Looking on the bright side …

April 8th, 2009 at 8:22 am by David Farrar

Still fairly ropable about the decision re Cullen, but looking on the bright side I am amused that Dr Cullen will now be working for Jim Bolger, Tuku Morgan and John “Rich Prick” Key.

Slightly cheering me up also is the talk that quite a few in Labour are pissed off also, with his decision to take up a Government Board role. By departing before the Mt Albert by-election (his valedictory is 29 April), it will make the issues around candidate selection more transparent to the public as Damien O’Connor will be an MP before Mt Albert goes to vote.

I’ve also made lots of money on iPredict investing in the probability that Clark and Cullen would both be gone this year.

And with Clark and Cullen gone, we get a new Father of the House. Initially I thought this would be Phil Goff as he was elected in 1981 – the only Muldoon era MP left in Parliament now.

But he lost his seat in 1990, so his time only counts from 1993. Mr Speaker will in fact become the Father of the House when Clark and Cullen go. He came in in 1984. So did Mallard and King but they also spent 1990 – 1993 out of the House. And for those who like trivia, Jacinida Ardern is the “Baby of the House”.

UPDATE: Rodney reminds me that Sir Roger entered Parliament in 1969! Of course he had a small break from 1990 to 2008!

UPDATE2: Actually Jim Anderton and then Peter Dunne will become Father of the House. They also entered in 1984 and were swown in before Lockwood as it is done in alphabetical order. I only looked at the two main parties as the minor parties were all set up in the 1990s, but of course they both entered as Labour.

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Cullen press conference at 1 pm

April 7th, 2009 at 11:21 am by David Farrar

Michael Cullen is holding a press conference at 1 pm.

The expectation is that he will announce the date he is going to resign from Parliament.

Judith is getting closer and closer to returning!!

I’ll update with the details after 1 pm.

UPDATE: Transtasman have just said that Cullen is going to be appointed as Chairman of not one but two SOEs – NZ Post and Kiwibank.  I think that is a crappy crappy move from the Government and a slap in the face to its thousands of volunteers and supporters.  I fully appreciate Cullen’s skills, but appointing him to Chair an SOE while he is still an Opposition MP, and just weeks after you were talking about prosecuting him for Public Finance Act breaches sends out a confused message.  Any future appointments for Cullen should have been decided on their merits, and left until long after he has retired from Parliament. Not be part of some shabby backroom deal, as this appears to be.

UPDATE2: Transtasman has it a bit wrong, and not quite as bad as thought. Cullen is appointed to NZ Post only, and is expected to become only deputy chair in the medium term. No word on Kiwibank, but I guess that is appointed by NZ Post Board?]

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National to appoint Cullen as Reserve Bank Governor

April 1st, 2009 at 7:15 am by David Farrar

I understand that later today National will be announcing that they are appointing Michael Cullen as Governor of the Reserve Bank.

Their initial plans to make him Chairman of a major state-owned enterprise were criticised for his lack of commercial experience. Hence they have shifted course and now plan to make him Reserve Bank Governor as that is normally filled by people with more of an academic than commercial background.

Some MPs have told me they opposed the appointment, when it was notified to Caucus yesterday, but no formal vote was held. His appointment is part of the Key’s strategy to appear magnamious in victory and use talent from all parties.

The dissenting MPs are worried that here could be a minor loss of credibility for National to appoint to such an important role, the man whose financial and economic policies they have criticised for the last decade. But the clinching argument was that as National has adopted so many of them, they may as well adopt their architect also.

It will be interesting to see whether the dollar rises or falls, once the appointment is confirmed.

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Trans-Tasman on Cullen as SOE Chair

March 12th, 2009 at 4:45 pm by David Farrar

Trans-Tasman has some good advice for the Government in discussing the ACC funding issue:

Which may be why the Nats have gone coy on making Michael Cullen the Chairman of Mighty River Power’s Board.

They also recall John Tamihere’s famous comment about Cullen’s ability to “cut a deal on a piece of legislation, he can change a single word in a piece of legislation without those other bastards [coalition partners] knowing about it, and it melts down everything they wanted.”

If it happens with coalition partners, imagine Cullen running an SOE under a National Govt.

That is a good reason, plus the angry horde of National Party members who would encircle the Beehive and try to burn it down if they appointed Cullen as an SOE Chair this year.

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Cullen to chair an SOE?

March 7th, 2009 at 10:04 am by David Farrar

The Dom Post reports:

Michael Cullen is being tipped for a six-figure salary as chairman of one of the country’s top state-owned enterprises.

Top of the likely list is power generator Mighty River Power, Government sources say.

I have real problems with this.

I do not think it is credible you can go directly from attacking the Government in Parliament to working for them, chairing a major SOE, with say only a day or two in between.

Yes Jim Bolger chaired SOEs under Labour – but he was appointed around four years after he left Parliament. That makes a huge difference.

Supporting Helen for the UN job is different also – that is an international role – not a role that is serving the NZ Govt and at the total discretion of Cabinet.

I am not arguing that Cullen is not talented, and at the appropriate point in time, would be a good appointee to certain boards. But he should be out of consideration until National’s second term (if there is one), or at least for a minimum of a year after he leaves Parliament.

How can the Government think it is serious when it complains abut breaches of the Public Finance Act, massive blowouts in the Crown Accounts, the disaster of a purchase that was KiwiRail, and then people read oh yeah we are looking to reward the guy who did all this – before he even has even resigned from Parliament?

Most people in National were very relaxed about supporting Clark for a UN post. They are very much the opposite when it comes to having Cullen chair a major SOE.  I’ve already had absolutely furious phone calls this morning from very senior and long standing party members. I think some members would resign if an appointment was made during 2009.

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Cullen to swap sides

February 27th, 2009 at 9:00 am by David Farrar

Michael Cullen is set to swap sides. No, not from Labour to National, but from representing the Crown in Treaty negotiations to representing Tuwharetoa in Treaty negotiations.

This is almost the opposite to National’s Chris Finlayson. Chris used to be Ngai Tahu’s lawyer, and now of course is the current Treaty Negotiations Minister.

It is possible Cullen could end up negotiating with Finlayson on behalf of Tuwharetoa. For their sake I hope Chris has forgiven Cullen for personally vetoeing Chris getting the QC in 2005!

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Vernon Small says Cullen to quit soon

February 25th, 2009 at 8:53 am by David Farrar

Vernon Small seems to have an exclusive at Stuff:

Former finance minister Michael Cullen is expected to quit politics in the next two months. …

But party sources said Dr Cullen’s departure was imminent, and would certainly be before the May 28 Budget.

Former Tasman-West Coast MP Damien O’Connor is next on Labour’s list and would be first in line to take Dr Cullen’s seat.

Miss Clark’s resignation would trigger a by-election in Mt Albert. List MP Phil Twyford is seen as the front-runner to be Labour’s candidate. Next in line to replace him would be former Auckland Central MP Judith Tizard.

Everyone assumes Damien will accept the list spot. I certainly think he will. I do wonder if anyone has actually asked him?

There may be one small complication for Damien. The Taito Philip Field trial is in April I think. Now I don’t know if Damien will be a witness, but it is possible. And there could be some embarrassing stuff come out on two fronts. The first is why Damien approved such a massively high proportion of requests from Field. The second is his insistence he was not warned about what Field was doing, despite numerous warnings sent to his office.So Labour may want to delay Cullen going until after the trial.

Judith Tizard returning, would be of course wonderful. Every party in Parliament has edged away from her daft s92A law. But wonderfully Judith was on radio yesterday giving it her full support.

At some stage I’ll write the “eulogy” for Michael Cullen – probably when he does announce his resignation. The term “flawed genius” is what most comes to mind as the theme.

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How bad is Labour’s legacy

December 18th, 2008 at 12:21 pm by David Farrar

We found out today how bad is Labour’s economic legacy. In 1999 National left Labour with a strongly growing economy, falling unemployment, low interest rates, and low inflation.

Today’s DEFU tells us what Labour has left National. And my God it is bad:

  • Unemployment to hit 6.4% (and maybe 7.2%) within 15 months
  • Gross debt to increase from under 20% to a massive 33.1% (and maybe 38.6%) by 2013
  • OBEGAL deficits of $23 billion over next four years
  • Cash deficits of $48 billion over five years

This is appalling.  Even the “upside” scenario sees a massive increase id debt, deficits and unemployment.

Deficits of up to $6 billion are just unacceptable. If we do not improve from the lgeacy Labour left us, we will be leaving the next generation with a mountain of extra debt.

It gets even worse over the ten year horizon:

  • The costs of all the borrowing basically fuck the economy. We end up with a permament structural deficit with the books Labour have left us.
  • Even after 2019, the crown will be running an permanent OBEGAL deficit of 2% of GDP, or $4 billion a year. Even the “upside” scenario sees an ongoing deficit of 0.7% of GDP. So Labour have left us with an economy that is stuffed, even under the more optimistic scenario. We just can not run a decade of deficits.
  • Gross debt is now projected to hit 57% of GDP in 2023. Do you remember Helen and Michael telling us that hitting 22% of GDP would be reckless. Well they have left us with a debt on track to hit 57% of GDP!!!
  • Even net debt, which had reached zero, is projected to rocket up to 47% of GDP

This is a set of books, every bit as bad as those left behind by Labour in 1990. They are horrible. Bill English has the toughest job in NZ for the next few years.

The task for the National-led Government is to improve on this. DEFU is basically what would happen if you continue with Labour’s policy settings. The tax cuts were fiscally neutral so don’t affect things. Over the next few years we should always refer back to this DEFU as what we would achieve under Labour. National has to deliver smaller deficits and less debt than DEFU is projecting. That is their challenge.

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Following Cullen’s lead

December 11th, 2008 at 11:31 am by David Farrar

I blogged this morning my concern that bills under urgency were not being made available to MPs at the first available opportunity, and that the rules should be changed, if they were preventing this.

It does seem perverse that the House votes urgency on bills before they are tabled, but Graeme Edgeler at Public Address supplies this transcript from Hansard:

Appropriation (Parliamentary Expenditure Validation) Bill
First Reading

Hon Dr MICHAEL CULLEN (Minister of Finance): I move, That the Appropriation (Parliamentary Expenditure Validation) Bill be now read a first time.

Dr Richard Worth: I raise a point of order, Madam Speaker. Would it not be appropriate for us to see this bill?

Madam SPEAKER: That is not a point of order. [Interruption] The bill is on the Table.

Hon Dr MICHAEL CULLEN: Speaking to the point of order, I say that a copy of this bill was made available to National Party members this morning before their caucus.

Gerry Brownlee: The bill was delivered to us halfway through our caucus this morning. One copy was given to me, and another copy was given to Dr Brash. There are only two copies on this side of the Table, and they were brought into the House just as Dr Cullen was about to speak. This debate should not progress until there are sufficient copies on the Table for every member to have an opportunity to read it.

Madam SPEAKER: I understand that copies of the bill are available for members on the Table.

Gerry Brownlee: I seek leave for the House to adjourn for 20 minutes while the bill is distributed.

Madam SPEAKER: Leave is sought. Is there any objection? Yes, there is. [Interruption] Members, please, we will preserve a little bit of respect and decorum.

Hon Dr MICHAEL CULLEN: Of course, when bills are moved for introduction and passing under urgency, they are tabled subsequent to the motion being approved.

So rather rich for Dr Cullen to be complaining, when he himself cited the procedure he is now complaining about.

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Setting up Parliament

December 9th, 2008 at 12:26 pm by David Farrar

The order paper reveals some useful things:

  • Lindsay Tisch is to be Deputy Speaker
  • Assistant Speakers will be Eric Roy and Rick Barker. A pity Ross Robertson is not carrying on, as he was good in that role.

The full list of Select Committee memberships has not yet been revealed, but they do propose the Committee to review the ETS, and it is:

  • National – Craig Foss, Nicky Wagner, Paul Hitchison, Hekia Parata (4)
  • Labour – David Parker, Moana Mackey, Charles Chauvel (3)
  • ACT – Rodney Hide (1)
  • Greens – Jeanette Fitzsimons (1)
  • United Future – