NZ Govt to borrow 10% of GDP

New Zealand Debt Management Office to issue NZ$20b, or NZ$4,500 of debt per person this financial year

3rd May 11, 3:45pm by Gareth Vaughan

By Gareth Vaughan

The New Zealand Debt Management Office (NZDMO) has confirmed it will issue the equivalent of about NZ$4,500 worth of debt for every New Zealander this financial year.

The government's debt manager said today it was lifting the 2010/11 domestic bond programme by NZ$3.5 billion to a maximum of NZ$20 billion. This is the equivalent of around 10% of GDP.

The programme has now been lifted by NZ$6.5 billion since March 30 with today's increase the third since then, with NZ$1.5 billion increases announced in both March and April, after a NZ$13.5 billion annual programme was set last December.

NZDMO Treasurer Philip Combes cited three reasons for the latest increase:

The programme size is now much larger than the forecast cash deficit for 2010/11, enabling pre-funding in favourable market conditions.

It reduces borrowing programmes in future years.

It ensures that the market has continuity of supply by providing for average issuance of around NZ$400 million a week for the next two months.

Based on New Zealand's population of 4.4 million, NZ$20 billion dollars would be about NZ$4,500 per man, woman and child.

Combes said recent demand had been very strong for government debt.

“We announced significant revisions to the bond programme on 30 March and 12 April but the extra supply has been easily absorbed by investors,” said Combes.

“Despite recent events, the rapid pace of bond issuance has built up our cash holdings to record levels. Consequently, it is most unlikely that there will be any further increases to this year’s programme” he added.

The NZDMO will announce the 2011/12 bond programme in conjunction with the Government’s May 19 Budget.

Analysts at the ANZ predicted in early April that the NZDMO could increase this year's programme to NZ$20 billion as it soaks up strong investor demand and raises money to help rebuild Christchurch after the devastating February 22 earthquake.

A spokesman for Finance Minister Bill English said the increase was an operational matter for the NZDMO.

Prime Minister John Key said although he was not happy about the level government was having to borrow, the increase reflected the fact the Christchurch earthquake in February had a significant impact on the government's books.

"When you get to see the budget on May 19, Treasury is doing quite a lot of work to separate out what the effect of the earthquake has been, and [it is] probably better we have that discussion when all the facts are on the table," Key told media in Parliament this evening.

The extra NZ$6.5 billion of borrowing announced in the last 5 weeks is equivalent to NZ$185.7 million per day, or NZ$7.738 million per hour, or NZ$128,968 per minute, or NZ$2,149 per second.

The NZDMO last month issued NZ$1 billion worth of debt in a single bond tender, its biggest ever one-off issue.

(Updated with PM Key's comments, Finance Minister's reaction, Interactive chart of government debt)

Government debt

Select chart tabs

Source: RBNZ

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81 Comments

by John | 3rd May 11, 3:58pm 1304395105

Why can't I have some of that action, i.e. I could pay my bit and they could pay me the interest tax free, as the money was going offshore anyway. Yes we could talk about opportunity cost, i.e. I would have paid tax, well thats if I saved it as opposed to deciding to spend it as its not worth saving money as the govt devalues my purchasing power.

Don't give me an incentive to save more, give me an incentive to spend overseas by keeping the currency high, and borowing by keeping interest rates low.

And everyone wonders why the country is going backwards.

by rp | 3rd May 11, 4:06pm 1304395603

...the words "like a drunken sailor" and "highway to hell" come to mind

by KevinMcMenamin | 3rd May 11, 4:10pm 1304395800

how much of this is new borrowing versus rollover borrowing versus future borrowing brought foreward. Although still a frightenly large number - and still they are give pay rises to government employees. Trust us - we know what we are doing..yeah right

by Nicholas Arrand | 3rd May 11, 4:15pm 1304396139

An accountant friend told me a few years back, that he could tell who was going broke next by the rate that his clients borrowings increased relative to the company growth. Sheep and lamb stuff, I guess.....

by rp | 3rd May 11, 4:25pm 1304396706

..so true, shrinking income (tax receipts), increased borrowing (above), and add to that increased spending. Whammo that's a good forumla for running the country...if you're in the IMF business and wanting a new client.

by meh | 4th May 11, 10:15am 1304460922

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10723321

Christchurch rebuild work to cost more than $2b.

The group of construction companies tapped to rebuild Christchurch city infrastructure damaged by the earthquakes are looking at more than $2 billion of work over the next five years.

If the rebuild of infrastructure is $2b over 5 years why then in the govt borrowing $20b now? Why is the govt borrowing anything under the guise of rebuilding Chch - I would've thought the bulk of the damage incl infrastructure was covered by insurance?

by Kunst | 3rd May 11, 4:29pm 1304396940

Time for culture and leadership change. The reason why I don’t believe in a recovery, but the opposite is following:

We are culturally to much depending on consumerism and not enough on production/ manufacturing. The uprising to change the trend from the public/ media is weak – to none existent.

Therefore our government has practically no resistance of mismanaging our economy, because often businesses families/ citizen do exactly the same – creating more and more debt.

