Half Year Fiscal Update

December 18th, 2012 at 1:39 pm by David Farrar

The 2012 Half Year Economic and Fiscal Update has just come out. A couple of interesting graphs from Bill English’s presentation.

hyfuspending

It is worth considering that the reduction in spending has occurred despite the Christchurch earthquakes. Spending at 35% of GDP is not sustainable, and in my opinion needs to get below 30%.

hyfudebt

 

The turn about in household debt or savings is the reversal of a 15 year trend. It reflects the new world we are in.

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66 Responses to “Half Year Fiscal Update”

  1. Brad (75 comments) says:

    Good on you for ignoring a tax hike. I bet you did the same when Labour was in government too

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  2. Andrei (2,668 comments) says:

    And National’s solution to all of this – to further strangle the economy with massive increases of excise duty on fuel.

    Thank God my kids have the smarts to get real jobs elsewhere and leave this nation to the deadbeats and the deadbeats who run it

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  3. David Farrar (1,902 comments) says:

    What are you talking about. These are graphs of spending and debt, not revenue? And overall taxation has reduced.

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  4. berend (1,716 comments) says:

    Overall taxation has been reduced? That’s why we get another 9 cents per litre petrol tax?

    [DPF: That is a user charge more than a tax. Are you saying non road users should subsidise road users?]

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  5. campit (467 comments) says:

    You get another 9c a litre on tax to pay for the economically unsound Roads of National Significance. That is $150m out of the economy every year for the next three years. Tax and spend, tax and spend…

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  6. Manolo (14,086 comments) says:

    And overall taxation has reduced.

    Numbers, please.

    [DPF: Did you not notice the drop in the top tax rate from 39% to 33%]

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  7. Andrei (2,668 comments) says:

    And overall taxation has reduced

    GST under Labour in 2008 12.5%

    GST under National 2012 15%

    funny reduction

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  8. david c (254 comments) says:

    Petrol taxes…they’re pretty regressive don’t ya think? I mean don’t the poor get hit hardest with these sorts of taxes…and won’t it be the wealthy who will benefit most from the RONS?

    Damn.

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  9. Richard29 (377 comments) says:

    Andrei – 3c a year is not a “massive increase” that will “strangle the economy” its dwarfed by supply disruptions each time there is instability in the middle east (which is all the time). Plus they are not making any more oil so you may as well get used to it increasing in price over time.

    If you don’t like paying a lot for petrol then trade in for a smaller car.

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  10. berend (1,716 comments) says:

    DPF: That is a user charge more than a tax. Are you saying non road users should subsidise road users?

    Let’s just say that it is a very funny user charge:

    1. If you ask people in Auckland to put 9 cents on the litre to fund roads they don’t use.

    2. If you put 9 cents on the litre to build roads, but after which they are built those 9 cents will never disappear.

    3. All petrol tax basically goes into the general fund. If petrol tax was solely to be used for roading, we could perhaps come to some kind of agreement, but it is just a general tax hike. Spend and borrow now, and let the children pay you back.

    I’m all for extra roads, but they should be toll roads. Let the costs fall as close to those that use them as possible, else rational economic behaviour won’t emerge.

    [DPF: You’re wrong. Petrol tax used to go into the general fund. It is now ringfenced for transport and in fact the taxpayer has been slightly subsidising the overall transport spend]

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  11. berend (1,716 comments) says:

    Richard29, at least the middle east sees the petrol price drop at times. Government taxes never drop.

    Funny how DPF can talk about tax decreases, while the tax package was designed to be tax neutral.

    [DPF: That was the 2010 tax package. There were tax cuts in 2009 also]

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  12. Weihana (4,607 comments) says:

    DPF: That is a user charge more than a tax. Are you saying non road users should subsidise road users?

    Is there such a thing as “non road users”?

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  13. rg (214 comments) says:

    Fiscal responsibility is more of an ACT Party thing. National’s spending on wff, interest free student loans, kiwsaver etc is reckless, pointless and driving the economy into the ground. What’s the difference between National and Labour again? can someone remind me.

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  14. Weihana (4,607 comments) says:

    Andrei (1,531) Says:
    December 18th, 2012 at 1:45 pm

    And National’s solution to all of this – to further strangle the economy with massive increases of excise duty on fuel.

    Thank God my kids have the smarts to get real jobs elsewhere…

    Does their CV list “smarts” or does it list actual qualifications?

    “Thank you New Zealand taxpayer” is the phrase you are looking for I believe. :)

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  15. Cunningham (846 comments) says:

    Andrei (1,531) Says:

    “Thank God my kids have the smarts to get real jobs elsewhere and leave this nation to the deadbeats and the deadbeats who run it”

    If they have a whinging personality like you then thank fuck for that. NZ is to full of people like yourself who bitch and moan about everything. Just leave if don’t like NZ or else STFU.

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  16. YesWeDid (1,051 comments) says:

    Great top graph, pity that most of the interesting stuff to the right is basically just a total guess.

    Any idea what growth figures English used to calculate his numbers and how these compare to the Treasury estimates?

    English has a habit of picking the figures that suit him.

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  17. Elaycee (4,410 comments) says:

    Andrei:

    And overall taxation has reduced
    GST under Labour in 2008 12.5%
    GST under National 2012 15%
    funny reduction

    Which part of the term overalltaxation do you not understand? Pffttt

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  18. berend (1,716 comments) says:

    YesWeDid: stuff to the right is basically just a total guess.

    Good point! Yeah, my guess is debt goes straight up, no flattening out that I can see.

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  19. Manolo (14,086 comments) says:

    What’s the difference between National and Labour again? can someone remind me.

    None whatsoever.
    As a matter of fact, socialist Labour got comrade Clark, Labour lite has Smile-and-wave.

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  20. RRM (10,034 comments) says:

    I note that according to Brownlee this 9c a litre will only build the Pekapeka to MacKay’s Crossing approach to transmission Gully – not the Gully road itself. I shudder to think how much additional tax it’s going to take to make the rest of it happen…?

    Clearly the Roads of National Significance are NOT budgeted for yet, if new taxes are being raised in their name…

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  21. dave (988 comments) says:

    DPF: That is a user charge more than a tax. Are you saying non road users should subsidise road users?

    1. Who (besides prisoners most of the time ) are not road users?
    2. If I get petrol for my lawnmower, how is that a user charge of roads when I am paying more tax to cut my grass?
    3. How much of the 9c increase is to be used for roading?
    4. How can you explain to your Dunedin readers who wont be travelling north in the next three years how this tax is a “user charge”, when it is more like a toll for something they don’t use?

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  22. berend (1,716 comments) says:

    And what do I see just now in my twitter feed? Finance Minister Bill English admits that without hiking petrol taxes, the government could have missed its surplus target

    So nothing to do with user charges for roads. Just another fleecing of the taxpayer.

    Yes, I know it’s really too much to expect that National could have reached its surplus target by let’s say, some belt tightening. Because we know that every bit of government spending is essential. Including the department for women’s affairs.

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  23. berend (1,716 comments) says:

    dave, +1

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  24. Manolo (14,086 comments) says:

    Doble Dipton, a vampire and sucker of taxpayer’s money as his predecessor, the now Sir Michael Cullen, wrecker of the NZ economy.

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  25. campit (467 comments) says:

    Top chart has my pet hate which is a non zero starting number on the y axis, which exaggerates the downward trend. And yes, the trend to the right is a total guess. I’m not sure there should be too much value placed on it. What did the future projections look like three years ago, and were they accurate?

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  26. berend (1,716 comments) says:

    HT to PC, who gives us a nice overview of John Key’s promises:

    May 2008: We believe in tax cuts. We believe in the power of tax cuts. And we will deliver them.
    September 2008: an ongoing programme of personal tax cuts.
    Ocober 2008: the pledge to deliver about $50 a week to workers on the average age remained on track
    December 2008: National will not be going back on any of these promises, as we fully costed and funded them

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  27. berend (1,716 comments) says:

    campit, according to this:

    Then I checked against TSY’s PREFU forecasts (October 2011) for the 2012 year:
    Their forecast 2.2% current account deficit came in real at 4.5% for the year ending June 2012.

