By Bernard Hickey
Are we ready for the government to return to surplus?
Prime Minister John Key and his Finance Minister Bill English have talked a lot in recent weeks about returning the budget to surplus by 2014/15, one year earlier than previously forecast.
The tone of their comments in an election year is startling. At a time when most politicians are sweet talking voters with suggestions of tax cuts or new spending, they are talking tough about being a fiscally responsible and trying to avoid adding new debt.
It all makes sense and sounds sensible, but what does that actually mean for the economy.
The scale of the task ahead is enormous and it may prove much tougher to do than to forecast.
That's because the size of the government support for the economy at the moment is enormous.
The government is forecast to run a budget deficit this year of 5.5%. That's the size of the prop under the economy.
To put that into context, if the government was not running a deficit of 5.5%, it would have contracted by at least that amount because the economy is basically flat on its back right now.
Deutsche Bank has forecast the New Zealand economy fell into a double dip recession in the second half of 2010. Both John Key and Bill English acknowledged this week that a double dip recession -- defined as two consecutive quarters of GDP contraction -- may have happened.
They are more confident about some sort of growth this year and into 2012, but it's clear from their rhetoric in recent weeks they are much more aware of the risks that growth may be slower than the 3.4% forecast for the current year to March 2012.
The key question for the government and the economy is this: can the private sector take up the slack and grow another prop to replace the government's prop as it is pulled out over the next four years?
Will private sector employers take on tens of thousands of new employees? Will businesses invest heavily in new infrastructure, equipment and training? Will this passing of the economic baton from spending, borrowing and government spending to saving, investing and exporting happen smoothly?
Bill English seemed a little nervous about this baton passing exercise when he spoke to the Finance and Expenditure Committee in Parliament this week.
He pointed out, rightly, that households still have twice as much debt as they did before the housing boom in 2003. The economy can't rely on the so-called non-tradeable sector, which includes the housing industry and retailing, to take up the slack.
The load will fall on the export sector, which actually shed 55,000 jobs or 12% of its workforce from 2003 to 2009, he said.
Exporters will need to bounce back very, very quickly and start employing an awful lot of people. That's because our economy is so skewed still towards the non-tradeable sector. It employs four times the amount of people in the tradeable sector.
So English is saying that the skinny runner in the outside lane is going to have to sprint across the track, accelerate to the front and grab a big, big baton for the New Zealand economy from government.
Can exporters do it?
So far the signs are not great. Manufacturers are struggling with a high currency. Farmers and commodity exporters are doing much better, but they too have a debt problem to fix.
This is obvious in provincial New Zealand, where the benefits of the high Fonterra payout are being redirected to debt repayment rather than spending in the shops and tractor dealerships.
If the economy and the government can pull it off, it will be deserving of a gold medal.
The signs this week are that even the spectators are getting nervous as the runner approaches the bend.
75 Comments
Can exporters create more jobs? Not likely with every other sector of society trying to get a share of the only real productivity to keep them in a lifestyle that most of the exporters do not have . Civil servants and government are the main one's, not the only. Indirectly of course. ACC, Labour dept, suppliers used to having a fat profit from the time we borrowed to live. Now the suggestion of taxing the hard workers even more. Oh well, as most of the commentators conclude we will need to hit the wall before anything changes. Doom and gloom mungers yes but correct, but its a question of timing and who it effects. Maybe thats what happens naturally, hit the wall make the changes and then get on with a new prosperity, for younger people, instead of more debt for them to repay.
Public sector employees always get he first whack on the bum for excessive indulgences.
However the real private sector fat cats may be fewer and less able to be grouped but do far more damage to the economy. That is obvious even more in USA where they have collectively destroyed their own national economy and expect their own low and middle populace to dig them out without cost to themselves.
Regrettably governments seem unable or unwilling to bite the tax bullet to help restore some reason and balance.
Albert Einstein once said that "We can never solve a problem by applying the same process of thinking as we did when we created it". Still New Zealand is constantly trying to do just that by pouring money into more old bureaucracy as NZTE and the China embassy. It was that bureaucracy and its laidback and incompetent bureaucrats that created the problem in the first place. I am told that 40% of skilled Kiwis has left and become the brain drain, I guess I am one. They just cant stand the incestuous culture.
Every time, as I hear, someone of those expats contact New Zealand and ask if they can help, they get thrown as a bag of garbage into just the same bureaucracy, just to be buried in the bureaucrat’s waste bin. They are dangerous, they may actually achieve something and show the laidback bureaucrats up in a bad light.
These brain drain expats are just the people who can solve the export problem, but still Kiwis love themselves, handing out accolades and prices and appoint each other to “world class” something, while the export deficit is ballooning by the hour.
We are just talking around the circle in this country – with not many practical results.
Without the support of the government allocating our infrastructure needs, especially in energy, transport and telecommunication to NZcompanies (NZworkforce), manufacturing and it’s associate sectors don’t have a chance for solid developments – but will remain in a constant struggle to compete internationally.
We do not have a manufacturing culture in New Zealand - but a consumption culture - we do sell houses to each other and speculate money we don't have in boats, cars, finance companies, lotto tickets - etc.
Kunst, you are tragically right. That is why the productive people are leaving. Kiwis have for a long time been living off each other washing the shirts for each other and thinking they hare doing well. It is this incestuous introvert self love culture that drive the productive people out. The underlying problem is not only the consumption culture, but the "beancounter" culture, hoards of unproductive people always looking for someone else to do the al work, while they stay in charge and take if for granted that they will reap the profit. Instead of engaging people to do the job, Kiwis are trying to invent schemes that aim to find some other sucker to do the job.
So let's first start by trying to employ those that are resident, already. We have to stop immigration for the sake of 'growth'. It's destructive. Let the competition for non specialist jobs start with our young who are in long supply. What is the biggest barrier to your home grown production, Walter? Wages! That's why the jobs go elsewhere. We have to lower our labour costs as they cannot promote industry growth. Sure, we'll initially lose some, many to Australia etc.- that may happen anyway- but when resident labour that has only istelf to compete with , and not 'welfare' or immigration the level of wages can adjust upwardly. What does any company that's trying to survive do? Cut staff or lower wages; not increase staff and raise wages! - that comes after 'survival'. So then, it's lower community wages, and less social support. And the trade-off for lower wages? A lower cost of living delivered through a lower cost of housing. Because it doesn't matter what nominal wages are, if they go further.
Nicholas, New Zealand wages are not too high, and the exchange rate is not too high. A high exchange rate is the opportunity, it make it cheap to sell overseas. You need to hire those who are overseas first, because that is where the missing competence lies. They know how to do it, to sell New Zealand and earn the money so companies can afford to pay high salaries and employ more people at home. What you are describing is just the problem, they hire incompetent people at home and then cut wages and staff to compensate for the failure. There nee to be a fundamental change in thinking.
New Zealandwages high ???? Solid “Manufacturing countries” aiming for quality/ high tech create good national wealth. With your theory we get poorer and poorer, where even daily necessities for a wider population aren’t affordable.
@ Nicholas Arrand
You are absolutely correct. However I advocate more radical measures - closing the doors altogether. Many articles covering a variety of topics have been published in interest.co.nz over the past 6 months. Many of the contributed posts eventually refer to immigration as "an underlying factor", but the topic is quietly ignored, and never warrants an in depth examination in itself. Immigration of all kinds has to be curtailed, for a variey of reasons, including the one you have mentioned. It goes deeper than that. As a comparison: America has 4½ million inhabitants of Native American Indian descent, while 3 million illegals cross the Mexican border into America every year. Australia has 450,000 inhabitants of Aboriginal descent, while the government allows 400,000 non-aboriginal immigrants into the country every year. The clear evidence is the native populations are being statistically bred out of existence. The same thing is happening in New Zealand. eg
census population statistics for the Auckland region
2001 Total Population 1.158 million
2006 Total Population 1.303 million
Increase in Population 245,000
2001 Maori descent 127,629
2006 Maori descent 137,136
Increased Population 9,507
2001 Asian descent 106,611
2006 Asian descent 234,219
Increased population 127,608
The Maori people should comprise properly constituted "Tribunal" that determines the level of migration into New Zealand.
Wait, I thought we were assured that the wealthy Asian horde was going to save the property bubble?
Anyway, a Maori tribunal will just sell 'Aotearoan passports' to absolutely anybody with the cash to buy them, so what's the point?
Can we compete with overseas low-tech labour costs?
no.
Mostly, our exporting will be design, which will be overseas built - F&P, Weta trimarans, etc.
That employs a few at the Cad screen, but at shop-floor-assembly?
no.
And whatever you export has to be compatible with an energy-starved, growth-starved world.
So you'd better have a serious point of difference.
As an afterthought - define jobs. I wouldn't be taking anything for 'given'.
Oddly enough, manual labour will come back into vogue, but not necessarily with the same wealth-returning possibilities. It's a good question, though, Bernard.
Of course we can compete with overseas low tech labour costs, but that is ignored now. We can produce 10 times for the same number of labour guys, therein lies the advantage.
A $10 bottle of wine can sell for $150 in China, but the lazy incompetent buggers are just sitting home and thinking of how to get someone else to sell.
Export to be design, fine, what’s wrong with New Zealand becoming the inventor shop for China. Just one town in western China has ten times the Kiwi population. There would not be enough people in Kiwiland to shop floor build the stuff even if we wanted to do it.
So it is a matter of spending a bit of seed money and go and do it. Get rid of the useless bureaucrats as NZTE that just stands in the way.
The only way you can compete with lower labour costs, is with lower wages.
Which does wonders reducing your imports, which has the same result as exporting more.
Essentially, it's an internal wealth transfer upward, though. Then you sell the energy supply off , and the poorer of those who currently own it, don't. But they pay for it still, so that's another internal wealth transfer upward.
The upward folk folk have a dilemma at some point, in that unless they buy a few thousand microwaves apiece, there won't be a mass market for microwaves. The patterm ends with 200 million slaves constructing Rolls Royces or Pryamids, for a very few.
Nonsense aside, we have a bigger problem - that of addressing physical sustainability - and whether you choose to ignore debt, given that the system will most likely not survive, is a secondary question.
I tend to think that it is better not to run the risk, and that the best way to be out of debt is not to get into it. Meaning lowering wages/salaries now, and taxing commensurate with retiring debt within an agreed X years.
Given what I write about here, X = less than 5.
Imagine the howls, Left and Right! Yet all I'm suggesting is living within one's means.
"We can produce 10 times for the same number of labour guys, therein lies the advantage."
you are deluded......
pdk - coming from a “Manufacturing Country” I’m amazed of the low knowledge base of people judging on a nation’s advantages/ disadvantages coming from that sector.
Even our parliamentarians making big mistakes - e.g. sending part the NZworkforce rather to prison in stead sending them to factories. We do not have enough decent jobs for the wider population in this country.
As a result, the government should legislate, so more people of the wider population are working in the production industry then service/ consumption industry.
Stupid enough and none make them accountable - the same parliamentarians who allocate infrastructure orders to Asian countries are the ones who ask for more police and prisons.
I agree, we don't have enough jobs, and that is because we are not selling anything overseas, so there is a complete madness in importing more inexperienced people into the country. They don’t get jobs anyway because of the built in state racism in New Zealand. I don't see how the ethnic composition of the population has anything to do with it though, unless you subscribe to the attitude that some ethnic groups are just lazy bugger who just want to see others work for them. I don’t agree with that personally.
We sell heaps. But it's all in bulk pallet form - milk powder or in big massive blocks of cheese. Nothing value added an all made in world class labour efficient factories. Other countries make it into infant formula and into pizzas and into chocolate and therefore employ people in their factories that if we were smarter we would. :)
"We do not have enough decent jobs for the wider population in this country."
It would appear we have to many ppl, fullstop........
Apart from that I dont think this problem can be solved, no matter what the numbers, there will always be a % who are at best semi-skilled.....so if its 100 ppl in th epopulation, say 50 will be semi-skilled, if its 1000 ppl 500 will be semi-skilled....I dont see how you can chnage that significantly....the end result is this is world wide......no matter where you go you have that same % being semi-skilled...so the only differentiator is wages.....
Factories....and where pray do we send the goods? and where pray do we get the raw materials?
150 years ago we got something that DNA / genetics didnt allow for I suspect, really cheap fossil energy to do the work of humans...so the demographics are split wrong for an abundance of energy, but thats changing back.....so the semi-skilled will become as they were, before manpower....
regards
In case you missed what your New Zealander of the Year Paul Callaghan had to say on the subject:
http://www.stuff.co.nz/dominion-post/opinion/4628542/Path-to-prosperity…
Well I for one mostly agree with him.
But Kiwis still devote their lives to their employers which is really weird because their employers think they are worthless scum who are a pain in the a***. But Kiwis happily work way too much and for almost nothing and the worst any of them will do is grizzle a bit or bugger off to Australia for a few years.
This is why we have a few billionaires while most people earn much less than $20 per hour, with none of the benefits the employees in other developed nations take for granted.
Amanda - is Paul Callaghan "your" New Zealander of the Year too? Am just curious as to why you've made this comment in the way that you have? Don't you think he should be NZ'er of the year? If not, who would you suggest? Cheers, Les.
Les,
Mr. Callaghan seems a worthy fellow...based on his observations. Was just trying to protect myself -- as one of those nasty immigrants who has washed up on your lovely shores.:)
Amanda
Thanks Amanda, ok, understand better now. Less of that "nasty immigrant" talk, many of us are immigrants. Cheers, Les.
He is absolutely right, look at Singapore, no bigger than New Zealand in population, and no land. 50 years ago it was a poor fishing village. Look at Sweden, 70 years in Cleantech, a top experienced engineering culture running the show and the companies, same for Switzerland and Germany. Look at China, engineering is the top profession, math and physics are most desirable in school, everyone running anything need to be an engineer, even the top political brass and certainly in company management and on the boards. No sight of bean counters, they are a low level profession sitting in the back room in the basement doing the books.
Then look at New Zealand, top professions are useless professions as beancounters and lawyers producing nothing of value. Cleantech is just hot air from politicians and beancounters with no experience and no background, and whatever they have they can not even show up to tell anyone about.
So Samsung earns $850k per worker, Apple $1,700k and F&P $400k. How many of the workers see any of those earnings? If the consumer/sheep didn't constanly see the need to buy a whole lot of gadgets they probably don't need would those companies still earn the same amounts?
F&P's gadgets are probably a lot more benefit to the end consumer so I can see the good there, but again, how many of there workers outside of management share in those earnings?
There are always going to be low wage jobs and a need to fill them. Is the factory worker, cleaner going to get a $100k salary? Better still lets all aim to be in mid and upper level management - wait a minute - those positions won't be available if there's no one to work in the sweat shops. That's not how capitalism works.
Great article Amanda. Paul Callaghan is on the right track.
We are poorer because we choose to work in low-wage activities. Our current gross domestic product per capita corresponds to $120,500 of revenue per employee. To match Australia, we need $174,000 a job. By contrast, tourism in New Zealand earns $82,800 revenue per employee, a mere two-thirds of what is needed to maintain our current per capita GDP. Tourism may provide valuable employment for underskilled New Zealanders, but it cannot provide a route to greater prosperity.
Productivity is not about how hard people work. It is about the nature of the work they do. Samsung, which makes silicon chips and consumer electronic products, earns NZ$850,000 a job while Apple Inc earns $1,700,000.
The backbone of our prosperity is dairy farming, with $350,000 a job, but environmental limitations prevent us from scaling up.
By contrast, Fisher & Paykel Healthcare comes in at $400,000 per employee a year. Export businesses like that consume little energy. They do not emit significant greenhouse gases or dump nitrates in our lakes. The Resource Management Act is no bother to them at all. There is no limit to the numbers of such companies, except to the degree that our brains and enterprise make such businesses possible.
cheers
Bernard
Well of course he's right. But good luck on trying to increase NZ's tech sector anytime soon.
Just look at this blog as a microcosm of what New Zealand is like. How many here are actually working in the tech industry or are qualified/experienced enough to be able to do so? Apart from me, I don't think there is anyone else. And that's the problem we just don't have enough of those sorts of qualified innovative people to start a critical mass that would get NZ tech really going. So how are you going to create all these industries if you don’t have the people? Add to that the general anti-science sensibility (often straight out bloody minded ignorance quite frankly) of much of the population (hasn't the Greens already called for Rakon to be shut down because it 'supports' the US military?) and you begin to realise that NZ struggles in this area because of the attitude and belief patterns of many New Zealanders.
Why just recently a biotech company, and I use that word loosely in this situation because really it’s just a food company, BioVittoria, failed to raise enough money on a share float to list on the NZ stock exchange. Why, because New Zealanders didn’t support it because they just don’t get it. I understand that company is now going from strength to strength but little of that wealth will now end up in the hands of Kiwis. That was a real missed opportunity. But unless New Zealanders are scientifically literate, how are they going to be able to partake in its dialogue, avoid its pitfalls and take advantage of its opportunities? Here’s a question for the team here at interest.co.nz. How many here would consider themselves to be sufficiently science and technology literate to be able to analyse whether a NZ science/technology business was worth investing in or not? Could they apply the same informed analytical skill to a technology company that they can apply to the analysis of a finance company?
When it comes to science and technology, in my experience it’s that old cliché. You can lead a New Zealand horse to water, but you can’t make it drink.
Immigration is a vital issue. People fear opposing it because they fear being labelled "xenophobic".
Look, we'll always need a certain number of immigrants to fill skills gaps. But our immigration policy needs to become a lot more focussed.
But its a bit like housing. Policy makers know something SHOULD be done, but they also realise that the shorter to medium term economic consequences of doing something will be adverse (in terms of GDP growth), even if the longer term consequences are positive. And because of MMP and the electoral cycle..........
Matt,
Totally agree
Policymakers and business for too long have seen immigration as a solution to expanding their market.
They have never been able to prove that is so and a society with immigrants who will not fit in until the third generation becomes a drag on those who can and do so as well as those here already
Guy's ... Your all missing the point ...
Until we get a lower exchange rate managed like Singapore and others who have seen the light - NZ exports are going no where and so are our growth forecasts.
Treasury growth forecasts are just that - forecasts and useless in the present environment. They simply project based on the now irrelevant past. Without magical growth we will never achieve a surplus in the crown accounts.
Which means we will continue to borrow to pay the interest. It used to be called insolvent.
We simply can't compete at current NZ $ levels.
Look at the NZ $ vs the Pound over the decade. There is simply no way you can lose half your revenue stream and stay profitable - end of story.
The UK market has gone to most exporters.
Now the Euro tumbles over the last 2 years and we face the same problem.
We will I suggest - soon see a blow out in the current account as the interest bill starts to bite.
JB - see:
http://www.interest.co.nz/opinion/opinion-drain-dragged-down-debt#comme…
also the comment above and my question at 8.42pm today in that thread.
Thoughts?
Les.
…and here we go again around, around, around the circle. I’m not coming back to this forum until you guys are starting to talk progress and about the real issue. “Providing Enough Decent Jobs for the wider NZpopulation” –resulting in reduction of the account deficit and the only way to make us as a nation not only happier, but also wealthier.
We need fundamental changes – a culture change !!!!!!
To understand this in context please, read my comment above also.
The point made above by Drooler was quite valid.
Kiwi employees are doormats.
The old saying "Aussies work to live, Kiwis live to work" is apt.
When a government is more focused on keeping the general populous in debt than in work then it's a little to simplistic to make statements like:
“Providing Enough Decent Jobs for the wider NZpopulation"
Is our ability to get a decent job OUR responsibility or solely the governments?
"Why do they want to keep us indebt"? Well, because if we weren't what control and power over us would they have?
Example:
Imagine a "home" you created Kunst where YOU generate your own power and heating, YOU provide your OWN water and waste treatment, YOU produce your OWN food and necessities to life.
Now I ask you this Kunst? DO YOU BELIEVE THE GOVERNMENT WANTS YOU TO HAVE THIS ABILITY?
....and here we go again - around, around, around the circle - picking the crumbs - ooooaaahhhh 12:39am - time for bed - good night !
Ahh - 4,56% YOU and 6.78% HE and 6.666% SHE - 88.567% FECK and 12% GOVERNMENT and...WHOEVER is involved -2,567% MUBARAK and some -% for HAMMMAS and HELEN and some HELLERS HERVELATS also.
YOU GUYS JUST KEEP GOING - I"m out of here.
Oh Kunst, I agree. The economic policy of the last 25 years has NOT worked and most of the comments are absolute drivel. Just arguing for arguing's sakes. Talk of lowering wages!!!! Does anyone think of the consequences of that. There is no silver bullet to fix the problem but there ARE solutions.
Hi Patricia- a number of the best articles/ comments in this blog are coming regularly from women.
I personally would like to see more women in positions of decision making – policy makers/ parliamentarians. Some of the males (Brownlee/ Joyce/ Hide etc.) are hopeless underperformers and need to be sacked.
"The Meaty Club of Corrupted Boys" - they all cover up their arses with each others - yak !
You can disagree with my view on lower wages, Walter, but this is going to happen to New Zealand, as well as Australia, if we don't.
"Qantas Airways Ltd offshoot Jetstar will look to Asia to hire more pilots and support staff as it seeks to compete on price with its main Asian rivals, according to a report in the Australian Financial Review. Jetstar chief executive Bruce Buchanan told the newspaper plans to forge partnerships in the Philippines, as well as other Asian markets, would not be feasible if it is forced to offer the same wage agreements as Qantas."
I agree Kunst but Parliament and Boards are just like this blog. Men arguing foir arguing sake. Just point scoring. As my Mother used to say if you haven't got an intelligent solution to a problem keep your mouth shut!!
Kunst you would love this website.
http://golemxiv-credo.blogspot.com/
It is English and he only writes Monday-Friday (their time). His clarity of thought and his ability to explain is just wonderful. Each morning it is just so exciting to open his blog to see what he has written.
"...Though with food prices rising, wages falling..." Even your recommended blogger see it happening, Patricia!
If you see a car hurtling at you, do you not try to avoid it? I hope for your mother's sake you do. Thinking is what we have brains for. How to stop wages falling is a problem ecause the consequences would be horrific and there are ARE solutions.
It's not 'wages' that are important, Patricia, It's what people are able to do with them, whatever their nominal value is. Do you not think that New Zealand would be better off halving the cost of living, and halving the cost of 'wages'? The lower nominal $ labour cost is then added into our exports ( what there are left of them!) making them more saleable.
Yes I agree Nicholas but how would we do it. And would it make any difference if everything was halved. A country where there is a large inequality of income, as New Zealand has, creates enormous social costs which relate in more actual costs. A managing of the exchange rate in favour of the exporter would reduce our purchasing power BUT would increase our current foreign interest cost (why doesn't the Government insist that all overseas loans be in the foreign dollars not NZ dollars) unless of course we then introudced a foreign tax BUT that would...................... and so it goes on. I really don't think lowering the cost of wages to zero - if that were possible - would actually help the export sector much at all although Steven, would reduce the population!! We have to start thinking about what sort of society we want for New Zealand and introduce an economic policy to acheive that. I do believe that if you get the right economic policy then the people will all prosper. I saw a car sticker the other day that said "The people DO matter." I think that sticker says it all. It is not just about consumption.
I suspect. Paticia, the answer is contained in 'that' post of Golem's that you linked. But it's not just 'the bankers etc' that are going to have to take a haircut. It's all of us. In that context the obvious mechanism in New Zealand is for property prices to fall. The over-indebted get the most attention from the barber ( as Golem notes; they must) and 'you' get to buy or replace your house at ,say,50% of the current price. That 'saves' the average homebuyer here, $150k, straight away, that will compensate them for 'selling their labour' for a lower price ( wage). The servicing cost on any mortgage will be lower in nominal terms, and hence our national overseas borrowings will likewise reduce. Additionally, it will give future homeowners more disposable income,as it won't be 'wasted' on interest payments. It's a case of New Zealand having whatever development captial it has/needs tied up in property. It's our own Golden Cage, and we are the trapped birds.
Yes I can see Nicholas and I do think the lenders should take a haircut. But that would only occur if NZ was declared bankrupt and the IMF is not an institution that encourages bankruptcy. It is there to protect the lenders. But in the meantime what do you think of a law that would limit what a person can borrow or be gifted? From anyone whether it be the Bank, the family or whatever. The Banks do need to be controlled and the Banks have most of the private debt that makes NZ so vulnerable. Does anyone know whether the NZ Government is still guaranteeing the Banks' overseas borrowings?
The Senior Debt Holders in Denmark have just taken that loss, if I read that Golem link right. Denmark is neither broke nor under the IMF? So, what stops the NZ (Oz) banks, similaly, taking their loss, but on their mortgage books? Re borrowing or gifting? It's immaterial, if you are referring to our changing laws, as there were many ways of avoiding an outdated regulation. Remember; "It is only the honest that abide by the Law".
"Do you not think that New Zealand would be better off halving the cost of living, and halving the cost of 'wages'?" Only if you are prepared to never be able to afford going overseas...
IMHO You cant half the cost of living because we are in a global market........much fresh fish and seafood goes striaght offshore on a plane....this is because there are enough wealthy japanese, chinese and Indians out there buying...This also is reflected in rice exports being banned in India and I think Thailand, beef exports from Argentia? Govn's acted to ensure their population had food....
So actually I suspect the opposite is better..........
regards
"ARE solutions."
OK, so where?
regards
Not where. What. Think.
OK, smart ass....
So what are the solutions?
Think........I do.......
but I dont accept wishy washy wants and half baked ideas by ppl who have no idea....
When you are up against an expotential curve, where population is out of control ie 220k ppl more every day and we are on a finite planet the only thinking I can see is
Thomas Robert MalthusProbably has it right.
regards
No Steven I am not trying to be a smart ass. But we have to start thinking about what sort of society we want for New Zealand and introduce an economic policy to achieve that. I do believe that if you get the right economic policy then the people will all prosper. But prosperity does not just mean consumption. Band aid policies like WFF are merely that. There is no concentration of thought on why it it is needed and what policies should exist so that such a need does not arise. To me the WFF is a subsidy for employers. It is the people who matter and I want an economic policy that reflects that. I find it interesting that in the developed countries where mostly there is a state welfare component the population growth is going down and yet in the developing countries and the Middle East (where there is not) the population is exploding with 70% of the population under 30. And no jobs. This results is revolutions as we have seen in Tunisia and Egypt. I know a young Saudi boy of 26. His mother has 13 children - no twins - and she is 44!!!!! There is an employment problem in Saudi which will only get worse. It is too easy to say the population surge in those countries is due to the lack of a state welfare system but I am sure that is part of it.
No Steven I am not trying to be a smart ass. But we have to start thinking about what sort of society we want for New Zealand and introduce an economic policy to achieve that. I do believe that if you get the right economic policy then the people will all prosper. But prosperity does not just mean consumption. Band aid policies like WFF are merely that. There is no concentration of thought on why it it is needed and what policies should exist so that such a need does not arise. To me the WFF is a subsidy for employers. It is the people who matter and I want an economic policy that reflects that. I find it interesting that in the developed countries where mostly there is a state welfare component the population growth is going down and yet in the developing countries and the Middle East (where there is not) the population is exploding with 70% of the population under 30. And no jobs. This results is revolutions as we have seen in Tunisia and Egypt. I know a young Saudi boy of 26. His mother has 13 children - no twins - and she is 44!!!!! There is an employment problem in Saudi which will only get worse. It is too easy to say the population surge in those countries is due to the lack of a state welfare system but I am sure that is part of it.
Patricia -
welfare or not, only addresses who gets what share of a total.
http://www.chrismartenson.com/blog/egypts-warning-are-you-listening/525…
I think that's the problem emerging in Saudi - and a hundred other places. It's really been happening here too, disguised by increasing debt.
Economic policy? such as?
What we see from the loony left or rabid right is nothing more than simple income re-distribution....just the direction differs.
The west population is decling mainly because of education and equality of women letting them choose fertility....in developing countries like saudi there is now no economic limits to family expansion because Saudi is rich and women dont have education, equality and dont get to control fertility.
At least that's me agreeing with what others have said....
You are still vague on "economic policy" you actually say nothing........apart from "I'd like it better" and "better" is up to you....
What you fail to understand I suspect is our expolitation of fossil fuels gave us a one off period to have more energy at our disposal as in numbers and not individuals than any other time in human history.....and that period is ending........
"To me the WFF is a subsidy for employers", yes if you want to consider it that way....kind of strange.....from my point of view....its simply re-distribution to support large poorer paid families....
Saudi un-employment, indeed.....they have not controlled population, and in fact I think there was an interesting statistic that the $ per capita I think is now 1/3rd of what it was....
Whenever you look at it the problem comes back to too many people.......
regards
patricia - wages will lower, whether voluntarily or by being forced. Not enough left to underwrite anything else now.
I call it the 'penny will drop when the penny drops' message.
It hasn't but it has, so to speak.
why can't we just drop the ocr to say 1%, peg the kiwi to the aussie, and get a cgt on non-primary assets? conducive to wealth creation in a small, open economy?
Dropping the OCR has been tried by the USA for instance....it doesnt work.......long term, what we see is the crazy taking on of debt in quick rich ponzie type schemes because the cost of borrowing is very low and very easy.....ie this is why we are in the mess we are in....
Pegging the NZD, in effect that means we do the same a china and the US is complaining....when NZ relies on free markets to sell its goods we have to be seen as walking the walk...suspect it wouldnt work either.....
CGT, probably helpful....
regrads
With the high currency there will be no growth. Exporters are treading water, if we are lucky those in the sector will hang onto there jobs, but higher the currency the more likely employees will add to the unemployment line rather than the other way around.
There will be no growth anyway, no more cheap bountiful energy.
Apart from that when everyone else "competitively" devalues it achieves little/nothing, also because we are so small with no clout, bigger countires like the USA will look at us and slap on tariffs to compensate.......
regards
"Why exporters will struggle to pick up the economic baton of job creation"
The other question that should go with that is
Will The exporters be able to reduce NZ unemployment when they can?
We have around a 6.5 unemployment rate.
With over a 20% unemployment rate of under 25 yr olds..not counting those still living at home supported by parents
We are having ti 'import' labour from Asia on work permits for low paying jobs, like milking cows.
We have a huge proportion of youth who prefer to sut at home and collect $140 or so per week than work a 40 or 45 hr week and clear around $440 (after tax) at min wage to start . Which by coincidence the tax of $145 tax is near the same as an unemployment benifit.
The problem is not so much getting these youths to the jobs, but turning up in the morning to get the cows in...and talk to any farmer, or employer for that matter...work ethics is the root of the problem.
We have the jobs in existance now, we just prefer to pay them to stay at home and bring in labour from overseas instead.
We have spent decades throwing money at PC re training schemes that turn into rorts.
Money at investgations with PC solns
Money at these solns
But it is not PC to to kick these 'people' up the backside....say "work or starve "" "
It is still accepted practice to say..."poor little johnny, hes had a bad upbringing" or what ever excuse and let them sit on their bums."
Maybe what this country really needs is a full on go broke, Germany 1920/30s style...and forget Iceland sytle.
Only then will we be able to put NZ back on the road to posterity and "catch up with Aussie"
http://www.todayonline.com/Singapore/EDC110201-0000217/112,500-jobs-added-last-year,-mostly-service
http://business.asiaone.com/Business/News/SME%2BCentral/Story/A1Story20110211-263105.html
SINGAPORE - The booming services sector was the main driver behind the creation of jobs here last year - accounting for a staggering 97 per cent of the 112,500 jobs that were added.
If Singapore, with much less resources than us can do it I don't see why we can't.
First we have to get past the mentality that only manufacturing creates worthwhile jobs, wealth, export opportunities etc - a comment which on this board is equivalent to lighting a fuse and retiring to a safe place ...
and what else does?
NB Manufacturing can be a physical item, or design....or software....
regards
Govt can do it better. eg IRD - haven't hey improved over the last 5yrs. Accountants used to have to have all these things to work it all out and IRD just made the rules but now IRD make it clear and easy on their website. National said they would not increase costs and they have done that ... except maybe resource concent/ environment court where they made a duplicate system staffed by consultants.
Private business needs funding, cashflow support through the critical early years. Where Blis or Pacific edje biotech are - burning cash but close to breakthrough. Where Pike river coal was! The lines companies, SOEs and universities have the cashflow to develop new business but it is hard otherwise.
Bernard - A good article. You are correct and raise a very good point - the tradable sector can not generate sufficient jobs to rebalance the economy over the medium term to abodrb the numbers entering the workforce - particularly the increasing numbers of under-educated and unskilled.
Over the next political term, the NZ government (whoever is in power) will have no option but to slash public expenditure. A left leaning government may attempt to increase expenditure and to increase taxes on the "rich". However, this will not be sustainable and will only ultimately result in deeper expenditure cuts when the ecomony hits the wall.
Re. immigration, instead of limiting those coming in, we should have a "one-in, one-out policy".
i.e. For every hard working educated, skilled and socially responsible person wishing to enter NZ, we should send out one person who has wasted their excellent free education system, who refuses to work hard or who is socially destructive.
1st para, agree.
2nd para next term....maybe..........no they will have the choice of increasing taxes.....the trouble is with cutting expenditure is when you take out amounts for education, health and welfare for instance there isnt a lot left to save on.....Now you could cut the first two but all that happens is ppl have to provide privately, and that's a doubling of the cost....in terms of GDP...into the hands of inefficient corporations you just swap Public tax for twice in "private" tax, and thats also un-sustainable as we can see in America....
Immigration....I would agree....in fact if a NZer leaves long term for another country they should lose the right to come back.....so single nationality.....
Last para is palin silly, we live in a finite world, there simply is no where for them to go if nothing else.
regards
steven
we spend more than we earn...not rocket science...cheap credit is a good thing IF its directed at productivity...thats where cgt comes in. im a tiler and i price to get 70% of quotes, if i win more im too cheap, less im too expensive...nz should be doing the same?
mark
I agree....trouble is it looks like much of the cheap credit has not been used productively....and ultimately that's the Govn's fault...and Im not suggesting its just labour's fault......its successive Govn's poor policy for many years IMHO.
NZ is small enough to go for the higher margin segments, so no not competing on price compete in scarcity and high margins....however for yourself it looks like you have a good method sussed for your income....
regards
How can a society pay for infrastructure needs in the Billions imported by the government – with a wider population working in low wage jobs ? The result is the current massive debt – growing by the day.
The only, but extreme answer is, the society either reduces demands, resulting in a massive reduction of standard of living or the wider population need to be higher skilled/ educated – means higher wages - in order to pay for a current standard of living – including taxes, etc…
Depending on many current and upcoming factors, most nations will lose their standards of living anyway. Keeping Employment and National Economic and Social Security is a massive challenge. Therefore we should not allow our government to import infrastructure needs in the Billions, but allocate **orders to NZcompanies – to the NZworkforce. Our debts aren’t decreasing, while wages go down/ stagnate and prices of basic daily needs go up. We have a task on our hands. The “Low Wages” game is certainly over.
Sustainable production including manufacturing and it’s associate sectors need a better chance for solid developments. **We need urgent changes to improve the skill, knowledge base of the wider population in order to lift wages to compete on many fronts – otherwise bankruptcies not only for families are just around the corner.
Providing Enough Decent Jobs for the wider NZpopulation not for a high Standard of Living but for a Decent One.
NZ people are at a point in history where it can go down two routes.
1. Sell the land and be wealthy then poor in the future (tenants in our own country)
2. Sort the mess out and not sell the dam place to overseas investors as with the increased global population NZ can really kick arse if done properly.
Tax food exports, tax on secondary homes, tax on overseas people purchasing NZ's residential property.
With these taxes raised;
Push the green NZ brand further internationally for tourism and food combined.
Invest in productive areas (software developers, food production...)
Invest in electric trains for freight and passenger transport keeping the countries green image intact, and not Steven Joyce's trucks and tarmac plan e.g. http://www.aucklandtrains.co.nz/2011/02/15/northland-gives-puhoi-the-big-tick/
Snowball effect to a wealther NZ for the people NZ people.
The photo in the article you link to made me smile. I've got children's books both in English and French. There's one with drawings of various objects and their names underneath. In the French version, the drawing of the train shows something like this http://en.wikipedia.org/wiki/TGV. In Kiwi books, a "train" usually looks more like what's shown in the photo in your article.
I've been told before that there are "not enough people" in NZ to invest in a high-speed train network. I can understand that the low-density of people could be an issue but the "not enough people" argument seems to be an excuse for a great deal of things we "just can't do". I really don't like excuses.
Agree with your other points too, although not sure about the "green NZ" one - I think we've lost quite a bit of credibility in that area in the last few years.
Can exporters do it? Answer = "No"
FYI from a reader:
Dear Mr Hickey,
We have a serious situation in the country now with a growing unemployment figure. The unemployed are starting to vote with their feet and heading west to Australia. They include not only tradesmen but professionals IT experts Doctors and nurses that we sorely need to keep in this country.
Yet in spite of this the Government Remuneration Authority can see fit to give Parliamentarians a pay rise while the Government gives the upper pay bracket a substantial tax reduction with just a small one for the lower paid while hitting them with a GST increase that has little effect on the higher paid but is causing more hardship on the lower paid and especially the unemployed.
No wonder the exodus continues to grow.
Turning now to closer to home we were told that there would be savings to be had by having just one City Council.
We note this Council has already increased their salaries and now promising our Maori friends an increase from $400,000 for their Committee to $3 million.
Well like the people of Egypt we have had enough. It is time to get people back into work who will then be paying the Government paye income tax instead of the Government paying out the dole.
There is much to be done in this country. Rebuilding much of the infrastructure for a start to encouraging more young people into farming of all types.
New Zealand farms should not be allowed to be sold to overseas buyers but to New Zealand citizens and companies only. Young farmers should be given generous help to get them onto the land.
In Auckland there are just three projects that could put thousands into work. Projects that would make the city really start to hum and bring great benefit to all.
-
Shift the container terminals out of the inner city and redevelop the whole of the waterfront.
-
Build another bridge harbour crossing.
-
Build the railways ring route and extending it to the airport.
For details of 1 and 2 above are available now if there is interest in these projects and I promise we won't go broke in the process.
Time we got off out butts stop the hand wringing and get on with it.
There is an old adage – a busy man is a happy man – an idle mind is the devil's workshop - so Egypt and Tunisia have just found out.
Regards
Well said.
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