is how long before that happens here....

Services will I am sure be cut.....and the middle class will bear that brunt I am sure.....

Not just HC and in fact looking at some of the disaster areas fo the last 3 decades so great Pollie plonkers come to mind....Jenny Shipley for instance......Donny Dork Brash......

I agree WFF wont be canned...its a great piece of social engineering...enough ppl benefit from it to ensure its needs to be cut back but that again is a hard one, LAbour Im sure will be on the look out for that event....and will scream from the hill tops......until they get back in and face the mess of course....

China, I expect will blow up, whether its the particular fuse that sends us into the double dip who many of them...........



MIA - I agree, but someone has to take the challenge up, or are they waiting until the country defaults, then the IMF will make the decisions on behalf. Wake up NZ the country really looks to be going down the toilet, and being helped along by the decision makers abdicating responsibility.

I hope those who write in the blogs are taking the time to write to their MP’s and indeed to the ministers to voice concerns etc, because this blog can fix nothing, but public pressure can….do it for the sake of your country people.

Ruh Roh......

Who would have guessed that burning 275 mil a week on a bloated public sector, WWF and other vote purchases while getting high on property bubble debt fuel to the detriment of investing in value added export earning enterprise would have in such a precarious position?!

JK and Co are the prefered aquiesent salesmen setting us up for an eventual IMF 'reality adjustment'. They're just needed to buy votes long enough for the 'magic' to take hold. Once we're on the ropes and completely addicted to debt crack and debilitating FTA's we become a lot more compliant to LBO's of strategic assets and future generational servitude.

But of we're going to become the New Ireland of the South Pacfic of course!....complete with our own tax free financial hub: Money for noth''s the New New Zealand way.




Commodities are at record highs, more than likely they will slide back next year. Then we need to rebuild our stock numbers because of droughts etc. Im thinking next year will almost certainly be worse, I also suspect that the government knows it.

Does JK look a happy chap? The pictures Ive seen of him strike me as guy who's thinking he's got the best job ever, only to wake up and realise it isnt.....

Fair number of National's voters and MPs are farmers, they must see that.....or are close enough to be hearing...


yeah JK looks pretty frazzled

it hasn't been an easy year, with the tragedies, and economic woes. But I quite like the guy, I just wish he could be a bit braver

having said that, cut out WFF, and there will be even less spending, and therefore less tax revenue through consumption. I wonder if cutting WFF would just be tax neutral at the end of the day 

Really, the damage has been done, in terms of our indebtedness. And Labour must take a lot of the blame for allowing the property ponzi scheme to inflate so greatly

Mind you, they did do some good things. I am a supporter of Kiwisaver, for instance

Key has had it EASY! Whenever he and his outfit have been caught with their hands in the cookie jar a natural disaster has occurred to save them. Think Samoa earthquake & tsunami, Chch earthquake, Pike river etc.

That is uncalled for , to imply that the Pike River disaster has in some way assisted JK & his government . ........... Dirty pool , man !

Even though commodity prices are high, Farm costs last 5 years gone up 38%. returns 4%  Farmers will not be able to restock farms because banks pulling out of sheep and beef despite their rhetoric. Rates payments down 20%. People should be pleased we have a welfare system keeps the masses quiet. The only way this country is going to get out of the shit is :   Keys to use the legislation in the Reserve Bank act by an order of council   through the Governor General "reserve Bank may be directed to formulate and implement monetary policy for different economic objective and the minister can direct the bank to deal in foreign exchange.......within that range of rates specified by the Minister.

Banks are strategically placing farms on the market. Next autumn many more farms will be forced to sell. The Banks state only 10% of farms in intensive care approximately 43,000 sheep.beef and dairy farms means 4,300 farms to go. How is that going to work.Virtually no capital to invest, Banks are chasing bonds and sterile men and women, legislation getting pushed through to prop up Westpac.........But I forgot Keys is the money man he made his fortune gambling. He knows what he is doing !!!Rural debt needs to be restructured, profitability needs to return to the primary sector and dare I say it capital gains tax introduced . I don't understand why people are so vicious about WFF, DPB etc, how many of you have bought a family up on the minimum wage and enjoyed the experience. If the social welfare system was slashed the money saved would only be diverted to the penal system. Here's an idea.....    Lets create a  new job  programme............ build more prisons. We will need them!!

WJ I know of 5 dairy farms in the last two months which have been placed for tender or auction in various parts of the country.  Not one of them have received a single bid/tender.  These are farms that a few years ago would have been snapped up.

Those farmers that do have the cash to buy still seem to be 'waiting in the wings'.

I was talking to a young family in the UK recently. They have already lost their child tax credits and will be losing their child benefit (approx£134 per month). It is the loss of their child benefit that they say will be the hardest blow. 

However it was also interesting to hear them say that for the sake of their children's future the UK needs to make these sorts of decisions. They are more concerned about what the UK will hold for their children's prospects than austerity measures being introduced.

I am not convinced that a capital gains tax would produce the revenue that the govt needs.  It is not likely to be retrospective (or if it is, it wouldn't go too far back) and with falling property values people could have tax write offs. It hasn't saved those countries that do have it from either the property bubble or fiscal deficits.  A rise in income tax rates to 40%,  on those earning over $150,000 would probably raise just as much.


Great comments, suggestions and foresight for where we should be heading. Some heading into politics genuinely believe they can make a difference in a positive way.

JK may have felt that too; but with favours to repay, it just becomes more daunting....nothing new here. Add a few national disasters and a global meltdown....mmmm

The reality is that being PM  of a tiny country near Antarctica is a hell of a lot more dangerous than being a CEO of a global corporation.

JK and the like face the bullet every three years and you are never going to see positive change when they must pander to the demographics of voters.

That very simply is the cost of democracy. That cost is spiralling in every way and I dont see how we can continue to afford it. The alternatives are????





There were no control mechanisms in place for the property madness. Every man and his dog was on the band wagon. Now is pay back time.

Mossad sees Japan as "The Wild Card". What will Mrs. Watanabe do to her Uridashi's if her own country suffers?

JK and BK will have to crank the printing press harder. Back to the mid 80's again.

AUD/NZD hit 1.3200. Will see 1.3300 - 1.3500 range before Santa's arrival or S&P review.

Are we seeing overall property prices back to 2005 levels or lower this summer??

Over in Aussie, 1st. home buyers are suffering from AIDS (Acute Income  Deficiency Syndrome) as reported by agents.

Agents reporting today new money in an Aussie Bank for 4 months - on call a/c -  returning 6.4%  and - 36 months t/d - with interest paid yearly at 7.2% with government guarantee till October 2011.  Ain't bad to have money there plus the increase in AUD/NZD exchange.

Looks like the Aussie banks longer term lending rates are heading North.

It is either Mossad or me, but Bernhard you can't have it both ways.

1998-2007 International cheap credit = 

Banks lend more at ridiculous terms (100% finance) =

More house buyers (don't miss out hysteria) = 

More people enter the property cycle in employment roles (RE agents, lawyers...)=

House prices go up in price due to increased demand.


2008-2010 International recession

Banks tighten up lending =

Less buyers = 

Unemployment of RE Agents... = 

House prices drop /  stagnate in real terms except for high demand area's


Crystal Ball

2011-20?? International expensive credit due to rating downgrade?

Mortgage interest rates go up = 




011 will see the arrival of a very angry bond market and the fraud that is the NZ ponzi economy will cop it. Banks that have been hiding their dirty loans will find exposure brings ridicule and red ink in equal doses. Expect the BS indicator to blow a fuse. The survey game is set to run red hot.

The public trend toward prudence and deleveraging for survival...set to become the normal behaviour along with the post xmas sales shopping for needed stuff. Backyard gardens and chooks.

Today we hear some of the truth with the release of the half term budget details....which Key has tried to water down with his chitchat yesterday. We will also get a good helping of warm fuzzy projections of better times ahead just round the corner when the light shows up in the tunnel at the end of the day blah blah blah. All total BS.

This is the new normal economic activity level in NZ. Get used to it all of you especially you John Key. If you want to be helpful, start cutting back the beast that is the state. Here's a comment from the UK...


By Graeme Paton 6:30AM GMT 13 Dec 2010
"Only a quarter of people believe more money should be spent on benefits compared with more than half in the mid-1980s, it was disclosed.

A large-scale analysis of social attitudes over three decades also found fewer adults wanted the Government to redistribute income and many believed inequality was down to “individual laziness on the one hand and hard work on the other”.

The disclosure, in the annual British Social Attitudes report, is being seen as evidence that public opinion is “far closer” to many of Lady Thatcher’s core beliefs than it was when she left office in 1990."

More than a little to think about over the break John.....enjoy the holiday at the batch in Hawaii...try to avoid Barry Obama....tar sticks!

"[The} tax take is has been slightly less than we anticipated, although the expectations are that will come back into line next year

Would someone explain to me how come the tax take will increase on this year, next year? Thanks

 All the dairy farmers I know are dropping in production fast. While we haven't had the autumn yet, which really is the defining season, at current production drops the latest announced increase in Fonterra payout will probably not compensate for the production loss, so there won't be any extra tax take coming out of the dairy sector. With agriculture out of the equation that just leaves retail and/or manufacturing and I didn't think that their profits were going to be that much higher.

 "how come the tax take will increase on this year, next year?".....beeeecause John said so CO!

Tweak and Fiddle still believe strongly in the power of positive BS....that there are more than enough idiots in the country to carry on with the game.  And don't forget the banks have their hands on more cheap loot..plans to splurge on advertising and pump the bubbles.........

I wondered Wolly, if maybe in the month I have been absent from NZ that maybe something really wonderful had happened, but I see it is more of the same old, same old.  Sigh.

I see Liverpool Citry Council is cutting 48 out of 72 senior managers jobs due to a £1bn deficit.  Perhaps that sort of cut should be applied to Treasury for getting the 'predictions' wrong (which they seem to do frequently).

Careful CO....Sir Humphrey would quickly justify the hiring of ten thousand more state servants to facilitate the application of Cabinet proposals to pursue the potentiality of fiscally prudent policy.

CO, So the options are, cuts in government spending, or tax increases.

 Im betting, ineffective cuts in government and more taxes.  I think a land tax is more likely than a Capital gains tax. When you think a bout it a land tax like council rates is a given. Just comes in year after year and hits the 'rich' except those with assets off shore like some, hence a popular choice in a society used to handouts and getting poorer because of poor productivity.

AJ the first option is always the BS...extend the spin and pretend....a tweak here and a fiddle there...lie like hell and hope the big bad hole will go away. Taxing land will only serve to compound the fall to this new are suggesting the thieves get the billion a month not from bond sales but from those who saved and invested in productive enterprise...there can be no better way to reinforce the idea that govt destroys all.

The heart of the problem are the property bubbles and to date govt and RB policy has been to protect the bubbles. That is why the new OIO rules leave open a hole that Gerry could fall through. As long as the total land area is under a set size, no OIO ok is needed. It's an open door policy. The aim was to provide the govt with room to BS the public over land sales to the banking mafia, while ensuring the rural bubble is saved on the back of more land sales to the banking mafia. 

BS rules AJ.

Waolly -


If you don't want to vanish with a boot up the bum

Gotta give the population something to hum.

 " the four months to the end of October, the red ink was running $1.9b deeper than forecast mainly because of the Canterbury quake and lower tax receipts as the economy languished.

That suggests the cash deficit could top $15b, pushing up the Government's borrowing requirement – including refinancing existing debt – from $250 million a week to as high as $350m."

Hellllllloooooooo....anyone home......just popped in to wish you all a merry.....oh ...I see you're already having a merry.....pooooooh that's awful....where did you get it?.....why are you feeding it ..?

The economy it friggin didn' opted for a lower level of activity based on growing frugality so it could feed the banks....while the savers decided to spend even less knowing the level of shite that is still to hit the fan....and to pay down the 180 billion in household debt will require a step down to a much lower level of normal...suck on that.


350 million per week is the same as the weekly PAYE income tax that over 2 million taxpayers earning 50000 per year pay. That kids is a LOT OF MOOLA.





"The problem with socialism is that eventually you run out of other people's money." (Margaret Thatcher)

"And the problem with capitalism is that you eventually run out of other people's resources".