    And their forecast 2.8% Real GDP came in factually at 1.6% for the year ending June 2012.

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  28. RRM (10,034 comments) says:

    What’s the difference between National and Labour again? can someone remind me.

    An excellent question! :mrgreen:

    :arrow: Cullen steadily reduced crown debt down to about 20% of what he inherited.
    :arrow: Helen Clark said NO to Maori foreshore & seabed demands.
    :arrow: Cullen devised a new widely-subscribed retirement savings scheme.
    :arrow: Helen Clark signed free trade agreement with China.

    YOUR National Government has achieved the following:

    :arrow: John Key signed free trade agreement with Warner Brothers Entertainment, Inc
    :arrow: Tobacco excise tax up 24%, April 2010
    :arrow: GST increased to 15%, October 2010
    :arrow: Tobacco excise tax up 10%, January 2011
    :arrow: Tobacco excise tax up 10%, January 2012
    :arrow: October 2012, Turia announces annual 10% tobacco excise tax hikes to continue 2013-2016

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  29. RRM (10,034 comments) says:

    So yeah, a vote for National is a vote for ANNUAL tax hikes, pretty much… :-P

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  30. Kleva Kiwi (289 comments) says:

    RRM (6,004) Says:
    December 18th, 2012 at 2:53 pm…

    Cherry picking much?

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  31. berend (1,716 comments) says:

    RRM, brilliant!

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  32. Ancient Dan (47 comments) says:

    Labour did it in the best terms of trade and a period of prosperity not seen since the 60’s

    For the deluge of revues they received they did not do well

    In case you are unaware the world economy went down the toilet in 2008.
    National has done middling to well all considered.

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  33. skyblue (215 comments) says:

    National are doing the Greens dirty work. Under Commie Norm petrol will increase by much more and all of the revenue will go into the spend and spend fund. By all means berate the Nats, I am.
    Looking forward to 2014 if we have a government with the green tail wagging the Labour Dog. Have a look at France as an idea what will happen, 75% tax on EURO1M. High earners are voting with their feet, http://www.guardian.co.uk/world/2012/dec/17/belgium-gerard-depardieu-want-to-live-there
    I will fix my mortgage in Sept 2014 before the election as inflation will increase from 2015 when we devalue the dollar also with Commie Norm.

    I have been speaking with other people on 2013, Chch will ramp up considerably from Feb. Customers in the construction area are really noticing an upswing due to this, so this is a good out for National, I think 2013 will be a boom year for NZ, both external & internal reasons

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  34. lazza (387 comments) says:

    “National’s promise on the surplus is too big to break. It has to get there. But it’s forecast to get there with a razor-thin margin of just $66m by cutting jobs, selling assets and raising prices at the petrol pumps,” he (David Shearer )said.

    Yep! Dave … its called budgetting. Might be a good idea if your mob took lessons … make this one a case study eh? and while you are at it go tell your Local Council to do the same. NEWSFLASH … there’s a recession on!

    And Oh … BTW … radical concept, petrol taxes get spent on roads, Soooo … more tax=’s more/better roads:Result; anti recessionary stimulus and economic benefits. Pray tell moi … Where’s zee problemo?

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  35. MT_Tinman (3,263 comments) says:

    There are no “non road users”!

    Everyone uses products and services that rely on road transport or the transport of workers.

    The increase in fuel/road tax simply increases the subsidy fuel users pay to those who don’t purchase fuel e.g. road lice, miserable bastards, criminals who have been caught etc.

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  36. adaman (43 comments) says:

    What we need in order to kickstart the economy is the elimination of 20-40% of govt spending MINIMUM and return that money back to the people a.k.a the market. In terms of taxes, I propose the following.

