Treasury looks long term
February 1st, 2010 at 12:00 pm by David FarrarTreasury has done a working paper on our long term fiscal issues. They construct two main fiscal scenarios – a historic trends scenario that uses historic and current settings to interact with changing demography and a sustainable debt scenario that applies a fiscal constraint on non-benefit spending so that Crown net debt stays within the medium-term fiscal target.
I should say from the start, I am a fan of keeping net debt down!
Under the historic trends scenario, net debt reaches 225% of GDP by 2050. The sustainable debt scenario has it at 20% of GDP by 2050.
I won’t go into all the facts and figures but a key message I took from it, is that if we have a high level of fiscal restraint for the next 10 – 12 years, then it becomes easier to keep net debt down over the long term. This means stuff like health spending only increasing by 3% a year.
Superannuation is a big part of the mix also. I’m going to do some dedicated posts on this issue over the next few weeks.
February 1st, 2010 at 12:16 pm
Superannuation is a big part of the mix …
So we should have stuck with the Cullen Fund?
Perhaps in subsequent posts you could comment on Key’s “promise” not to increase the age of entitlement for superannuation over the next few years and the consequence this will have on eventual debt levels.
[DPF: The Cullen Fund makes no difference to long-term sustainability, and it has not been abolished. I have blogged many times on how I think the age of super should go up and certainly will be doing many more posts on that]
Vote:February 1st, 2010 at 12:21 pm
Mickey, if we want advice on how to fuck the country within 5 years or how to hide billions of dollars in liabilities within an SOE we’ll give you a call.
Vote:February 1st, 2010 at 12:47 pm
If you need help with significant repayment of Crown debt and the establishment of a super fund that would have addressed the problems that DPF has commented on feel free to do so.
[DPF: The Super Fund at best was going to pay for 11% of future superannuation. Peddling it as a solution for sustainability is almost fraudulent]
Vote:February 1st, 2010 at 12:54 pm
Mickey, remind me again how much my Kiwi saver lost? I have less than I started with.
Vote:February 1st, 2010 at 12:57 pm
Once more a Socialist shows ignorance of matters economic.
From April, HMRC will apply a 50% Tax on all trust incomes paid out.
On Pensions HMRC will exact a tax of 85% on any surplus over the lifetime limit allowable in that tax year.
Communist Governments like these funds because they are astatic target for their tax harvesting. You just can’t have enough money for
social engineering and paying the State Organ Hierarchy a lot more than the PM. Lies, smears, and collective spending of other people’s money.
Socialism is a great concept. Great until you have spent everyone else’s money and have to borrow heavily to fund the habit.
Labour Party full of intellectuals who are afraid to take risks with their own money.
Vote:February 1st, 2010 at 12:59 pm
Q: How do you become a Millionaire?
A: Start off as a Billionaire and go and live in a country with a Labour Government.
Vote:February 1st, 2010 at 1:02 pm
How does hiding billions of dollars in liabilities for the next government ‘helping reduce debt’?
Labour were in power when the country was booming, unfortunately for the country they didnt realise that the boom times were not going to last forever pursued policies that have strangled the economy during the bust. If the country needs guidance on how to spend like a drunken sailor, I’m sure Labour’s polling will rise.
Note Mickey, there’s a reason your lot aint in power anymore – you fucked the country up too much.
Vote:February 1st, 2010 at 1:21 pm
[DPF: The Super Fund at best was going to pay for 11% of future superannuation. Peddling it as a solution for sustainability is almost fraudulent]
I actually said that it would have “addressed” the problem. I did not say it was the solution.
It would have contributed $120b towards the problem.
Remind me again what is John Key doing about this problem? Putting his head in the sand should not be an option.
Petal, New Zealand Labour was not responsible for the world financial crisis. Go and talk to George Bush.
Bevan, Net Core Crown debt was zero in 2008. The information is at http://www.treasury.govt.nz/government/financialstatements/yearend/jun08/08.htm#_toc_Debt. The figures are from that well known leftwing organisation the New Zealand treasury.
[DPF: JK made the same promise Labour did. I don't agree with it, but I understand why he made it - to stop Cullen from scaring pensioners that Key will cut pensions.]
Vote:February 1st, 2010 at 1:39 pm
Mickey, clearly you do not understand how an economy works, I’ll keep it really simple for you. A countries surplus relies on its income (eg: Taxes, etc) being greater than its spending (WINZ, Health, Police, Defence, Etc…). When you have a surplus, not only do you not need to borrow more money but you can also reduce your debt. But when you add further items to your expenses (eg: WFF), then your surplus goes down wshich means less new spending, and less debt recovery unless you can improve your income. During a downturn, your income goes down and the economy can go into deficit, because you cant just stop spending money on things like Health, Winz, Police, Defence, WFF etc…
And when you have a deficit, who pays for that? Answer Debt.
So all those increases in spending during the 00′s is why we all say the Labour have fucked this country. They should have used the boom times to strengthen the countries position, yet they spent like drunken sailors.
Go and talk to George Bush.
He is just as responsible as Bill Clinton, Jiang Zemin, Jacques Chirac or Tony Blair. I note you never mentioned any of them. The seeds of the financial crisis were sown in the 90′s and then exagerated in the 00′s. You could blame Bill Clinton for the sub prime mortgages that banks were forced to take on. You could blame the Chinese Peoples for refusing to value their dollar at a fair level. You could blame the French for their completely unfair farming subsidies… But no, you only blame George W Bush.
Your thinking is so simple on everything.
Vote:February 1st, 2010 at 1:41 pm
[DPF: JK made the same promise Labour did. I don't agree with it, but I understand why he made it - to stop Cullen from scaring pensioners that Key will cut pensions.]
But he is trying to have it both ways. He has neutered the fund and he refuses to acknowledge that the only logical solution is to increase the age of eligibility. How responsible is this? All that can be predicted is that eventually the working population will pay through the teeth for a superannuation scheme that cannot be afforded or there will be significant cuts to entitlements.
It is good of you DPF to open for debate what is an important issue. I hope that Key reads your comments.
[DPF: I plan to blog much more on the superannuation issue. The good news is changes don't have to me made in the next decade, but they are needed longer term. The Changes to the Cullen Fund (at worst) means only 8% pre-funded instead of 11%. Not a big factor.]
Vote:February 1st, 2010 at 1:46 pm
Thats meant to be “Chinese Peoples Assembly”
Vote:February 1st, 2010 at 1:50 pm
Why is that so many useless people cannot understand the concept of leaving my money alone and let me determine my standard of living. Its pretty simple stuff. I see no reason that anyone should rob me legally or otherwise.
Vote:All govt.s seem to be the same. This one so far is no better nor no worse than the last one just has a smile instead of a scowl.
February 1st, 2010 at 2:49 pm
A CGT on the sale of a second property will bring significant revenue to the govt coffers. How can that be difficult?
Vote:February 1st, 2010 at 2:55 pm
@ Bevan 1.39 May I amend last line to “Micky YOU ARE SIMPLE !”
Vote:February 1st, 2010 at 4:01 pm
Why is that so many useless people cannot understand the concept of leaving my money alone and let me determine my standard of living. Its pretty simple stuff. I see no reason that anyone should rob me legally or otherwise.
Because a significant amount of people in this country want your lifestyle without putting in the hard work to obtain it themselves, and their will always be political parties like Labour who are willing to pander to them.
You just need to move to Australia, where you are taxed less on earnings up to $180k.
Vote:February 1st, 2010 at 4:18 pm
GUy fawkes
social engineering and paying the State Organ Hierarchy a lot more than the PM. Lies, smears, and collective spending of other people’s money.
Socialism is a great concept. Great until you have spent everyone else’s money and have to borrow heavily to fund the habit.
Labour Party full of intellectuals who are afraid to take risks with their own money.
Just the Labour party, I’d say probably a load of the new intake of National too.
Vote:February 1st, 2010 at 6:34 pm
Bevan, that is true but a nearly retirement age and most of my assets in the about to be plundered housing market one has a dilemma. After years of hard work, saving and working bloody hard and losing everything once.
Vote:How do I extract the cash and have anything left?
February 1st, 2010 at 7:55 pm
Bevan, that is true but a nearly retirement age and most of my assets in the about to be plundered housing market one has a dilemma. After years of hard work, saving and working bloody hard and losing everything once.
How do I extract the cash and have anything left?
Wait 2-5 years, if you can – housing always goes up. The Herald is just running scare tactics, National wont scuttle the housing market – they would be a one term wonder if they did!
A stock broking friend of mine gave me the best bit of advice “You only loose money when you realise your loss” meaning you only lose when you sell your assets for a loss, normally because you have to. My shares went well down during the worst of the crisis to well below what I paid for them, lucky for me I wasnt over extended and could afford to hold them (and even brought a few bargin basement too I will gloat), and now they are recovering and most stocks are close to or slightly above what I paid for them – if I only look at the ones I paid bargin prices for, then I’m a freaking investment genius!
Vote: