Greens claim they will run bigger surpluses – yeah right

August 21st, 2014 at 7:00 am by David Farrar

The Herald reports:

Prime Minister John Key has taken a shot at Green Party co-leader Russel Norman, saying he must have been smoking dope to believe the could pay off debt faster than National.

The Green Party has claimed its economic policies would pay down debt faster and get bigger surpluses, than under National. Mr Key said he knew the Greens were also keen on legalising cannabis.

“If they really believe that, maybe they’ve been trying the substance because they can’t do it.” Asked if he thought Dr Norman had been smoking weed when he put out the numbers, Mr Key said “well, if he really believes those press releases, yes. Press releases are cheap and easy. Getting back into is a much more challenging issue.”

Mr Key said between them Labour and the Greens had made $28 billion worth of promises already. Even if Labour stuck to its promise to remain in surplus, it would leave no buffer if there was another disaster that impacted on the economy.

The claims they would also be fiscally restrained are laughable.

First of all Labour and Greens have condemned every measure of fiscal restraint in the last six years. We would not be on the verge of surplus if they had been Government.

Secondly it is important to understand how they are claiming they will stay within surplus. It involves the operating allowance.

The Government has allowed $1.5 billion a year of extra spending. This is cumulative. So this year is is $1.5 billion, and next year it is $3.0 billion (over two years ago) and the year after $4.5 billion. Labour and Greens say they will fund all their policies for the next three to four years from those operating allowances.

This is again not even close to credible. What Labour and Greens are implicitly saying, and you have to believe, is that if elected they will make no more spending decisions for the next three or four years. That they will not fund any new initiatives. They will not even have a Budget where they announce new spending, because what they have done is pre-allocate the allowances for the next four years.

Now if you believe that they will make no new spending commitments in the next four years. That for four years they would announce Budgets that are basically one page long and just say “No more spending” then you can believe they will run a surplus. But if you do believe that, can I also offer you this nice bridge for sale.

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37 Responses to “Greens claim they will run bigger surpluses – yeah right”

  1. Berend de Boer (1,716 comments) says:

    It’s a bit hard to know what the Greens would do as they haven’t bee in government yet.

    But we know what National did: borrow $300 million a week. For six years.

    Tax cuts? You didn’t get any (tax cut was fiscally neutral through GST increase).

    Smacking? Still prosecuted severely.

    Number of civil servants? Nothing changed.

    Their plans for the next 3 years? Spend even more of your money.

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  2. ciaron (1,441 comments) says:

    Key needs to be very measured at the moment. Comments like that will only serve to keep the dirty politics meme in the spotlight.

    – Not that I disagree one iota with what he’s saying.

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  3. Scott1 (579 comments) says:

    Or they could have a tax increase in every budget….

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  4. Pete George (23,688 comments) says:

    “The Government has allowed $1.5 billion a year of extra spending.”

    This is over and above an allowance for inflation?

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  5. emmess (1,433 comments) says:

    I disagree Ciaron
    If the left are going to accuse National of “dirty politics” no matter what.
    May as well do it anyway, within reason of of course.

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  6. RRM (10,034 comments) says:

    Some clown with a Phud in Political Science is so much better than Key & English, that he’s going to spend $28 Billion and still run surplusses that are $2 Billion higher than the National Government?

    Righto…

    I wonder how many printing presses will be required?

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  7. wreck1080 (3,972 comments) says:

    I thought the greens were relying on tax increases to fund this stuff.

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  8. ciaron (1,441 comments) says:

    @emmess,
    Fair enough. But Key trades on the “blokes bloke”, ordinary kiwi thing. Whilst I agree treating the Greens policy with contempt and derision is appropriate in this instance, making snide allusions about what particular Greens get up to in their spare time may come back to bite him.

    @RRM,
    they’ll just 3d print pallets of cash… that’ll work, right? :)

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  9. duggledog (1,589 comments) says:

    Looking forward to the mortgagee sales. Should be a few on the cards in the years ahead whoever is in power

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  10. flipper (4,241 comments) says:

    Heh folks…

    It makes good entertainment, so don’t knock the red melons.

    I would correct RRM’s comment on only one point:

    *** “…clown with a Phud in Political Science (EDIT – aka Jim Anderton’s Alliance) is so much better than Key & English…”

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  11. ciaron (1,441 comments) says:

    Russel Normans first speech as the finance minister

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  12. radvad (772 comments) says:

    The extreme left and the even more extreme left (the Nats are only moderate left) take great joy in pointing out that some commodity (milk, logs) prices are dropping. By doing so they are shooting themselves in the foot as it gives Key the obvious response that there is an even greater need for fiscal responsibility.

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  13. FeralScrote (229 comments) says:

    Beat the rush, buy your shares in printer ink now.

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  14. flipper (4,241 comments) says:

    While the red melons dream of dual Deputy PMs, and their printing presses are churning out norman dollars, time to recall DPF’s excellent summary:

    *** ” No tax cuts
    August 19th, 2014 at 12:00 pm by David Farrar

    Have been in the two hour PREFU (Pre-election Economic and Fiscal Update) at Treasury. These are required by law, after that period in the 1980s and 1990 when incoming Governments got a nasty surprise when they found out the Budget forecasts were so far out of date.

    Key points made by Treasury are:
    » Surplus for 2014/15 now projected to be $297 million, down from $372 million
    » Core crown expenses forecast to be 30.3% in 2015, down from 35% in 2011. This is the critical figure – making sure spending doesn’t increase faster than the economy.
    » Economic growth last year was 3.3% against 3.0% Budget forecast. For this year now forecast to be 3.8% against 4.0% Budget forecast.
    » Unemployment forecast to be 4.5% by 2018
    » Average annual wage forecast to increase by $6,600 to $62,000 by 2018.
    » Household disposable incomes rose 7.1% last year and forecast to increase 4.0% a year in future
    » Inflation forecast to peak at 2.5% in 2016
    » Annual increases in house prices has declined from 10% to around 6% in the last year
    » Total cost to taxpayers from the Canterbury earthquakes now forecast to be $15.8 billion
    » Economy still growing strongly and above potential
    » Fiscal restraint remains beneficial and important to stop inflation
    » Trading partners still expected to have strong growth
    » Terms of trade will ease up earlier than in Budget, but will remain above historic levels
    » Should utilise upswing to strengthen Crown balance sheet
    » Weakness in global dairy prices is more a short-term issue, not a structural issue, and not inconsistent with Treasury central forecast ….. “

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  15. Bob (497 comments) says:

    I have more trust in the financial judgement of National than Labour. I shudder to think what the Greens would do to the national budget if they got any control over finances. I am concerned the general public are taking too much notice of Nicky Hagar and not enough about the political competency of the parties seeking election.

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  16. Judith (8,534 comments) says:

    Even though I tilt to the left, that is one thing I find hard to accept.

    Frankly I doubt any party will be able to run a surplus with all that is going on in the world today. Best party will be able to manage to keep the status quo and make sure we don’t get into anymore debt, whilst at the same time making necessary changed, cutting back on the excesses, and reorganising those savings where they are most wanted needed.

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  17. Fiscal Watch (1 comment) says:

    Good post. I said much the same to Mike Hosking on Newstalk ZB at around 7.45 this morning. The arithmetic of increasing spending, increasing taxes by lesser amounts and then producing increased surpluses does not make sense. Both Greens and Labour are pre-spending most of the BEFU / PREFU allowances for future Budgets. But they do have a point that the current spend on Health, Education and Environmental Protection does not allow for inflation. Approximately $3.84 billion of the $9.62 billion future budget allowance would be needed to allocated to maintain constant real levels of spending. That leaves a little under $6 billion for future discretionary spending. That will be reduced by any new spending National promises in the lead up to the election – likely to be rather less than $1 billion. So a National led government would have a cushion of around $5 billion for future Budget new spending initiatives. Labour and the Greens would have very little, and may even run deficits if they try to fund both parties promises (as they both have similar sources for the extra revenue needed to fund their spending).

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  18. radvad (772 comments) says:

    Hell just froze over, Judith has crossed to the dark side.

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  19. Paulus (2,672 comments) says:

    Of course it is easy – Just Print Money !

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  20. polemic (460 comments) says:

    Yes you can run bigger surplus’s in “Co-Boat” because it wont go anywhere

    A vote for Labour is a vote for the “Co-Boat”

    Labour = Greens – The Famous Co-Boat

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  21. Steve Wrathall (285 comments) says:

    Furthermore, even the Greens’ policy auditors have said that they have massively overestimated the revenue gathered from their 40% envy tax. Delusionists: meet Laffer Curve.
    http://www.act.org.nz/posts/green-party-scores-massive-own-goal-as-their-own-policy-auditor-criticises-their-fiscal-plan

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  22. Ross12 (1,456 comments) says:

    Jamie Whyte has been able to rubbish it just based on the comments of their auditors ( Infometrics)

    https://nz.news.yahoo.com/a/-/top-stories/24769066/greens-score-own-goal-with-fiscal-plan-whyte/

    ( edit. Steve got before me )

    As I said yesterday , only 6 months ago the greens were saying having a surplus was not that important , when responding to the Governments message. Norman is a hypocrite to come out with this ‘plan’ and pretend they can put it into effect.

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  23. Rich Prick (1,729 comments) says:

    The Greens can deliver a surplus while eliminating Child Poverty, saving the planet and inventing cars that run on pixie dust. Why do you question them. Of course we will be paying for milk with billion dollar notes fresh off Norman’s printing presses, but we will all be rich, rich I tell you.

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  24. kaykaybee (154 comments) says:

    Of course you can run short term surpluses if you tax the existence out of your productive and investment sector.

    Have no doubt that should they become a coalition Labour and the Greens will implement massive tax increases we can only imagine and that will be but the tip of the iceberg. They’ll bring in a raft of socialist policy based on their love of the Scandi/Franco systems – try 35 hour week and worker rights, leave entitlements and penalty payments of ALL descriptions.

    Of course Cunliffe won’t give a clue as to how their proposed govt would be structured as he claims he needs to see the lay of the land.

    I cannot imagine how the markets would be affected by this monster, but it’s the unknown, the undeclared that we need fear. The best intentioned and moderate in Labour are no match for a red flag waving Cunliffe, his activist McCarten running Labour and the Greens having 30% influence and policy implementation in cabinet. Imagine were Internet/Mana to be pivotal in any coalition.

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  25. jackinabox (776 comments) says:

    How much does cannabis law enforcement cost the country each year?

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  26. mister nui (1,030 comments) says:

    I thought the greens were relying on tax increases to fund this stuff.

    Yes, and what will those tax increases do to the tax take? Certainly not what the left think/hope.

    This is why I don’t understand a lot of the Grey Lynn/Ponsonby set voting for a Grebour government – these people are some of the most highly mortgage indebted people in the country. When Grebour fuck the dollar, ramp up public spending (which drives inflation), ban foreign investment etc. etc. these people will be in one helluva pickle, with only themselves to blame. Are they really that thick they can’t see this?

    One part of me is hoping for Grebour win, as it will smash the NZD and I will swoop in with all my overseas currency and make a killing on all the over-leveraged mortgagee sales that will flood the market.

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  27. david (2,564 comments) says:

    It would be entirely consistent with Labour and Green philosophy fro them to immediately introduce draconian controls over international currency transactions and restrict the inevitable Capital flight resulting from the shut-down of NZ’s most productive sectors – the logical response to higher taxes and CGT.

    We would be back to needing to justify the need for FX to a bureaucrat whether it be travel funds of expatriation of capital. It could also very easily dry up the ability of the PI community to remit funds to family back in the sunshine.

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  28. david (2,564 comments) says:

    mister nui – nah, Russel would unfloat the dollar and fix the exchange rate. Back to the Future we go. Now where did I put the keys to the De Lorean.

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  29. mister nui (1,030 comments) says:

    The other problem with the Greens tax plan is that they’re going to bring in a 40% tax rate at 140k, whilst at the same time printing money with a bank of printers at cruising height… Which means we’ll be paying 40% tax on everything above the cost of a loaf of bread.

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  30. skyblue (215 comments) says:

    I am voting Green now, I have a $300K mortgage and it will soon be inflated away.

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  31. mister nui (1,030 comments) says:

    Problem is skyblue, so will your earnings, unless you’re earning foreign currency.

    Argentina, here we come.

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  32. skyblue (215 comments) says:

    Mr Nui – but we will be living in the great socialist utopia. What could be wrong with that?

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  33. mister nui (1,030 comments) says:

    but we will be living in the great socialist utopia

    Shit, how did I gloss over that? Guess it’s off to the gulags for me for some reeducation…

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  34. thor42 (971 comments) says:

    The only surplus the Greens would know anything about would be a surplus of weed.

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  35. flipper (4,241 comments) says:

    Heh folks…

    How about someone with some more time than I have at the moment, doing a script for the first meetings between red melon Finance Minister Norman, and

    1. The Governor of the Reserve Bank, and

    2. The Secretary to The Treasury.

    Might make a Hollywood movie script. Someone could suggest the cast! :-)

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  36. flipper (4,241 comments) says:

    thor42 (959 comments) says:

    August 21st, 2014 at 10:02 am

    *****

    But Thor, did you note the several attempts to portray J Key’s “weed” sluice at Norman as “dirty politics”.

    Thank goodness that Key did not flinch.

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  37. ciaron (1,441 comments) says:

    Flipper, that’s exactly what I was saying in my first comment – when Key should be putting out that fire by depriving it of oxygen, he just put a little more fuel on it…

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