    1. Eliminate the petrol tax. This tax merely helps in stagnating growth and in eliminating the middle class via higher marginal costs faced to the extra tax.
    2. Bring down personal tax rates. I think have all income up to median wage tax free and everything over at 15%.
    3. Bring down business tax rate. Small to medium businesses make up roughly 80% of businesses in NZ and hire about 80 percent of people. Lets help the economy by making the first 200k tax free and then a rate of 15%.
    4. Eliminate RWT and GST. RWT has the effect of lower savings growth and I say lets give those diligent enough to save their money back and lets try improving our dismal savings. GST is a tax that disproportionately affects the middle and lower classes as they have a higher marginal propensity to consume and as such this tax is nothing but a way of wiping out the middle class.
    5. Eliminate the ETS. Our economy is struggling, and having a tax that does strangulates our major sectors is going to do nothing in improving our growth, our prosperity etc.

    Unfortunately the majority of NZers vote either for Labour or Labour Lite and with the commie greens in third place, NZ is buggered unless changes are made whereby we don’t allow these pigs, I mean politicians, same diff, continue to dip their snouts into the trough that is our hard earned money and at the same time strangulate the economy via the various taxes that they either raise or create.

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  37. bringbackdemocracy (428 comments) says:

    Red Labour and Blue Labour continuing their “high tax big government” spending.

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  38. Steve (North Shore) (4,596 comments) says:

    There are many road users who pay nothing and bever will. Road Lice. How much do they contribute?
    Don’t give me that bullshit about they pay tax when they use their car, how much do the bludging Road Lice pay for using the roads?

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  39. Steve (North Shore) (4,596 comments) says:

    never*

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  40. Steve (North Shore) (4,596 comments) says:

    What’s with the Edit function? Is it WordPress, or has it been disabled? Bit of a pain for us who like to check speeling and add a further note

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  41. liberalcentrist (1 comment) says:

    Road users paying for road construction costs, moving to a balanced government budget so that we can pay down debt, and curbing imported non-renewable fuel use which will help the environment and the balance of payments. Sounds eminently sensible.

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  42. Colville (2,300 comments) says:

    English has a habit of picking the figures that suit him.

    Whilst Cullen just hid everything that didnt suit him then said ….. suuurrrprise!

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  43. Manolo (14,086 comments) says:

    A few minutes ago I listened to a halting, mumbling and hesitant Bill English trying to defend the indefensible petrol tax hike.

    As rapacious as the disgraceful socialist Cullen, English is nothing but a tax vulture. He and his party deserve the axe.

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  44. mikenmild (11,798 comments) says:

    adaman
    That sounds a bit like an ACT manifesto. Now, either the policies themselves were deeply unattractive or the crowd of politicos who tired to sell those policies had some credibility issues. I’m not sure which.

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  45. Manolo (14,086 comments) says:

    Well said, adaman.

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  46. wat dabney (3,814 comments) says:

    National have done bugger all economically. The global crisis gave them every justification to examine state spending root and branch. But no. The country could have been on auto-pilot for all the difference they’ve made. Utterly useless.

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  47. big bruv (14,166 comments) says:

    Where is the cut in welfare spending?

    Where is the attack on DPB slappers?

    Where is the cut in WFF?

    Nope…much easier to raise taxes on the productive sector.

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  48. Manolo (14,086 comments) says:

    At this pace Labour lite will be defeated in November 2014. From the pan to the fire for our country.
    Neville Key has a lot to answer for.

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  49. Viking2 (11,580 comments) says:

    Actually Brash himself has suggested that raising petrol taxes is better than most other taxes although he suggested it in relation to controlling inflation..
    Taxing people has too many outs and fishooks whereas taxing feul catches everyone.. there is no out. Its also easy to collect.

    One thing that does need doing though is to stop subsidizing buses from various rates accounts and make bus and train passengers pay their share. Oh and cyclists as well! :lol:.

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  50. mikenmild (11,798 comments) says:

    Ah, those evil cyclists free-loading on our beautiful roads.

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  51. libertyscott (359 comments) says:

    OK let’s clear this one up:

    1. The government decided on a massive spendup on roads, which based on the antiquated PAYGO funding formula, was above the expected revenue from RUC and fuel tax.

    2. The overspending on roads meant a transfer from other taxes to road spending in the absence of the fuel tax/RUC increase.

    3. The fuel tax/RUC increase is a tax on ALL road users, but the road capex is concentrated in Auckland, Waikato, Wellington and Christchurch. Historically road users in Canterbury have overpaid relative to money spend on their roads, whilst those in Northland, Gisborne, Taranaki, West Coast and Southland have underpaid, so this isn’t entirely unreasonable. However, it is clear that the main beneficiaries will be a small set of motorists in main centres.

    4. The PAYGO funding system for roads bears little relationship to user pays because unlike all other capital expenditure on major infrastructure (telecoms, electricity, water, airports, ports), this is based on paying for new capital with existing revenues, rather than borrowing so that the future users of the infrastructure pay for it as they use it. It is a huge transfer from existing motorists to future generations, which ought to mean future generations pay LESS, although that’s extremely unlikely as politicians always find something new to spend money on in transport.

    5. About half of the RONS projects are economically dubious and at best poor spending compared to other road spending, with lower cost alternatives available. e.g. Puhoi-Wellsford, Hamilton East bypass of the Waikato Expressway, Transmission Gully.

    So however it may be justified, it isn’t economically efficient, it is a transfer from most motorists to a minority of motorists and an intergenerational transfer from current road users to future ones.

    Of course the stock response is Labour and the Greens would be worse, which may be true, but hardly inspiring.

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  52. campit (467 comments) says:

    Am I interpreting the bottom chart correctly if I say that since National came to power in 2008, Government debt has increased from about 5% of GDP to 25%? What does the chart of GDP look like? Has that been fairly flat during that time?

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  53. dime (10,137 comments) says:

    an increase in petrol tax? wtf???

    ya know what blows Dimes mind?? in the US when petrol hits $4 a gallon they go apeshit and their economy is doomed. what are we paying per gallon? add that to the houses that cost double what they should.

    how much tax do you pay owning a car?

    Step 1) buy the car. Pay GST. any duties built into the cost.
    Step 2) register the car and get a WOF. registration is gravy and GST on the WOF
    Step 3) get insurance. pay GST on it.
    Step 4) Pay petrol TAX

    seriously national, why do I even care if youre in power any more???

    im gonna knock another 100k off my mortgage before the next election to help insulate me against the tax increase I will get hit with… BUT low income peeps will have more money to buy my imported goods :D ill make more money.

    I generally vote for the good of the country, but when I look at national I think they have done a bad job. they wont repeal any crippling labour bribes, they cant give money/ rights to the maoris quick enough. turning into a debacle.

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  54. mikenmild (11,798 comments) says:

    Only ‘turning’ into a debacle dime?

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  55. adaman (43 comments) says:

    mikenmild

    The policies are not that unpopular and there is in fact a lot of support out there and I have spoken to many people who just did not like those trying to sell the message and its just that in terms of those people trying to sell the policies, many of them are egocentric, individualistic arsewipes who couldn’t for the life of them figure out what team play meant. I’m all for individualism and am a strong proponent of it, but at the same time there are things that most individuals on their own simply cannot do and thus require the need to work together and build a united front in order to achieve common goals. This was missing from the ACT Party and we are seeing this in Labour now as well.

    In terms of the ACT people, initially I cannot see that there were credibility issues, even with the likes of Sir Roger and Prebble being at the forefront considering Rogernomics which many people saw unfavourably. These guys were still seen by a lot of people as “saviours” who transformed the NZ economy and saved it from collapse or impending collapse.

    Unfortunately the message got lost when social conservatives took the helm of the party and brought with them a socially conservative manifesto. The infighting that followed between liberals and conservatives helped if not started the demise of the party and with it credibility as many from the conservative side had lets say backgrounds which were not squeaky clean and should have been made public, people who were controversial etc. Lets also not forget making mistakes or as some people call it making a serious error in judgement in terms of perks. Also leadership battles and hissyfits when people did not get their way did not help. The credibility of the ACT party and those people involved who were essentially in charge of selling the message similar to what I promote was tarnished when the social conservatives took over. The tory dinosaurs destroyed ACT’s credibility and as such with it, tarnished the message.

    It shall take time before the stench is removed from the message, but once removed, the message of personal freedom, economic freedom including lower taxation and elimination of some, will prevail as people wake up and see that govt cannot build successful economies, only the marketplace, that is you and me and in NZs case, the other 4.5million people, can build a safer and prosperous nation.

    I’m a straight shooter and call it as I see it but also as a libertarian, I also have my subjective views which not everyone will agree with. Hopefully we can learn from our mistakes. Many of those who were tarnished or tarnished themselves could have and would have been awesome MPs, heck many still could have been still in parliament or played a greater role in the background but we make mistakes and unfortunately these have added up to the point where the message has become “tainted”.

    The message is pure but has unfortunately been tainted by personal squabbles and till it is cleansed, it shall be seen as unattractive. Lets hope that it is not too late when the people wake up.

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  56. mikenmild (11,798 comments) says:

    There’s a lot to agree with in what you say, but the crowd of dodgy types who flocked to ACT really damaged the ability to sell economic and social liberalism. Also, I think ACT suffered from being associated with leading advocates of rapid economic ‘reform’, with consequent loss of trust.

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  57. bhudson (4,741 comments) says:

    since National came to power in 2008, Government debt has increased from about 5% of GDP to 25%? What does the chart of GDP look like?

    @campit,

    Did the Gobal Financial Crisis and Chch earthquakes escape your attention on Planet Labour?

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  58. bhudson (4,741 comments) says:

    adaman,

    Unfortunately the message got lost when social conservatives took the helm of the party and brought with them a socially conservative manifesto.

    Rubbish. There is no way you can claim that ACT under Douglas and Prebble were pushing socially liberal policies in the ‘original’ ACT. Reality is more the reverse – the traditional economically liberal/socially moderate ACT leaders were hijacked by committed libertarians who clouded the clear, economic messages with smoking dak. Look what happened to the ACT voting base once that happened

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  59. Colville (2,300 comments) says:

    seriously national, why do I even care if youre in power any more???

    Because we are doing quite ok thankyou. NZ is beating the arse of most countries.

    Can you imagine the last 4 years with Hullun/Cullun or One of the Davids/Norman in control?

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  60. dime (10,137 comments) says:

    colville – voting for the lesser of two evils is uninspiring.

    im sorry but any tax hikes give me the shits. they never come off. in 5 years when the economy is going great do you think the petrol tax will go down? nup.

    im over tax increases, continued welfare for families and the weird alliance with the racist maori party. the ones who will side with labour as soon as they can. fuck em.

    im glad they are in power but im still pissed at them.

    also, I hear soundbites like – this will lead to more people moving to Australia. umm who cares?

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  61. bchapman (649 comments) says:

    Even better- you pay 15% GST of the 9c a litre increase in fuel. Doubly good for the govt coffers.

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  62. burt (8,324 comments) says:

    Partisan politics at it’s finest. DPF argues that a petrol tax hike isn’t a tax hike it’s a user charge and the lefties lambaste National for increasing taxes.

    Shit it’s almost worth making sure National win in 2014 (perhaps they could rort the spending rules?) so by 2016 we see DPF defending National’s ‘New and improved’ electoral finance act while x Clark supporters lambaste it’s titling of the playing field and shutting down of free speech! DPF would be priceless leading the counter protest with a megaphone to shut down some Labour party bloggers congregating on parliament.

    Musical f##king chairs …. don’t ya love it !

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  63. burt (8,324 comments) says:

    Petrol tax is highly regressive – has exactly the same effect as high electricity prices under Labour. Those who can least afford it get hurt the most. F##king stupid…. National… you can do better than this.

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  64. burt (8,324 comments) says:

    A progressive registration fee based on vehicle tare weight would be logical…. oh so simple … but no … gouge the easily hidden way… know that memories are short and don’t need a documented reminder every [6 or 12] months. The drivers will be blaming the oil companies again next time the price goes up won’t they… Filth… Left wing dishonest type of filth – center right government – pffft !

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  65. southtop (266 comments) says:

    Completely agree with Burts posts

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  66. dime (10,137 comments) says:

    “Petrol tax is highly regressive” – thats its only good point!

    you say regressive, Dime says FAIR

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