90 seconds at 9 am with BNZ

90 seconds at 9 am with BNZ: Budget 2011 to rely on strong growth to return to surplus early and tweaks to KiwiSaver, WFF, Student Loans

19th May 11, 8:15am by Bernard Hickey

Bernard Hickey details the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand on Budget Day 2011.

The government is expected to paint its last budget before the election as an 'austerity' budget with 'zero' net new spending and cuts to KiwiSaver, Working For Families and Student Loans.

But it will still depend on a strong growth forecast to return the budget to surplus earlier than the 2016/17 forecast without the changes.

Economists are picking a surplus by 2015/16 and expect the government's promises to keep net government debt below 30% of GDP will be enough to protect New Zealand's AA+ sovereign debt rating from downgrade by Standard and Poor's. See Alex Tarrant's budget preview here.

However, the strong growth forecasts expected are crucial to the outlook. For the last 3 years the budget has forecast growth of 2-3% but the economy ended up contracting or flat.

The question is: has the global financial crisis changed the way New Zealand households and businesses think about debt and spending?

Has this lowered the likely growth outlook and will it make it much more difficult for the government to return to surplus without much more severe cuts.

Alex and I will be in the budget lockup in the Beehive's banquet hall from 10 am until its release at 2pm.

Check out the site then for all the details and analysis.

Meanwhile, see all our extensive pre-budget coverage here.

No chart with that title exists.

We welcome your comments below. If you are not already registered, please register to comment

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

49 Comments

by Kunst | 19th May 11, 8:59am 1305752384

After the budget

Listening to politicians on the parliamentarian channel last night, I ask myself, when will the Kindergarten of accusing each other stop ? When will parliamentarians see the severity of the situation and start working together for urgently needed solutions in many sectors ?

Here a proposal:

Debt/ tax reduction with investment in “Student- Shares”

Why do free market approaches not apply to upcoming academics ? Why does the taxpayer fund students in the millions with interest free loans ?

Most successful students are becoming high earners, some earning millions. So why not establish a private organization, which financially looks after students, selling “Students Shares” ? This would be a great opportunity for family-members, friends and/ or companies, etc. to invest in potential brain capital. This would also force students to perform better and get rid of the laziness within the system

Even the world of animals does better then us:

http://www.youtube.com/watch?v=Iqmba7npY8g

by Ms de Meanour | 19th May 11, 9:40am 1305754837

"why not establish a private organization, which financially looks after students, selling “Students Shares” ? "

Go on, then.

by Kunst | 19th May 11, 11:05am 1305759909

I think these principles would certainly work for you MsM – not performing with decent solutions/ proposals – no money from investors – out - which means no more money from taxpayers for underperformers – simple !

Are there not already too many students, costing billions, because of not enough job opportunities ?

by me | 19th May 11, 12:33pm 1305765224

Think you miss the poin about challenging, arguing etc, the whole rationale of being the Opposition is to scrutinise and oppose, keeps the Government members on their toes, needing to explain, justify, account for. It's the whole basis of the democratic parliamentary system

by scarfie | 19th May 11, 8:59am 1305752364

How about a quick fire brainstorming session to find questions for Bernard and Alex to ask.

1. What happens if we don't meet growth expectations?

by Sepherial | 19th May 11, 9:03am 1305752625

Growth is over scarfie the planet just dosnt have the resources avaliable any more.

If you examine growth and GDP it dosnt take rocket science to figure out its aload of nonsense and fancy BS.

What economists and the majority miss is the ECO part in front of nomist!

by scarfie | 19th May 11, 11:02am 1305759750

That is exactly why I want the question asked:) Let us see if they have a plan B, because I don't think they have.

by Sepherial | 19th May 11, 9:16am 1305753414

lol economists couldnt tie there own shoe laces.

I downgraded Standard and Poors in 2007 to -YY and that was being generous.

by powerdownkiwi | 19th May 11, 9:42am 1305754949

Agreed.

Economics is like standing alongside a conveyor belt, counting biscuits. Yes, if you speed up the conveyor, more go past.

Excellent, and no doubt it's valid to keep count.

What economics doesn't do - at all - is keep track of the finite amount of ingredients in the hoppers, and what the biscuits turn into. You end up with empty hoppers, and a big pile of poo - all unaccounted. At which point, money has no value, and you die.

