NZPA on Budget
May 23rd, 2010 at 5:13 pm by David FarrarA very astute analysis by NZPA Political Editor Peter Wilson:
Wellington, May 23 NZPA – Post-budget best case scenario for the Government: Most people react responsibly, saving or investing their tax cuts. Inflation rises but far less than Treasury’s forecast. Reserve Bank raises interest rate by a quarter of one percentage point, says it’s because the economy is growing and has nothing to do with the budget. Families realise they really are better off, Labour fails to find anyone who says they are worse off. Petrol and power price rises caused by the introduction of the emissions trading scheme are accepted as necessary to deal with climate change. New Zealand First slips to less than 1 percent in the polls. Solo mum says “I’m voting National”. All Blacks win World Cup.
Post-budget worst case scenario for the Government: Most people spend their tax cuts, saying they don’t have a choice because GST at 15 percent is hurting. Inflation rises above 6 percent. Reserve Bank announces vicious interest rate rise and blames the budget. Families realise they aren’t better off, Labour finds hundreds who say they’re worse off. Opposition to emissions trading scheme becomes a serious problem. NZ First reaches 7 percent in the polls. Wealthy property owner says “I’m voting for Winston Peters”. All Blacks lose to France in quarter-final.
I think it will be obvious in a couple of months which scenario emerges.
Related posts:
- NZPA Political Column
- Bernard Hickey on the desperate and dangerous budget
- Labour polls budget before it is delivered
- Interest Rates
May 23rd, 2010 at 5:25 pm
Well the All Blacks aren’t going to win the World Cup so its all downhill after that.
Vote:Senario two looks to be the winner. The NZF bit is wrong though.
May 23rd, 2010 at 5:32 pm
The 2nd?
Vote:May 23rd, 2010 at 5:43 pm
My opinion is that much of the tax cuts will be eaten by tax rises.
Petrol / energy bills will increase .
Local body rates are rising far faster than inflation. eg, here in tauranga they have forecast a 35% rates rise spread over the next couple of years. I don’t even know if that is counted in inflation figures .
GST increase swallow up a bunch of other income.
ACC premiums will increase far faster than inflation (is that counted in inflation figures?).
It is looking towards some pretty nasty inflation figures in the next year or so.
However, without the tax cuts things would be far worse. This countries costs are spiralling out of control .
Although, John key likes this as it will dampen consumer spending (less carbon emissions ).
John Key is a hypocrite though. While he is rich enough to ignore carbon taxes,many of the rest of us will need to curb lifestyles. If he were truly against global warming, why would he holiday in Hawaii?
Vote:May 23rd, 2010 at 5:43 pm
Scenario #2.
. . especially since the journo omits any mention of that dumb-arsed ETS scheme scheduled to kick in.
Vote:May 23rd, 2010 at 5:52 pm
I’m also predicting #2.
Taxpayers will realise soon enough that their ‘tax cuts’ are simply National giving loudly with one hand, while taking away sneakily with the other.
There is no appetite for reforming out increasingly bloated public sector. Welcome to the Greece of the South Pacific.
Vote:May 23rd, 2010 at 6:01 pm
The future is always uncertain. I put it to you that anything the government does on the whole is no different to a child ‘playing’ an arcade game without putting money in the coinslot. The levers are getting pulled, the buttons are getting pushed, and the child thinks he’s controlling the action. The global macro factors at play have the potential to overwhelm any of these small budgetary adjustments.
Vote:May 23rd, 2010 at 6:10 pm
Scenario two for me…
Although, only in NZ would the election result be influenced by a game of bloody rugby.
Vote:May 23rd, 2010 at 6:11 pm
” Wealthy property owner says “I’m voting for Winston Peters”
Ha ha, I wonder who that could be!
Vote:May 23rd, 2010 at 6:21 pm
Naaaaah you’re all wrong.
Blenglish will strike oil on his farm and every dairy farmer in Southland will become an orl magnet. The payout will go to $10 per kg of milk solids and we’ll be back in surplus just in time for the next election. Russel Norman will resign and rush to the rescue of his fellow Queenslanders, positioning himself as the Bejelke Peteresen of the 21st century having done his apprenticeship in Neeeeoooo Zilnnnnd.
Shane Jones will accept an associate professorship at Auckland University – in Chinese money laundering and Trevor Mallard will be posted to Tonga as our ambassador where for the rest of his life he can punch sense into the natives.
John Key will defer the ETS at a time when its deferral will inflict maximum damage upon labour and Phil Goff will be posted to Athens as our ambassador.
Long live Phil The Greek
Vote:May 23rd, 2010 at 6:27 pm
Well it’s certainly not going to be the best case scenario as
1) All Blacks will get reamed
2) Labour will find some photogenic beneficiaries to lament their lot
3) The ETS is a big pile of poo poo
Given the global backdrop it probably won’t be the worst case scenario either.
So all in all the astute Peter Wilson analysis tells us that things might happen.
Can we workshop that?
Vote:May 23rd, 2010 at 6:57 pm
Scenario #2, with the obvious correction – ACT rather than NZ First.
Vote:May 23rd, 2010 at 7:14 pm
DPF, I can only say Dr. Goebbles would be extremely proud of you.
Vote:May 23rd, 2010 at 7:16 pm
GreeceZeland to the fore!
Vote:May 23rd, 2010 at 7:59 pm
ACT rather than NZ First.
Vote:Without doubt. probably 15%.
May 23rd, 2010 at 8:17 pm
We live in a pretty sad country if our only hope for the future is the all blacks winning the world cup. If people are coming to the world cup they should say to themselves “bloody hell I would love to live in this country”. I doubt if most talk to the locals they will be inspired with confidence.
Vote:May 23rd, 2010 at 8:37 pm
Odds are that neither scenario will be right. Since these are the two ends of a pendulum the truth is more likely to be the midpoint or status quo. That is National at 50% plus and THREE MORE YEARS.
Vote:May 23rd, 2010 at 8:46 pm
Astute analysis?!! Presenting two unlikely scenarios is hardly analysis.
Vote:May 23rd, 2010 at 8:51 pm
Wonder what Helen Klark is thinking about those optional scenarios?
Pity there isn’t a large Albatross to buy, like Kiwi Rail. Or shower pressures to regulate properly.
Vote:May 23rd, 2010 at 9:09 pm
As you well know DPF it won’t be one scenario or the other it will be a mix of both.
The only sure things are..
Most people spend their tax cuts..
Vote:May 23rd, 2010 at 9:11 pm
Clever or not, there is very little chance that the introduction of the zETS will be ignored. Especially as someone will sooner or later make widely known what most of the mainstream press, the greens, and the government are trying very hard to pretend isn’t so, it won’t maker a blind bit of difference. It doesn’t matter whether your a complete skeptic or a rabid warmenista, you cannot deny that even the most draconian “carbon restrictions” possible (like 0 carbon emissions by 2011 for all of NZ, and that’s a complete 0, not the same as 1990 or something), wouldn’t change anything at all about the climate system, or not detectably anyway.
So the only people who support it will be symbolists, those who believe that making a gesture is far more important than any consequences of that gesture.
Vote:May 23rd, 2010 at 9:17 pm
I’d split the difference between scenarios 1 and 2. Unless we get manufacturing to develop (very unlikely as interest rates will be going up and our dollar is kept artificially high) we will contnue our gradual decline from OECD 23 downwards. Wages will stagnate and National’s support will ebb slowly but surely as more and more people feel this decline.
Will they still be ahead but election time- probably, given that Labour will be also tied to our economic decline and National will still be looking fresher.
The big question is where the tax cuts will be re-invested in the economy. Given who it will mainly go to (over 70K earners), you’d have to think overseas shares, overseas and local high end property and infrastructure and energy bonds.
Will this help the NZ economy- not much you would think as manufacturing is being hit will increased taxation (depreciation of plant and building) and higher education is losing $99mill this budget. The service sector and the small scale local economies (local businesses) you would think will have money sucked out as a result of higher GST.
Vote:May 23rd, 2010 at 9:20 pm
So the Labour Party crawls around the country finding people who are worse off. And then gleefully points out that tax cuts don’t work. That taxing the “rich” and giving the poor welfare works better. Except the rich are not that rich at all. And they certainly do not think that giving people something for nothing sends the right incentives in the economy. So the political debate continues. Labour fighting an election on this sort of envy politics deserve to lose and lose badly. But then what for the Labour Party?? Dust-bin of history I hope.
Vote:May 23rd, 2010 at 9:46 pm
He obviously hasn’t visited ‘The Standard’ or the ODT page 7 coverage. The later was a shocking bit of left wing moaning and un sourced.
Vote:Never ACT instead of NZF, there are not that many sensible people in the country, that has been proved over the past decade or so despite optimistic targets by ACT’s leaders of 15%. One can just hope Rodney keeps his seat so we have some of them in Parliament.
>>>John Key is a hypocrite though.<<>> If he were truly against global warming, why would he holiday in Hawaii?<<< becuase it saves heating the beach house here in Kiwiland.
May 23rd, 2010 at 10:07 pm
“All Blacks lose to France in quarter-final.”
What a muppet. Does he not realise that we are in the same pool as France and therefore cannot possibily meet them in the quarter final, or the semi final for that matter. Hense scenario two is impossible….
Vote:May 23rd, 2010 at 10:29 pm
He forgot to put “Volcanic eruption destroys Auckland” on his list. Not sure which list it should be on though.
Vote:May 24th, 2010 at 12:40 am
Yeah, pretty good analysis, the only point of difference i’d have with that, is that Winston just got his foot in the door with Nationals’ signal of intention to sell off assets in their next term. Standing on a platform of no more asset sales alone should get Winston 10% of the vote, from those opposed to Nationals’ determination to carry out Roger Douglas’ grand economic plan to pimp New Zealand to the lowest bidder. Meanwhile as the ‘Super City’ debarcle intensifies and rates rise, ACT will drop below 1% and Hide will fail to hold his Epsom seat, leaving National and Labour to fight for NZ Firsts’ allegiance. Meanwhile the Maori Party having severed all ties with both major parties, will effectively hold the balance of power in a supply and confidence arrangement, with an agreement of no asset sales as a bottom line. While failing to win the world cup will finally end the pathetic love affair with rugby.
Vote:May 24th, 2010 at 7:34 am
> I think it will be obvious in a couple of months which scenario emerges.
Jeez, the World Cup is coming around faster than I thought.
On a more serious note, I’m bemused by the fact that both Bill English and Maurice Williamson have been complaining about the level of overseas borrowing that they have been “forced” to undertake. Meanwhile, English has of course been trumpeting the tax cuts – and by implication the loss of government revenue. Anyone with a basic understanding of economics would understand that if you’re going to cut taxes, you’re also going to be cutting revenue. Yet both Bill and Maurice seem genuinely surprised at the amount that is being borrowed. I guess cutting the taxes of the wealthy is more important than anything else.
Vote:May 24th, 2010 at 7:42 am
TVB wrote: “And then gleefully points out that tax cuts don’t work”.
Where have we heard that before? Sounds like something Roger Douglas might have said in 1984. He slashed tax rates during his time as Finance Minister. Apparently that policy wasn’t a roaring success because we’ve resorted to borrowing billions…nevetheless we’re going down the same route again with tax cuts. What’s the word for doing exactly the same thing over and over and expecting a different outcome?
Vote:May 24th, 2010 at 9:01 am
How lucky Bill English is to have so many financial experts on tap at Kiwiblog to advise him.
Meanwhile nothing matters except the ETS. If we want recover and growth it goes. Otherwise its economic suicide.
Vote:May 24th, 2010 at 1:59 pm
Best case scenario National drops the suicidally stupid, enconomy-ruining ETS that Key said he would not lead on in the first place. Nats have guts to cut excess government spending and has the spare dosh to bring GST back down to 12.5%
Vote:May 24th, 2010 at 2:10 pm
Even if the NZPA post-budget worst case scenario for the Government happened.. National will still win the next election.
So they can afford to drop the emissions trading scheme.
Vote:May 24th, 2010 at 2:16 pm
Hey John-here’s a tip, drop the ETS and say ACT made you do it. We don’t mind…
Vote: