Bernard Hickey talks with Marcus Lush on Radio Live at 6.50 am about a record budget deficit; the tripling of the EQC levy and the Rugby World Cup's economic failure

Bernard Hickey talks with Marcus Lush on Radio Live at 6.50 am about a record budget deficit; the tripling of the EQC levy and the Rugby World Cup's economic failure

Bernard Hickey and Marcus Lush talk every weekday morning just after 6.50 am about business, economics, markets and personal finance.

Every weekday morning just after 6.50 am I talk with Marcus Lush on Radio Live about the latest news in business, markets, economics and personal finance.

I usually send through suggestions the night before or earlier in the morning.

Sometimes we veer off into other areas or pick up on things that happen overnight.

But here's my suggestions as of 9 pm this evening. I'll update later with a link to the audio. Here's that link.

Marcus,

1. The budget deficit in 2010/11 was a record NZ$18.4 billion, with only half of that coming from the earthquake. Government spending is stopping the economy from falling back into a deep recession. Will the rest of the economy step up as the stimulus is withdrawn over the next two years? Total government spending rose to NZ$100 billion or 50% of GDP. It rose NZ$18.9 billion in the year, including NZ$13.6 billion due to the earthquake. That meant non-earthquake spending rose NZ$5.3 billion. While core crown tax revenue rose NZ$0.8 billion to NZ$51.6 billion. That means spending is rising 5 times faster than revenues, and that's excluding the earthquake. Growth in tax had been diluted due to policy changes in Budget 2010. These changes had the impact of reducing taxes levied by NZ$2.7 billion, Treasury said. No wonder we got downgraded. See more here from Alex Tarrant.

2. The tripling of the earthquake levy to NZ$207 a year will make it harder for households to generate the growth that is being removed over the next two years by the government. And the earthquake on Sunday night will make it harder to get the Christchurch rebuild going again. See more here from Alex Tarrant. 

3. It's early days, but it appears the Rugby World Cup isn't benefiting the economy much.Total spending on electronic cards rose 0.2% to a seasonally adjusted NZ$5.31 billion in September, according to Statistics New Zealand in the seventh monthly gain this year. Spending in core retail industries, which strips out vehicle related spending, rose 0.6% to NZ$3.35 billion. “The Rugby World Cup does not appear to have had a significant impact on the electronic transactions data in September,” Statistics NZ said. See our earlier article here.

4. European stocks are down in early trade for the first time this week after Europe delayed a debt crisis summit as a Slovakian vote overnight may throw a spanner in the works of an expanded bailout fund. See more here at Bloomberg.
Chinese banks rallied after a state fund intervened to buy bank shares in Hong Kong. See more here at Bloomberg. cheers
--
Bernard

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3. RWC is a sports tournament, nothing wrong with that. But did anyone ever really believe that it was going to solve any of NZ's economic woes, even for a short time? Remember Y2K with the similar false expectations of big riches? Holding the RWC in NZ is akin to hosting a big party. Everyone needs to take turns at being the host, or there will never be any parties! Invite all of our friends from around the world and enjoy the few weeks while it is on. But don't get too upset when everyone goes back home and the final cost is tallied. As long as everyone has a good time - isn't that what any party is about?

The type of party where you gouge the guests as much as possible, then wonder why your own mates don't come around anymore?