Excellent.

Folk might get to understand this, if the media - and Public Media (through lack of need to appease sponsors) should be leading here - stepped up to the plate.

Anyone hear RNZ Business this morning?

Growthgrowthgrowthgrowthgrowthgrowthstronggrowthgrowthgrowthgrowth

and I think I missed a few.

Goebbels would have been so proud......

by Matt S | 19th May 11, 10:02am 1305756163

yep. Growth is in the rear view mirror. "growth" of the future will be all about seeing ones "lifestyle" degrade slower than others.

by powerdownkiwi | 19th May 11, 10:15am 1305756902

Matt - no, there's a third option - efficiencies.

Yes, it's eventually a path of diminishing returns, but it's the best around.

We watched a couple building a 2.something million dollar house, on Grand Designs last Sat. All I saw was a badly-drawn, unergonomic, ugly, box. We discussed whether we would tak it in a straight swap for our $50,000 house, and - genuinely - said no. (I've lived in Bondi and Coogee, so I'm familiar with Clovelly, and my better half hails from Queensland, so it was a with-knowledge appraisal).

Efficiencies are free, they're just an elimination of waste from something you were already doing.

And it's fun. Great intellectual challenge.

by powerdownkiwi | 19th May 11, 12:17pm 1305764267

Tor lawn - it's been a long time since I saw such a faulty piece of logic.

The pixels on your screen are there because you turned it on. If you turn it off, my actions would have zero impact.

The answer is in your hands.

by scarfie | 19th May 11, 10:53am 1305759182

Grands designs rarely gets me excited. Sigh.

Even if you could forgive the excessive expenditure, they are still poor designs.

I actually think a post oil world will improve things, with a return to more hand made components and construction.

by HarryM | 19th May 11, 11:00am 1305759645

River Cottage here we come........

by Wolly | 19th May 11, 11:15am 1305760516

Already there HarryM...7am and two Fallow deer dance across in front of me on the drive to the gate not 200 metres from the house...

by HarryM | 19th May 11, 11:36am 1305761784

very jealous Wolly, mind you Wellington harbour is looking mighty fine today.

by Wolly | 19th May 11, 12:03pm 1305763389

Was a great place to live HarryM...had a whole year living on me boat there and winter was a calm between gales...

by Vanderlei Luxemburgo | 19th May 11, 11:48am 1305762537

Do you drive to the gate to get yer paper Wol?

by Wolly | 19th May 11, 12:01pm 1305763265

No it comes in a roll and in reach VL....I was away collecting summit.

by Matt S | 19th May 11, 9:38am 1305754739

Todays budget will be all about maintaining best advantage for politicians, public servants, corporate executives and bankers. This of course will mean more sacrifices for hard working kiwi's, but we will all happily except it without question.

The PR firms will have done their job well, having been paid handsomly with our money to deceive us. The politicians speeches will be well rehersed. The media will also play its part well today, and keep public debate away from the big issues. The public will lap it all up, predictably, prepare to tighten the collective belts, and turn around and vote for more at the upcoming elections.

It would be funny if it wasn't so bl00dy tragic.

by Sepherial | 19th May 11, 10:42am 1305758565

Indeed Matt S

Was it Stalin that said

"I love elections they always vote for us!"

by Roelof | 19th May 11, 9:39am 1305754743

Do they have their heads' in the sand when it comes to forecasting strong growth.....???? OR are they ignorant,.. and ignorance is bliss..????

We live in very, very , uncertain times...

The possible economic "fuckushimas" I see are:

1/ Debt problems in Europe 2/ The insane property bubble in China ( beautifully articulated by Hugh P. ) 3/ The ending of QEll... and possible starting of QElll.... ( mkts response to this )

Add in... The tragic situation that Japan is in...... The Global inflationary climate we are now in.... The secular long term upwards trend in Energy costs... NZs' levels of Debt.... ( Govt austerity will dampen growth )

It would take a very brave soul.... or an idiot... to forecast strong growth... ( like someone said ..maybe it is only based on the economic activity of rebuilding CHCH....???? )

cheers Roelof

by Casual Observer | 19th May 11, 11:18am 1305760689

Those houses in Chch are set to get more expensive

http://www.stuff.co.nz/business/industries/5023478/House-costs-may-rise…

by Wolly | 19th May 11, 11:31am 1305761465

Perhaps it's time to consider building with less wood CO....what about that Hebel stuff or maybe straw or rammed earth.....and extruded waste based plastic purlins over rafters of the same...gotta be answers there somewhere!

by Gummy Bear Hero | 19th May 11, 10:10am 1305756655

The true fact as to why you will not see any death photos of Osama Bin Laden is that these guys sent him one of their hats www.gawker.com/5801512/the-real-reason-you-wont-see-osama-death-pix-princess-beatrices-hat

.............. and the poor bugger died of shame ............

www.scottydonaldson.com/2011/05/princess-beatrices-hat-goes-viral-as.html

by Wolly | 19th May 11, 10:17am 1305757021

Bernard's now in the lockup....4 hours!...listening to English tell porkies and spin the BS....I wonder if he was allowed to take a big bag of Gummy Bears in with him!

by Gummy Bear Hero | 19th May 11, 10:25am 1305757549

Gummy Bears ? ... Behave ! .............Bernard knows how to " trough " ........ He'll be scarfing down the tax-payer expensed hor d'oeuvres ........ washing down the salmon vol-au-vents with a fine old Dom Perignon .

....... Pollies spare no expense to remain fully " nourished " .

by Wolly | 19th May 11, 10:31am 1305757888

Oh so now we know why Bernard started his own website media blurb...free grub and grog on the taxpayer...!

by Gummy Bear Hero | 19th May 11, 10:36am 1305758209

....... and he gets to hang around the office with Amanda ........ how cool is that !

by Wolly | 19th May 11, 10:48am 1305758894

How much of that grub and grog can a man stuff down in 4 hours Gummy?

by Gummy Bear Hero | 19th May 11, 11:07am 1305760063

How big is Gerry Brownlee ? ......... Quite alot of that grub , if he , Parekura Horomia and Jonathon Hunt are any guide line .

by scarfie | 19th May 11, 11:08am 1305760106

Obviously talking BS doesn't burn that many calories.

by Matt S | 19th May 11, 10:26am 1305757601

Bernard is probably a bit of an "outlier" journalist right now, having written a few too many articles with probing questions of govt. His future acess to the inner sanctum depends on him writing less critique and more spin. We shall see if he has been assimilated when he returns.

by Wolly | 19th May 11, 10:29am 1305757744

"Our problem today is that the most obvious source of a major crisis today is the debt structure of Western governments, central banks, and commercial banks. Because governments are the problem, there will not be a solution provided by politicians. The same is true of central banks"

http://www.marketoracle.co.uk/Article28200.html

by scarfie | 19th May 11, 11:16am 1305760591

That is why I don't ever bother with the Political threads Wally. Politicians are the problem, the whole damn lot of them.

Just a matter of waiting for it all to fall over. Then hopefully we can move on in a more meaningful way.

The fall will happen, and those who cling most desperately to the current system in denial will be hurt the worst. Even those around that have been unemployed for a year or two still don't get it.

by Wolly | 19th May 11, 11:23am 1305760983

Does seem that way scarfie but truth is they are just a reflection of the crud what votes for their promises and BS.....

Swap the whole pop for a German or Swiss townload of people and we both know what wealth would be built in these islands.

by Jethro | 19th May 11, 11:34am 1305761657

Will the budget allow you to keep your hair?

The big banks current call savings account rate for you as account holder is around 3.15%. The short term floating mortgage rate is around 5.7%. The banks using your money have a cashflow management risk but the main asset risk lies with you the depositor. The banks return after paying your interest is around 2.5% on your money. They get less margin on term deposits but we’ll stick with on call for the moment because the loan to equity ratio outweighs any differences. So this 2.5% on loans covers their costs and profit return to their shareholders. Shareholder return % is multiplied up by the ratio of deposits loaned to shareholder equity. Including retained earnings the multiplier on i.co.nz analysis is over 15 times book value of equity. So the (2.5% less costs)x15 = shareholders nominal return. Banks can borrow short and lend long at your risk as depositor and whilst the going is good make big returns for their investors. We’ll forget possible risk skewing of bank management decisions driven by short term profit linked pay to top management. In NZ that means a great business model for their parent banks. If things do go sour the government plan to be introduced later this year to reinforce banks readiness for next day operation after a quick haircut for equity holders and depositors makes it even better. Depositor will proportionally lose most of the hair. Recent NZ approval of covered bonds ring fencing up to 10% of assets for covered bond holders means the haircuts will be even closer for the average depositor. NZ and Australia are OECD members with no effective bank deposit guarantee. Against this background the government wants to encourage NZ savings. Fingers crossed that those with hair keep it.

by Gareth Vaughan | 19th May 11, 11:34am 1305761675

Official: Bernard Hickey & Alex Tarrant have been locked up. However, they'll be released at 2pm with news of the Budget.

by Gummy Bear Hero | 19th May 11, 11:39am 1305761980

So they weren't locked up to have a discussion about Arnold Schwarzeneggar's testicles ? ......

..... Huh , I must've mis-read that opening paragraph to today's Top 10 .

by Gareth Vaughan | 19th May 11, 11:53am 1305762780

No Gummy they weren't. And nor are they sharing a cell with that IMF bloke.

by Christov | 19th May 11, 12:30pm 1305765045

Well if they were any sort of Journo's Gareth the bloodywell should be....! that's where the real dirt is ....right about now he'll be all a quiver and happy to tell a coupla Journo's just about anything ...to keep his new Daddy off him for awhile at least.

by Gummy Bear Hero | 19th May 11, 12:35pm 1305765340

It'd probably be a boon for the country if they gave up on the budget , and just discussed Arnold Schwarzenegger's testicles , instead .

by Christov | 19th May 11, 12:49pm 1305766152

GBH...While probably far more interesting than listening to Billy Bob....I think Arnie is still well off the pace in the testicular regions.......as far as I know Buster Gonads and his Unfeasibly Large Testicles are still the stuff of Legends.

by Gummy Bear Hero | 19th May 11, 12:58pm 1305766695

A new theme song for the IMF , Count ? ....... www.youtube.com/watch?v=u4bIYbuc4_I

by Gareth Vaughan | 19th May 11, 12:34pm 1305765248

Here we go folks, a way to cut our debt according to Solid Energy honcho Don Elder. Lignite anyone?

http://tvnz.co.nz/business-news/lignite-coal-mining-could-cut-nz-s-debt…

by Christov | 19th May 11, 12:41pm 1305765698

No sorry...Don...ah...ya got anything else..?...anything..?

by meh | 19th May 11, 12:52pm 1305766358

He said half of that $5 billion would be straight profit that the country would otherwise be paying to someone else in the world for imports.

"That's the equivalent of about 10,000 policemen. It's a couple of thousand hip operations a week. It's paying for our entire rural broadband in two or three months. These are the opportunities we have and we can do it, dealing with the emissions," he said.

Expensive policemen!

by powerdownkiwi | 19th May 11, 1:14pm 1305767675

One of the best ways to see if something is horseshit, is to google it.

If you see photographs of existing plant, fine.

If you only see artists impressions, it doesn't exist.

Simple really.

'Clean Coal' (and Brownlees pathetic 'Sexy Coal') as just spin. Totally don't exist, totally disingenuous.

by Gareth Vaughan | 19th May 11, 4:25pm 1305779127

Dominique Strauss-Kahn to resign from IMF: IMF Managing Director Dominique Strauss-Kahn Resigns

Press Release No. 11/187

May 18, 2011

Mr. Dominique Strauss-Kahn today informed the Executive Board of the International Monetary Fund (IMF) of his intention to resign as Managing Director with immediate effect. Mr. Strauss-Kahn made the following statement in a formal letter of resignation to the Board:

Ladies and Gentlemen of the Board:

It is with infinite sadness that I feel compelled today to present to the Executive Board my resignation from my post of Managing Director of the IMF.

I think at this time first of my wife—whom I love more than anything—of my children, of my family, of my friends.

I think also of my colleagues at the Fund; together we have accomplished such great things over the last three years and more.

To all, I want to say that I deny with the greatest possible firmness all of the allegations that have been made against me.

I want to protect this institution which I have served with honor and devotion, and especially—especially—I want to devote all my strength, all my time, and all my energy to proving my innocence.

Dominique Strauss-Kahn

The Fund will communicate in the near future on the Executive Board’s process of selecting a new Managing Director. Meanwhile, Mr. John Lipsky remains Acting Managing Director.