Armstrong lashes Goff

February 1st, 2011 at 3:00 pm by David Farrar

John Armstrong writes:

It being election year, Phil Goff has decided to hold a press conference every Monday to counter the Prime Minister’s use of his weekly media briefing to set the political agenda. Yesterday’s first effort was hardly an unqualified success.

Instead of setting the agenda, Goff found it being set for him by the media. The questions had a recurring theme – where is the money coming from to fund Labour’s seemingly ever-expanding list of promises.

I am amazed that Labour has embarked on this strategy to dent its credibility. At a time when deficits and debt are so high, you can’t just announce spending plans with no way to pay for them.

Goff’s reluctance to provide detail beyond saying Labour would ditch some projects – such as the scheduled $875 million missile upgrade for the navy’s frigates – turned the 18-minute press conference into the media equivalent of shooting a rather large fish in a relatively small barrel.

Having got rid of any offensive capability for the Air Force, it seems they want to do the same for the Navy. Regardless the $875m is a one off capital cost – these upgrades probably happen every 30 years or so. You can’t fund much operational expenditure from delaying a capital upgrade.

One example suffices. Goff gave a “heads up” on families from today having to pay an extra $25 to $35 a week in early childhood education fees, something he described as a “tragedy” for childhood learning.

So would Labour restore funding to previous levels? Goff confirmed it was a “priority”. Almost in the same breath, though, he said that would happen as spare revenue “becomes available”. Given other priorities, Labour would not be able to restore those previous levels in its first Budget.

That begged the question of when is a priority really a priority or when is a priority just something on a long list of things a new Labour Government would want to do if it had the money.

I think John has absolutely analysed it correctly – a priority means “would like to do it if we could”

Unwilling to say exactly where the money would come from, Goff sounds like someone who not only thinks he can have his cake, but also eat more of it than exists.


Labour faces a conundrum. It has no choice but to say where it stands to have any hope of jolting the polls. Goff’s reluctance to say how Labour will pay for it all is fast turning a question of credibility into a credibility problem.

There’s a reason we refer to it as Goofynomics. It s lacking in credibility.

Goff’s discounted truffles

October 1st, 2010 at 2:25 pm by David Farrar

Matthew Hooton writes in NBR (off line) exposing another consequence of goofynomics:

Mr Goff’s policy would slash the price of American pomegranates, now selling at over $30/kg, New Zealand cranberries, selling at $25.30/kg, and Philippine figs selling at $2 each but would leave the price of low-fat milk, wholemeal bread and natural muesli untouched.

The ultimate in excess, fresh Alban truffles, currently selling for $6000/kg in Auckland, would fall by $800/kg under Mr Goff’s policy.  Good luck selling that one in West Auckland.

The residents of Epsom whose like French cusine, will be thanking Mr Goff for knocking $800/kg off the cost of their truffles.

But before they celebrate, I have to take issue with one aspect of Matthew’s claim. You see a truffle is a fungus, and is a fungus a vegetable?

I don’t know the answer for sure. But what I can guarantee is that when the answer is worth $800/kg, the court case will go all the way to the Supreme Court.

And think if the Supreme Court rules that a truffle is not a vegetable, for GST purposes. Then presumably mushrooms will also be deemed not to be vegetables. And so all the supermarkets will have to remove mushrooms from their fruit and vegetables sections.

We may end up with our own version of the 1893 Nix v Heddon when the US Supreme Court had to rule on whether a tomato was a fruit or a vegetable (it is a vegetable – well at least in the US).

I can see Labour’s GST policy attracting lots of votes from lawyers.

Goff’s GST pledge rewards top 10% three times more than bottom 10%

September 28th, 2010 at 10:00 am by David Farrar

If one goes to the Stats Household Expenditure Survey, it give details of spending on fruit and vegetables by income decile.

The poorest 10% of households spend $9.80 a week on fruit and vegetables. Assume two thirds is “fresh” and that is $6.53 they spend on fresh fruit and vegetables.

The “rich pricks” households making up the top 10% spend $30.70 a week on fruit and vegetables. Assume two thirds is “fresh” and that is $20.47 they spend on fresh fruit and vegetables.

The Goofynomics announcement yesterday means a weekly saving of 98c for the poorest households and a saving of $3.07 for the rich pricks. So the rich pricks gets more than three times the benefit of Goofynomics than the poor.

But let us give the final word on Goofynomics to Dr Michael Cullen, who said on 4 August 2004:

Hon Dr MICHAEL CULLEN: I am aware of many countries that have appallingly inefficient GST systems where they exempt various articles, where they have differential rates, and where one has to differentiate between food taken away from a place and food consumed within a place. Thank goodness we have not followed those very bad policies.

So we have it officially from the last Govt – “very bad policies”.


June 5th, 2009 at 2:36 pm by David Farrar

Matthew Hooton hits the mark in NBR today. Go buy a copy for the full column, but here are some extracts:

It’s embarrassing to even chronicle Labour’s descent into economic lunacy this week but it now seriously proposes that borrowing to invest in global sharemarkets is not only a good idea but a one-way bet.

Borrow no matter how gaping our fiscal hole, nor how long the books will remain in the red, Labour insists.

This and only this, it claims, will stop superannuation entitlements to those aged 44 or younger being butchered.
It’s sad seeing Phil Goff reduced to such nonsense. Clearly, he now has no expectation of ever becoming prime minister.

Basically Goff has said that no matter how fire the deficit or debt is, he supports borrowing to save.

Dr Cullen launched his fund when permanent surpluses were forecast. With zero gross debt being on the medium-term horizon, it made sense to establish a sovereign wealth fund.

Connecting it with superannuation, though, was entirely political. Even Dr Cullen made clear there was no link to future entitlements and future taxpayers were always going to have to meet 89% of costs.

Bill English’s decision not to borrow for the fund will increase that by just 3%.

Moreover, in national-income terms, Mr English’s decision relates to just 0.2% of GDP from 2030.

It is ridiculous to worry about such a number. The smallest economic shock over the next two decades – positive or negative – could double or eliminate it, as could small productivity changes.

The media hysteria over the suspension has been put into context by Matthew. 0.2% of GDP.

Failing that, maintaining current entitlements would simply require reducing our surplus or increasing our deficit by 0.2% of GDP, 20 years hence. That hardly justifies the preposterous notion that we should borrow more now to invest in stocks.

Yet that is what Labour is demanding we do.

In reply, Mr Goff says governments can’t lose. He bases this on the banal observation in a Treasury paper that long-term returns from a diversified portfolio are likely to match the market average which, most probably, will exceed the risk-free rate over time.

Armed with these Corporate Finance 101 assumptions – and apparently with certain knowledge that sharemarkets are about to bounce back – Mr Goff demands that Mr English borrow another $20 billion over the next decade, and calculates it will deliver a net return of $8 billion sometime in the future.

No other politician in the developed world would contemplate such lunacy. Take Mr Goff’s argument to its logical conclusion and why stop at $20 billion?

Why not $200 billion to get $80 billion profit, dead cert?

Make it $2 trillion or more and perhaps tax could be abolished altogether with all government services being funded through the sharemarket.

This isn’t Goffonomics. It’s Goofynomics.

A name is born.

Mr Goff should ask why no other political leader in the history of the world has proposed this before.

Perhaps it’s because they understand it’s not government’s role to borrow from taxpayers yet to be born to risk on Wall Street with the promise of free money in the future.

What amuses me most of all is how Phil Goff treats a 50 year Treasury prediction of returns on managed funds as the holy writ, when Treasury can’t even predict from month to month what the deficit will be.