Touche   :)

They were not using them at the time.   :-)

Casual observer; The only way out for the rural sector is a restructure of debt, the same that was done in the 80;s. If a restructuring programme was put in place then something else like a Capital Gains tax would have to be introduced to prevent yet another cycle of property boom.Also I think alongside restructuring there needs to be a nz owned rural bank established. There is no one waiting in the wings to purchase farms banks aren't funding New rural lending only .3% whereas in 07/08 it was 22.1%. I have alot of contact with farmers even those that have produced substantial profits and are able to cash flow their debt are being made to sell. A hill country farm tendered received one tender only for 40% of the farms rateable value another farm received a tender for a quarter of the debt. Banks don't no what to do if they accept these very low prices it sets of values falling even further and another lot of farmers will have debt equity issues. The only solution is a restructure and that will reqire government input. After all the govt were only to keen to bend over for Hollywood because " it was in the countries best interests" the samething needs to happen for agriculture. Look at the negotiations going on in the TPP talks. New Zealand is going to bend over again . My Farms are marketing for equity investments being fed farms by a bank, and the spin they use to entice investors is " land will never be so cheap, get in now and reap the rewards later when values goes up" so the same cycle starts again. Hence the notion of capital gains tax.

walker janette: we were first dairy farm buyers who settled 1 June 1986.  Despite the then Rural Bank trying to get out of lending us the money they had agreed to as they believed we would be broke after the first year, when mortgage discounting came in we were considered too profitable to qualify. At that time payouts for dairy farmers were very low which cannot be considered as a factor today.

I do not believe that farmers should be bailed out by the government by having their debt restuctured by the taxpayer for making less than sound financial decisions. Last time that happened within two years, a number of farmers who had had the advantage of having their mortgages discounted were back buying additional land.  They were able to do so because they had the benefit of having up to a third of their original mortgage wiped out via the discounting scheme.

In speaking regards the dairy industry - How much farm debt is due to properties, kids lifestyles, and parents above average lifestyles?  The reasons for some farmers being in trouble is no different to some of our urban business counterparts being in trouble. 

Property/business boom and bust cycles have been happening since commerce began despite capital gains tax. Introducing one here is not going to stop that.


Rhodes in SA, Bligh et al in Aus, Wood/Morley/Montague/Pethic-Lawrence in India, Palmerston/Elliot/ in China:

Lord Palmerton, Britain's foreign secretary at the time of the war said, "It would be called the Opium War because opium was the article of commerce that had caused it. But the war would not be fought over opium but over trade, the urgent desire of a capitalist, industrial, progressive country to force a Confucian, agricultural and stagnant one to trade with it."

They were using them at the time  .........:)

Twenty percent GST.should bring the tax take back into line.

AUD/NZD exchange 1.3290 just short of 1.3300 before "bigger hole" revelation.

How big is that hole JK?  Hope it is not the "mother of all holes" by your treasury.


The world economy has survived sovereign debt defaults in the past, not by bailing out the miscreants, but by paying close attention to their own balance sheets. If you don’t want a Greek default to lead to a crisis in your country, balance your own budget ahead of time.  

" the outer limits of what we'd regard as acceptable......."

Isn't it a bummer having to adapt dreams to the real world, rather than the other way around?

Isn't it funny how simply being a pragmatist like Roger Douglas or Don Brash, makes you some kind of pariah in modern day politics?

Casual observer, Obviously measures would have to be put in place so that some farmers can't rort the system. NZ's economy is dependent on a healthy rural sector.

1984-85 sheep and beef farms   surplus before tax /hct $70.60

2007-08    "                   "                "   surplus before tax /hct $13.75     Meat and wool stats

Farm costs have gone up 38% last 5years and returns 4%. Easy to say that farmers are in the shit because they had an extravagant lifestyle. 44% of farmers or spouses work of farm. Or that they made poor financial decisions. How about drought affected farmers they have stock to feed with limited od's and Maf waiting to prosecute and farmers still have to produce income. Most of the farmers I talk too are on the bones of their bums and are certainly not having a great time. This govt needs to formulate a comprehensive economic strategy and the rural sector is to important to NZ's financial wellbeing to just let it be a victim of boom  and bust. You only have to drive around the country to see that capital isn't being reinvested into agri businesses. Wrightson closing 15 outlets  and laying of staff. redundancies in the IRD, sub contracting prison management to overseas companies the list goes on. Farmers are the backbone of this country.