Some economic sanity from Labour
May 4th, 2012 at 10:29 am by David FarrarDanya Levy at Stuff reports:
Labour is scrapping its plans to resume contributions to the Super Fund, saying New Zealanders told the party they were uncomfortable with borrowing to invest and it now understands the need to be thrifty.
Leader David Shearer this morning told the Wellington Employers’ Chamber of Commerce Labour had listened.
“We’ve decided that until we are back in surplus, any new spending will have to be paid for out of existing Budget provisions, new revenue, or by re-prioritising.”
Labour’s insistence that you should borrow to save was idiotic. It also went against what NZSF founder Michael Cullen stated when he created the NZSF. Contributions from the Government were to come out of surpluses, not out of borrowing.
Of course it is quite another issue, as to whether we would ever get back into surplus under Labour. Their opposition to every single spending freeze or cut suggests they lack the fiscal discipline to do so.
But still it is good to see them adopting more sensible economic policies.
Related posts:
- Absolute hypocrisy from Labour over NZ Super Fund
- RPRC on NZ Super Fund
- Editorials on Super Fund
- The NZ Super Fund
May 4th, 2012 at 10:34 am
That’s a double take headline. A bit like: “Pope Does Browneye at Vatican Mass”
Vote:May 4th, 2012 at 10:43 am
good grief .. can’t wait for his MP’s to spin this change of direction .. what does Cunliffe think?
Vote:May 4th, 2012 at 10:45 am
But borrowing for tax cuts is ok?
Vote:May 4th, 2012 at 10:47 am
so another step closer to being lookalikes to National and another closer to total obscurity…
Vote:May 4th, 2012 at 10:51 am
DPF – do you really mean sanity from a part of Labour?
According to NBR: No Cullen Fund restart until surplus, says Shearer- but did he tell his MPs?
Trevor Mallard on Tuesday speaking in the House:
Payback for the ‘gotcha’ snubs? A case of the left leg not knowing what one of the other left legs is doing?
Or just more of the new era of party individualism?
Vote:May 4th, 2012 at 10:51 am
“Labour’s insistence that you should borrow to save was idiotic.”
Actually DPF, you are quite wrong. Either it is wrong to BE IN DEBT and HAVE INVESTMENTS in a super fund or it is not. It is the stock not the flow that matters to the level of leverage.
Both Labour and National are quite happy with a certain level of leverage when it comes to the super fund. National is currently increasing the level of leverage by running deficits but not selling down the fund. Labour was simply arguing to increase the level of leverage a bit faster. In fact it was National who were not being rational by saying the current rate of increase in leverage (due to borrowing) is OK, even though it is uncertain, but one more cent invested is not.
So the question is, if you think Labour’s former position was idiotic, why dont you call Nationals current position equally idiotic, for not selling down the fund? OK you can argue that there are reasons for not selling the illiquid assets, but the response to that is (a) the fund is mainly liquid, and (b) the government IS choosing to list SOE’s which are currently illiquid.
Vote:May 4th, 2012 at 10:56 am
It’s about time considering how obviously idiotic the previous policy was. But this is not about Labour making a considered decision as facing reality – as many other left-wing parties are having to around the world:
As Walter Mead goes on to point out:
Which probably means the Green Party vote is going to increase further here in NZ.
Vote:May 4th, 2012 at 11:01 am
@swan – the flaw in your argument is the intention of the ‘super fund’ is to provide future revenue to pay for the expected future cost of providing pensions. It’s not there to balance the books when we are running a deficit.
Personally I think the government should run a fund that attempts to balance budget surpluses and deficits and deal with future pension costs by pushing the age of entitlement back and strongly encouraging people to save in Kiwisaver.
Vote:May 4th, 2012 at 11:10 am
Labour MPs are economics ignoramus (as Donald Trump would like to call leftist Obama).
Not PC wrote 2 blog posts about Cunliffe.
Scroll down (the link below) to see some good comments from Canterbury University economists Dr. Paul Walker & Dr. Eric Crampton on that same thread.
- David Cunliffe’s speech
- Spending, “austerity,” and starting to grow again
The top 3 of that economics’ ignoramus ranking from Labour MPs are Cunliffe, Diane Fenton & Claire Curran. Simply stupid.
Vote:May 4th, 2012 at 11:17 am
“@swan – the flaw in your argument is the intention of the ‘super fund’ is to provide future revenue to pay for the expected future cost of providing pensions. It’s not there to balance the books when we are running a deficit.”