Why is our government allowed to importing most everything and pushing New Zealand into more debt.

Where are incentives for more diverse production sectors coming from the government in support of skilful employment research and technical developments ? Where are the incentives to make us weathltier ? There is no structure in our economy - but wasting massive NZbrain/ talent and skill potential - unbelievable - exported overseas.

What a great Import / Export business - HA !

by Kunst | 3rd May 11, 4:41pm 1304397706

Key is saying the government is heavily investing in infrastructure - think about – where the money is going – and for what - squib !

by powerdownkiwi | 3rd May 11, 4:39pm 1304397581

Some may be surprised, but I reckon we should pull our fiscal heads in too.

Because the ability to repay in future, will be increasingly compromised.

Where I differ with the ideology of the bleaters hereabouts, is that I think we need to keep - and in some case enhance - the services that Govt supplies. Govt is, after all, all of us.

So, it follows that we should pay public servants less (and less as time goes on). That will match those of us outside the PS, regardless of the screams and hollerings.

Sure, the timing may see some go elswhere for short-term gain, but by and large, every country will be in the same boat. Indenturing and bonding should be applied, and any other options looked at.

by scarfie | 3rd May 11, 11:06pm 1304420805

I think with better communites the need for government services would be greatly reduced. Getting away from the materialistic focus might be a good start. I hold out hope that what will be enforced upon us by depression will in the long run be beneficial.

by President of P… | 3rd May 11, 4:56pm 1304398600

Attention - including to the pointy hats in the buzzbox...

all that need happen is everyone can be taxed a bit less, and everyone allowed a slice of that there pie if they can ($4500 or more if they want).

the government then offsets future debt, and in turn rewards it's citizens to a good democratic future and the private backers, that is us, receive a very good dividend.

those kiwi financial backers smile and the $$$ remain on shore and stay on the merry-go-round.

government is TBTF so we need to bail them out, and it's a win win win flippin dippin win win suitation

even if you can not afford the pie, the small tax cut may allow you to by pie in the future, or at least survive through this, and also not be up to the neck in national debt, feeling gloomy too about the guilt of mountains of debt and a frozen future for generations to come

let's live like they do in Monaco and spurge in cash instead.

PS: no offence about the pointy heads, just needed the attention of the politicians

PPS: i will be happy to take my cut/commission at 0.000001% of all future capitialized debt saved nationwide.

President of Property A.K.A Brent Thompson / POP

by Vera Fayed | 3rd May 11, 5:18pm 1304399912

...sounds like the magic mushies have popped up early this year.

by JB | 3rd May 11, 5:26pm 1304400360

Borrowings the easy part ...

How do we plan to service this level of incremental borrowing ?

At current 10 year rates at 5.6 % that's another $ 1.1 pa - equal to the annual income of our Kiwifruit or Wine industry. So we need to create one of these sorts of industries ( which takes about 20 years ) in 12 months just to pay the interest on this years borrowing.

This is absolutely obscene and JK showing his real mettle as just another gutless populist PM - keep smiling through it all and bankrupt our grandchildren !

$ 880 million pa for Policy Advice,

$ 1 B pa for the ETS plus god knows what liabilities given we don't know the future price of carbon.

Yes he's been dealt a couple of bad hands for sure - but there is just no will for change.

Our little Island is going to end up spelt with an " R".

With 2 S&P warnings - a downgrade is just a matter of time now as there will be f-all of substance in the budget with an election months away.

If you think we have a debt problem now - wait till we see Portugal type rates with a 9 in front. Then default is certain.

by Gummy Bear Hero | 4th May 11, 12:06am 1304424382

Well said , JB . ........ Excellent !

by OMG | 4th May 11, 1:17am 1304428656

Well said, and here's one way of paying, just as peakoil strikes.

www.palmerston-north.info

So is some of this borrowed money going into wind farms to meet ETS/ Kyoto "obligations"?

by Matt S | 4th May 11, 9:44am 1304459048

Spot on JB, well said.

by Wolly | 3rd May 11, 5:29pm 1304400547

The debasement is the key plus the fact that future credit will cost a shite more. It is not the borrowing that is critical...it is the manner in which it is spent that matters the most. Sadly to date govt has failed to recognise the fact that this time things really are different...this is the new normal...the state splurge has to stop...It will not...$880million wasted on buying advice....just one example of the state cancer eating away at the country.

by Andrewj | 3rd May 11, 5:32pm 1304400759

Speaking yesterday at the European Parliament in Brussels, Mervyn King warned that a rise in long-term interest rates would have “severe” consequences.

http://www.telegraph.co.uk/finance/economics/8488547/Bank-of-England-Go…

by Gareth Vaughan | 3rd May 11, 5:39pm 1304401168

That extra $6.5 billion in 5 weeks ( since March 30) is equivalent to $185.7 million per day, or

$7.738 mil per hour, or $128,968 per minute, or $2,149 per second.

by Matt in Auck | 3rd May 11, 6:44pm 1304405057

Westminster

Rather than core services, how about we start with:

- getting rid of WFF

- cutting back on a bloated back room bureaucracy and policy analysts

And then raise extra revenue through capital gains and / or land tax. I personally think high income earners should also be taxed more

by Andrewj | 3rd May 11, 6:52pm 1304405561

Matt which high income earners have you in mind? Id dump regional councils and i would like to know the average wage paid to civil servants in Wellington, we should bring them into line with the average wage of plumbers and Electricians. High income earners are often highly mobile.

The reality is that we dont have a leader with the courage required to get us out of this mess. Next a currency crisis as savers piss off, then interest rates rise, then we get to do what should have been done years ago but now we get much poorer because we are lumped with the interest. Makes me angry.

by Matt in Auck | 3rd May 11, 6:57pm 1304405867

I'm not sure, probably people earning over 100K per year. That includes me!

Sure, some will bugger off from NZ, but if NZ collapses then even more will escape!

Everyone needs to make a sacrifice - the high income earners through higher tax, the middle income earners through losing WFF

by Andrewj | 3rd May 11, 6:59pm 1304405979

Matt I dont think it would earn enough to make a difference. The only option is massive cuts in Government spending.

by Matt in Auck | 3rd May 11, 7:03pm 1304406208

Andrew you could well be right.....what do you have in mind in terms of spending cuts - I assume you are pointing to cuts even to core services? That really spooks me

I agree we have a gutless dweeb of a PM.

by Matt in Auck | 3rd May 11, 7:10pm 1304406641

perhaps we could cut back massively on NZTA's motorway building programme

even without a financial crisis I think the cost/benefit ratios of these projects are questionable

by powerdownkiwi | 3rd May 11, 8:23pm 1304410989

Matt - you're close with that one.

Motorways for what?

by Elley | 3rd May 11, 7:17pm 1304407057

The problem with removing WFF completely is that so many low/middle income families have been relying on it to live for several years. As many have said already, people have been including those payments into their budget and have often taken on debt based on their overall income including WFF.

Also, the COL is so high these days compared with the average wage that life would become very tough for a lot of people. Although some say WFF has been a subsidy for employers I seriously doubt employers will suddenly increase salaries by a lot if WFF disappears. We're kind of stuck between a rock and a hard place with that one... The only way to completely remove it would be a "gentle weaning" maybe, over several years.

Re-higher taxes on salaries over 100K, it's too low a threshold I reckon. And as you say, people on higher incomes are often the most mobile (and the more able to pay an accountant to avoid paying higher taxes anyway).

by Matt in Auck | 3rd May 11, 7:38pm 1304408327

I sympathise with your view on WFF but unfortunately I can't see any option but to can it. As a country and individuals we will be in much more trouble longer term unless we make some rather drastic cut backs. We'll be REALLY poor in the longer term if we keep living beyond our means

I had my first kid when I was 26, was early in my career, didn't earn much, wife went back to work early in our first child's life. We really really struggled but we survived without WFF

by Elley | 3rd May 11, 9:44pm 1304415844

Yep, I know we have to cut our debt. I just don't know how people on average incomes can survive and when I read articles with families saying they can't afford to buy milk/cheese etc (even though the parents work) and see the kids with just junk in their lunchboxes because it's cheap, well, I just don't think it's right (my view on WFF is not interested - not getting it with 4 kids, won't be getting it when the new baby comes along in a few months' time).

Also, I am not saying not to cut it ever. I am saying not to cut it suddenly and without either our COL dropping or our incomes rising. Too many families are already struggling too much at the moment.

I understand what you are saying about you getting by when you were younger but we're the same age I think so that would have been about the time I arrived in NZ. The COL has increased by a great deal since then (to name just a few essentials, food, electricity and petrol, and of course houses). Salaries haven't.

by Andrewj | 3rd May 11, 9:54pm 1304416496

Elley are you having the first interest.co blogger baby? If you need a decent name you shouldn't go past Andrew, Wolly, gummy, Powerdown and the rest haven't got a decent name between them.

by Elley | 3rd May 11, 11:19pm 1304421551

Seems it's a little miss so will have to find something a bit sexier than Gummy (no offence meant GBH!) :) Probably a French name, again (but won't make the mistake to choose one with accent again, too complicated it seems!).

by Gummy Bear Hero | 4th May 11, 12:00am 1304424036

Thanks for the vote of confidence , Andrewj , but Elley needs a solid French name to put her baby girl on an equal footing with the beer-swilling-rugby-mad males of New Zealand ......

Something up to date , strong , sexy , respectful ...... ???

....." Megatron " ! ........ that's it , Elley , she won't put a foot wrong with a name like that .

Megatron . ......... Sweet !!!

No need to thank me . Glad to have been of help ........ Bless !

by meh | 4th May 11, 10:35am 1304462149

Elley, the problem with WFF (in my opinion anyway) is that it encouraged families to live beyond their means. How many upgraded into more expensive properties, cars and gadgets via increased borrowings because WFF improved their income and ability to meet repayments (according to the bank)? How many have had more children when maybe they should've stopped at what they already had? How many decided they'd rather not work because they could get a handout instead? How many have developed a sense of entitlement because of the handouts (applies to other beneficiaries as well)?

Yes the cost of living has increased but how much did WFF contribute to this (increased demand) over the past 6 years? Instead of subsidising employers why did the govt. not address the issues at the time, ie housing affordability and low wages - because they were buying votes pure and simple. Plus the govt. at the time needed to continue the illusion of a strong economy that was only built on consumption and property because the productive sector was non existant. Strip out the consumption and property and we were probably in a recession for the past decade.

by Elley | 4th May 11, 11:02am 1304463760

Meh, I completely agree with you; people's behaviour towards getting into more debt has been childish and financially illiterate. However this is the situation we have arrived to (people in way too much debt)... The problem is that now, too many people in NZ are in the "too much debt" boat. So what do we do? Make things harder for them overnight, which means they may well end up having to increase their debt/credit card limits which would make things even worse, or should we adopt a gentler approach, ie weaning people off subsidies over several years (maybe starting by cutting WFF for salaries above 100K and gradually reducing the amounts for lower incomes, maybe even limiting it to people with children < 5 years old or not increasing it after 3 kids) while implementing a solid financial/budgeting education at school.

As I said, I don't have an interest in WFF being retained myself. We have no debt, two incomes that are considered high by NZ standard and save more each month. My concern is that the majority of people are not in our situation and I am worried about the repercussions on families if subsidies were to be cut suddenly from them, especially with the COL escalating. My guess is the kids would end up being the ones getting "hurt" and as a mum, I don't want that to happen.

In addition to cutting subsidies over a period of time, reducing the size of bloated govt depts as well as not paying for a working group every time a policy needs to be developed might be a good idea (especially when their recommendations are dismissed anyway). And of course, trying to encourage the growth of businesses and the availability of well-paid jobs would be good too (no, I don't have a magic solution for that, just something I think we should aim for).

by Andrewj | 3rd May 11, 7:39pm 1304408398

Elley, Im with you the average earner needs WFF to get by.

At least we are having the right debate, I think our standard of living must fall it would be a shame if the wrong people wore most of the transition costs. As a higher income earner I already pay alot more tax than the average kiwi, how much are you planning to increase my taxes?

Our big risk is interest rates climbing

by Matt in Auck | 3rd May 11, 7:45pm 1304408750

Andrew I'm a tad confused you advocate govt spending cuts but support retaining WFF???

Please explain

by Matt in Auck | 3rd May 11, 8:01pm 1304409711

Maybe we just all ned to get a bit more creative

In all our cities there are huge Council reserves where most of the land is unused. Why can't we get a lot more community gardening happening in these spaces, if say 40-50% of a family's vegetable / fruit needs could be met through community gardens then that would be awesome

things like that aren't too hard, surely?

by Andrewj | 3rd May 11, 8:21pm 1304410913

Matt Im just a bit worried about the hardship many would suffer if WFF was cut and at least these guys are working. Im thinking that we need to slash the size of the state first, then attack the welfare state. I know this conflicts, but I have no idea how to create jobs in the present environment, WFF has become a subsidy to employers allowing wages to stay lower than if it never existed. Im thinking we will end up looking more like a south American country than what we have at present. We need more well paying jobs, I dont see that as a role of government other than to create a environment for business to thrive.

by Matt in Auck | 3rd May 11, 8:30pm 1304411434

Andrew as per my comment to Elley I sympathise with your view, but I just don't think we can afford it

I would rather sacrifice WFF and ensure all core services (health,education etc) are maintained or even enhanced

by Elley | 3rd May 11, 9:50pm 1304416221

I'd like a country where all core services are maintained or enhanced and the average working family can afford a decent standard of living (by "decent", I'm not talking flash cars and TVs, just the average family being able to meet their day-to-day expenses and not spend their life stressed out by financial worries). Andrewj is right, we need more well paying jobs.

by Gummy Bear Hero | 3rd May 11, 6:58pm 1304405927

Slash salaries of public servants , particularly the huge number on $ 400 000 + annual incomes , SOE CEO's , newsreaders at TV1 , .... rip into the bloated bureaucracies within the health boards ( put tax-payers munny into healing the sick , not into propping up $ 500 000 salaries for the executives ) , .........Whew , this is fun ....... and so much more to do , pity that Cousin Rodney didn't involve himself with this stuff !

by Wolly | 3rd May 11, 7:02pm 1304406122

Don't forget the $880million being dished out for spin, bullshit and other "advice" Gummy.

by Gummy Bear Hero | 3rd May 11, 7:16pm 1304406996

Yup , I had that in mind too . ..... It just goes on & on , the enormous waste of tax-payers' munny , or munny borrowed offshore .....

by Plebian | 3rd May 11, 9:05pm 1304413540

Westminster, the problem is not so much about what the government is spending on these services but the poor return we are receiving for such expenditure. An example... here in Gisborne we are having the courthouse enlarged yet once again. We had a brand new one built some years ago and the current work is the second time it has been extended. The population has grown very little over that time but the crime rate is obviously increasing to warrant this court house building spree. If the courts imposed penalties that sent a message to the miscreants of our society that a life of crime was going to be a most uncomfortable one then maybe the crime rate would decline and the need for expanded court houses and their attendant costs would be avoided. Bingo... no need for increased spending in the first place and so, no need for cuts further down the track.

Don't get me going on education. It is one of the foundation pillars of our society and it is riddled with termites. The return we get for our education dollar is a disaster.

by GG | 3rd May 11, 5:54pm 1304402087

And all this current borrowing failes to factor in the fact that the first of the BB's are only just starting to retire this year and the massive super and health liabiities are largely unfunded. Plus the tax base is still to heavily reliant on mobile skilled PAYE earners.

I can tell you that the consensus up in Asia is that NZ is insolvent in the medium term. The bet is that NZ will be forced into an unsustainable fiscal position and hence will need to relinguish its sovereign rights to its reources to appease those who have lent to it. Those who believe that default is a realistic option for NZ fail to realise the consequences of default for a country which has so reliant on foreign debt for the private and public sectors and where so many of the population are reliant on government spending for welfare or employment.

by JB | 3rd May 11, 6:02pm 1304402567

GG - well said !

Either we do it ourselves now or have it forced upon us with little concern for our particular NZ sensibilities we treasure.

Still when Brash said that some time ago he was laughed out of town.

Joe six pack has no idea of just how ugly it can get and neither do they understand how quickly it can turn to custard.

Right now with central and local government consuming ~ 50 % of GDP there would be huge disruption to current life styles and aspirations as this is where the axe would fall first.

by Gummy Bear Hero | 4th May 11, 12:15am 1304424914

You guys are right , we're heading towards the cliff ...... And the much maligned Don Brash foresaw this in 2005 , when he railed against Michael Cullen's seriously dopey policies .............. And come 2011 , everything Brash warned us about , has come to pass . Yet still the media and the populence loathe the man ........

.......... China / Australia will own most of the means of production in NZ one day , from defaults on debts and from the fire-sales of key assets .

JK & Goofy either don't care , or they each are too stupid to realise that their policies are ruining us .

by scarfie | 4th May 11, 8:33am 1304454780

GBG. Gummy Bear Gloomsters Inc, sort of has a nice ring to it:-P

by Andrew R | 3rd May 11, 6:44pm 1304405059

Confirms we could afford all the tax cuts doesn't it?

Interestingly even at this $20 billion rate of annual borrowing it still doesn't come near the $300 per hourehold per week being borrowed that Brash was claiming last week. Of course he wouldn't be bullshitting us would he?

by philthy | 3rd May 11, 7:07pm 1304406420

It's a joke, they cuts taxes so they could go and borrow money, when every other country in the world has been increasing taxes to pay down debts, we are doing the opposite.

by philthy | 3rd May 11, 7:23pm 1304407385

The scary thing is the government are trying to fool themselves and us that they can get the money from running down the public service to 3rd world status again.

They will run it down to a 3rd world service, I have no doubt of that, but it will do little realistically to help pay for the out of control borrowing going on now.

by Andrewj | 3rd May 11, 8:45pm 1304412300

We are not alone;

Whereas Mr King said the redution in purchasing power was the worst since the 1920s, Mr Bootle reckons Britons have not suffered anything like it for nearly 150 years. He predicts that for the next year many members of the ‘squeezed middle’ and others will feel like ‘new Victorians’ as meagre increases in wages are insufficient to keep pace with rising taxes and prices

http://blogs.telegraph.co.uk/finance/ianmcowie/100010094/why-our-purchasing-power-is-set-to-suffer-the-biggest-squeeze-since-1870/

by powerdownkiwi | 3rd May 11, 9:02pm 1304413321

AJ - he's right! All wealth is underwritten by real stuff, or it is a figment of someones imagination. A proxy for real goods and/or services, or ponzi-paper.

Only a few real-stuff-exporting countries, will stay on the high side of the ledger - for a while. We may well export primary produce, but we import the energy to do the producing, it's only a margin(al) operation.

We've all been in non-underwritable overshoot for a long time - decades - and that's the what the accumulated debt (kind of) represents. Nobody is acknowledging that, though. They still think they can magically grow their way out.

I'm still not sure why some see it, and some just don't seem to be able. We did out shift and house-build in 2004, and had a tight target to be mortgage-free as soon after 2005 as possible. Turns out the IEA says it was 2006, and our income stream supported our slight overshoot timewise :)

Trying to convince the DCC it shouldn't go into debt, and why, though, was a total loss - and I'll never forget that this Govt seeded that debt with a $15 mill throw-away.

Whether you see it as fiscal or environmental, it comes to the same thing - we're insolvent. And when you think on it, the vast majority are in denial, a bit like those Hubbard supporters..

by Andrewj | 3rd May 11, 9:11pm 1304413884

But our government knows no discipline, when the tax take falls it just borrows more and thinks it can increase taxes to pay the interest sometime in the future. Out of growth created by all the roads we are building and all the benifieries having extra babies to keep the benefit.

I think the CCCouncil debt problems are about to be looked at by treasury, should get some interesting answers.

powerdown do you know this guy?

http://jayhanson.us/page125.htm

Its a mad world

http://www.youtube.com/watch?v=4N3N1MlvVc4

by Matt in Auck | 3rd May 11, 9:19pm 1304414399

I can think of so much Council silliness in the past few years. Perfectly functional facilities replaced by grandiose monuments to ego (politicians and architect)

the silliness has pervaded at both local and central govt levels

by Andrewj | 3rd May 11, 8:54pm 1304412840

Then you throw in this,

Oil Scarcity and its impact on the Global Economy http://viableopposition.blogspot.com/2011/05/oil-scarcity-and-its-impact-on-global.html In the latest edition of the International Monetary Fund's World Economic Outlook publication, the IMF dedicates a chapter entitled "Oil Scarcity, Growth and Global Imbalances" to an examination of the world's oil markets and the impact of growing oil scarcity on the world's economy. In this document, the IMF seeks to answer the current status of oil scarcity, how oil scarcity will impact the global economy and how oil scarcity will impact economic policies around the world. Oh yeh, we got problems

by powerdownkiwi | 3rd May 11, 9:14pm 1304414044

IMF - I carried that on my blog last week, says it all when they're saying things like this:

"Nevertheless, persistent commodity price increases in recent years point to a break with the experience of the 1980s and 1990s as well as with the experience of earlier commodity price booms".

IMF'speak for: "we're into uncharted territory now".

by Andrewj | 3rd May 11, 8:57pm 1304413032

some humour

http://www.youtube.com/watch?v=sNzQEQjfYog

by kpnuts | 3rd May 11, 9:07pm 1304413624

Not sure where those people are coming from that worry about the cuts to what they say are core or essential services - if you ask any senior people working in health for example they will tell you its not the value of the dollar coming in thats the issue but the way its spent! Far too many overpaid policy / middle manager / specialist adviser jobs - red tape and compliance and far to few actual nurses and bandages. most of the current contracts/ providers are overpriced and inneficient - witness ACC who often contrat with the same bodies for services who have dramatically cut costs inthe last three years. Yes there may have been a few cases where the service has been diminished - but hardly the massive cutbacks that you would expect from the costs savings achieved.

WFF has to go for anything over $70K then freeze public sector wages - already a 20%+ difference for nurses and other health professionals over the NGO/private sector with better conditions as well

hard to believe the same is not true in education?

by Andrewj | 3rd May 11, 9:14pm 1304414075

Nicked this off the telegraph, he said it better than I can.

moraymint Today 08:51 AM

"Mr Bootle reckons Britons have not suffered anything like it for nearly 150 years ..."

Spot on Mr Bootle.

It's curious to note how, even now, 3 years after the global-financial-crisis-that-never-was, (it was punted down the road by the politico-banking mafia, to be picked up over the next decade and longer by hapless citizen-serf taxpayers), so few people comprehend the dire straits in which we now find ourselves.

We need a complete re-think of how our society should function for the next generation.

We need to drop the idea that rampant, debt-fuelled consumerism (made possible primarily on the back of decades during which oil has cost around $30 per barrel) is the right way for our economy and society to function for the next 50 years.

The harsh truth is, like I've said before, we now live in an Undeveloping Nation. Our standards of living are set to decline (which doesn't mean our quality of life has to decline). We need to get used to living within our means as far as energy and natural resources are concerned; which means living within our capital means too: more equity/saving, less debt.

Right now, I'm not sure that our political elite fully appreciates what needs to be done here: just take a look at the UK's lamentable energy security to get a hint of what I mean. Or look at the government's pathetic attempts to cut state spending and bring down the national debt.

The sense of being "squeezed" will go on for much longer than Mr Bootle's suggestion that we'll be squeezed "for the next year".

PS The watchword for the next generation will be "localisation". Globalisation, as we've come to know it in this generation, was an oil-fuelled aberration

by powerdownkiwi | 3rd May 11, 9:27pm 1304414835

Well said AJ - give that man a beer.

The other thing nobody has suggested, is that if there's no money to pay for it, but there's a social service needs doing, and there are folk not doing anything who would feel more involved, less inclined to trash, if they were doing it, somebody should put them all together.

I've been doing serious hours of voluntary work for years, not for the kudos but because I've always seen this impasse coming.

Imagine, we could take someone from the dole queue, give them a 3-hour DVD, and make them do a day's neurosurgery each week in return for the social services our society provides.

It would solve the waiting-list problem in two seconds flat, too.

Seriously, alongside diminishing public service incomes, volunteer work will be part of the mix.

by PeterPen | 3rd May 11, 9:36pm 1304415362

Unfortunately, despite all the smart analysis - nothing will change, until the system is so broken that no amount of bail-out, money printing, debt binging and other "financial instruments" will resuscitate it.

By then New Zealand will be a very different country, and for the vast majority of kiwis it is hard to imagine that it is going to be a better one.

Btw, is there no (even small) political party in NZ that stands for economic commonsense? If so, those who feel responsible for the future of this country should consider starting one. Not much else one can do, except seeing the writing on the wall and making sure the family is going to be ok ...

by Andrewj | 3rd May 11, 9:36pm 1304415406

PDK

at the bottom of the comment he linked to the Olduvai theory, id never heard of it before.

http://jayhanson.us/page125.htm

by steven | 4th May 11, 6:55am 1304448904

I had....its one if the scariest....and one that economists and indeed the "technology will fix it brigade" seem the most blind to....ie we take the easy resources first, then as technology improves the next etc etc....so eventually only the highest tech which is only available in a highly complex society is needed to get whats left...if for any reason we regress then our society becomes simpler...it cannot then support the technology (oh and consider nuclear power requires a very high level of tech to look after safely) so we can no longer extract minerals that are left....so then we cant extract anything...so our technology and society collapses...way back.

There is also a piece taht says to get a complex technology / society then that needs specialisation and a certain number of ppl....so we have 7billion and abundant cheap energy....(food subsitute) but the planet can only support 1.5 ~ 2 billion sustainably....so our global population has to collapse....

very scary....

I dont agree with this if only for the fact we have a closed sysle system ie a planet and a long time period, ie eventually everything is re-cycled but over many millenia...

"It has often been said that, if the human species fails to make a go of it here on Earth, some other species will take over the running. In the sense of developing high intelligence this is not correct. We have, or soon will have, exhausted the necessary physical prerequisites so far as this planet is concerned. With coal gone, oil gone, high-grade metallic ores gone, no species however competent can make the long climb from primitive conditions to high-level technology. This is a one-shot affair. If we fail, this planetary system fails so far as intelligence is concerned. The same will be true of other planetary systems. On each of them there will be one chance, and one chance only."

This is however (probably) humans one shot.....our male DNA unwinds in about 100,000 years. So its girls and batteries only after that.....

;]

regards

by steven | 4th May 11, 6:55am 1304448904

very scary....

I dont agree with this if only for the fact we have a closed sysle system ie a planet and a long time period, ie eventually everything is re-cycled but over many millenia...

This is however (probably) humans one shot.....our male DNA unwinds in about 100,000 years. So its girls and batteries only after that.....

;]

regards

by powerdownkiwi | 4th May 11, 8:53am 1304455994

AJ - it's in the local Library, I must have read it back around 2000.

Yeah, scary, but not much different from what you get from this graph: (Finally found a copy, see the comments 'Dave R', but the essay is worth it too.)

http://europe.theoildrum.com/node/3551

and:

http://greatchange.org/ov-simmons,club_of_rome_revisted.html

by Kunst | 3rd May 11, 10:43pm 1304419403

Good night guys and girls - have another nice sleep - with your policy/ philosophy you go nowhere - this is my last comment for a long time.

Be careful out there !

http://www.youtube.com/watch?v=nTNUQNvmJ-s&feature=autoplay&list=ULqM56UBlqyz8&index=2&playnext=1

by Kunst | 4th May 11, 12:16am 1304424994

Watch a few - great fun - before the day gets serious.

by Gummy Bear Hero | 4th May 11, 12:17am 1304425050

Why is this your last comment for a long time , Walter ?

by iconoclast | 4th May 11, 12:02am 1304424137

I missed the aricle that explains where the $20b is going and what it's to be used for and what will be obtained. Wolly is right about the $880m for advice. That's close enough to $1b for advice. What advice? Missed that one too. Thats a lot of advice. Who were the recipients? Who were the beneficiaries? What were the outcomes? Any pointers people?

by Gummy Bear Hero | 4th May 11, 12:39am 1304426369

Where is the $ 20 billion going , you ask ! ......... It's to bridge the short-fall on the government's operating accounts , the difference between incomings ( tax ) and outgoings ( welfare / healthcare / police / leaky homes / SCF bail-out / ACC shortfall / 'quake re-build / Allied Nationwide bail-out / WFF / interest-free-student-loans / rugby world cup / Americas Cup yacht team / DPB / Hone's by-election / ........... ah geez , it's seriously too depressing to carry on with this list ...

..... and $ 800 million for " advice " , .......... oh yeah , and public service require a cool $ 1 billion to operate parliament each and every year .............

.......... God almighty , where does it all end ? ........

Gotta nip off , iconoclast , Gummy needs to have a small cry !

by JB | 4th May 11, 5:38am 1304444280

GBC .... What about also eliminating some entire government programs.

Antarctic Research - just think carefully how our lives would be different if we had never been there. All I can think of would be less debt !

Sport & Recreation - Individuals can fund this if they think it's important. A family facing our national debt crisis levels would not borrow more to play sport.

Wipe out the ETS - That's $ 1 + billion pa and soon we start to get some significant savings.

You forgot the tax breaks for Warner Bros and Jackson so he can buy a new Gulfstream.

AMI & TV3 - the list just goes on and on !

Only problem is they will all be politically very difficult.

Key is starting to look like John Peron - liberally sprinkling borrowed cash to all and sundry.

It dragged Argentina from the top of the OECD ( along with NZ ) to the bottom and default but it got them re-elected.

by DC | 4th May 11, 2:24am 1304432640

For the government to save and make cash...

Kull the government departments

Tighten benefits

Tax international residential property purchases

Build more rail and cruise ship terminals & market NZ internationally

We don't need anymore roads thanks (the amount on roading is plain stupid)

by steven | 4th May 11, 9:41am 1304458880

Hi,

1) Tourism pays poorly....the average productivity per tourism job is $80k.....apple earns $2million per job...so we need high value jobs not more poor value jobs....this is why our productivity is dropping.

2) Transport is stuffed....we past peak oil....so tourism will decline as fuel costs make it impossible for teh average person to go on holiday.

3) Which Govn depts?

regards

by steven | 4th May 11, 7:04am 1304449460

A reply to the few comments thats Keynesianism got us in this mess...simply IF you follow all of Keynes and not cherry pick the bits you want as a Pollie, it probably works fine....same can be said for moneterism.....its just right wing Pollies abusing / cherry picking this time around instead of the left....add in no or in-effective regulation and we have an even bigger mess that isnt being fixed....

http://krugman.blogs.nytimes.com/2011/05/02/hard-keynesianism/

"Contrary to the beliefs of nearly all anti-Keynesians—and, regrettably, some Keynesians, too—Keynesianism demands more, not less, fiscal rectitude in normal times than does the orthodox theory of balanced budgets that underpins the EU. John Maynard Keynes argued that surpluses should be accumulated during good years so that they could be spent to stimulate demand during bad ones."

So in the good times if we had followed keynes we would have been saving those tax surpluses for rainy days, we didnt we got the left spending it and the right giving it back with the tax cuts we deserved...

oh dear....

So JK and National were being fiscally responsible with their tax cut in the face of the down turn?

Yeah right.........obviously not.

regards

by scarfie | 4th May 11, 8:35am 1304454956

Yep we suffer from bad governance not bad theories.

Trouble is from a pschological point of view that is predictable.

by steven | 4th May 11, 8:46am 1304455603

Yes....good design is fail-safe....even idiots cant hurt themselves or others.....So handing the OCR control to the RB makes sense....Pollies set policy not the OCR rate....

This suggests the only way to improve governance, well actually make it work is to pass yet more control to an un-elected body....which doesnt do a lot for me....I guess its looking like the lesser of two evils..........

regards

by Alter Ego | 4th May 11, 8:46am 1304455565

Elley,

My congratulations and felicitations.

We need some good news in this mad world of ours.

I will suggest a name that has good meanings in both English and French and just about every country under the sun...it seems.

FELICITY

My accent is atrocious, so will not be needed here or there, so here are a few links to read.

http://dictionary.reference.com/browse/felicity

http://www.babynamespedia.com/meaning/Felicity

May the happiness continue.

WHATEVER THE NAME.

Bises to one and all.

SIGNED...

The other one with no name.

by KevinMcMenamin | 4th May 11, 1:20pm 1304472031

What I would like to see is a plan - phased over the next 3 years - to take $10-15bn out of total govt expenditure. By phasing it in you give time for people to prepare and adjust.

My targets

1. WFF - cut the top now and progressively remove.

2. Roading infrastructure - I have yet to see an open book justification of what is being spent. But if you don't have the money you can't spend it.

3. Government salaries (including SOE's). Immediate feeze for 3 years. For earnings $70-$100, 5% reduction, for $100-$150k 10%, > $150k 15% (Therefore front line staff like teachers, police, nurses are unaffected, bureacrats are)

4. Include trust income with personal income for tax purposes (including abatement for pension). So any trust income is pro-rated across beneficiaries under the trust and treated as their personal income.

5. Carbon tax gone (well money used for paying off debt instead)

Target should be to reduce absolute government expenditure by $2b per annum for next 3 years, instead of this insane inflation + 1bn that they are saying is showing fiscal restraint.

by GenXGary | 18th Oct 11, 10:07pm 1318928874

You guys have forgotten raising the retirement age from 65 to 67 (as the Retirement Commissioner recommended in 2010). Surely that will help make a dent in our debt? After all, pensioners cost the taxpayer more than all the other beneficeries put together.

by GenXGary | 18th Oct 11, 10:18pm 1318929509

John Key in July 2011:

"We don't need to raise the age of retirement. I've given a very strong commitment to the public of New Zealand (not to do that)."

Ms Crossan said alternatives needed to be suggested if the Government was determined not to raise the age.

"What we want to do at the moment is strengthen the economy," Mr Key said.

"In the end the best way to make sure we can afford all the things we want... is to ultimately have a strong economy that produces the revenue that the Government can then deploy to make sure we can deliver the services we want. One of those is obviously pensions."

----------------------------------------------------------------------------------------------------------------------- PLEASE someone explain to me just HOW exactly Mr Key is "strengthen(ing) the economy"? His words have NO substance. I am really over this charade.