The “intention” of the fund does not change the central issue which is: is it better to have a mix of debt and investments, or get rid of all debt before investing any money.
But going back to the intention of the super fund – if we really want to ensure funding for super, we need to actually work out how much is required, and then run STRUCTURAL surpluses to meet that level of funding. So the government shouldn’t just be talking about getting back to surplus, it should be talking about what the structural surplus required is, and target getting back to that point as a break-even mark.
In short, if you really want to save for the future super liabilities, the Nats big talk of getting back to surplus by 2014/2015 is meaningless. They need to target the level of structural surplus required. And based on the current policy settings and treasury projections, we will never hit this mark, or might hit it 1 year in 10 at the peak of the cycle.
Vote:May 4th, 2012 at 11:33 am
jaba: good grief .. can’t wait for his MP’s to spin this change of direction .. what does Cunliffe think?
Hard to know, has he gone quiet since his speech last week? Maybe busy preparing the next speech that his supporters promised?
Funny thing, his “experimental” website has not got a link to his last speech (it hasn’t got much at all).
http://newlynnlabour.nationbuilder.com/
But the speech still there if you know the link:
http://newlynnlabour.nationbuilder.com/speech_get_your_invisible_hands_off_our_assets
Also interesting – not a mention of Shearer’s policy changes at http://blog.labour.org.nz/ – maybe Trev has banned him from there, and no one who’s allowed to post knows about it or they’re not interested.
Vote:May 4th, 2012 at 12:09 pm
Has anybody considered floating the idea of liquidating the current cullen fund to prevent the “asset sales” ?
Vote:Just saying!
May 4th, 2012 at 12:09 pm
I don’t want to hear any politician talk about superannuation without talking about the whole thing and a plan that goes out 40-50 years. eg. Politicain Banks being dumb last week and talking of raising the super age to 67. As a single one off move. Shearer has done much the same thing. Any real discussion needs to address.
Vote:- What is the time frame and steps now until 2055
- What is age of starting super. What steps of change
- do we eventually have super
- should the income guarantee for the elderly be the same as the disabled etc. eg. A minimal benefit, difficult to get etc. A safety net only.
- Should Kiwisaver be the main vehicle.
- timed phase in of Kiwisaver. What steps.
My suggestion is we eventually don’t have national super, a mimimal hard to get benefit only, and the main eventual vehicle be a universal compulsory Kiwisaver – prefunded.
May 4th, 2012 at 12:18 pm
KH – I agree that a real discussion on the whole future of Super funding is needed, it would have to be cross party with a comitment to sensible long term plans.
Unfortunately it doesn’t look like happening while Key remains PM, he’s painted himself into a corner on it.
Vote:May 4th, 2012 at 12:18 pm
Shearer’s “vision” is the complete opposite of what silent T had to say last week. According to silent T successive governments have got it wrong since the days of Muldoon.
I suspect that one of the reasons Shearer has released this policy is to slap down silent T and to show who is in control.
One thing is sure, Labour are still in a complete mess.
Vote:May 4th, 2012 at 12:57 pm
I thought Cunlife had been very quiet and a Google search on news seems to back that up.
However there was a show of unity between two of the Davids yesterday:
Vote:May 4th, 2012 at 2:06 pm
The Cullen Fund needs to be judged as both a financial and a political device. Consider: if it had not existed, what would the Clark Govt have done with that money? On that basis the Fund has been a huge boon, and can be again.
Vote:May 4th, 2012 at 2:23 pm
I’m starting to worry about the socialists, they also want to increase the super age to 67. Shit, have they given up on the Chardonnay?
Vote:May 4th, 2012 at 2:53 pm
Makes more sense than borrowing for government saving.
Leaves more money in circulation – warms up the economy.
Improves incentives to train / work / be entrepreneurial.
/Obviously doesn’t incentivise complete sentences though.
Vote:May 4th, 2012 at 8:56 pm
WineOh
It’s probably not a good time to try and liquidate the fund, but sure – it could be done. Then we would chew up a once in a generation pot of money to maintain status quo. Is that wise ? How might future generations view that?
Vote:May 5th, 2012 at 10:28 am
Rick Rowling
The problem is the lefties don’t understand tax. Their sense of entitlement to other peoples money makes it impossible for them to see tax as revenue to the government and understand that a tax cut is a reduction in revenue rather than an increase in spending.
You see in the head of a lefty a tax cut is the government giving people money….. It’s easy to see it that way when you believe that the state should own everything and you should be a slave to it.
Vote: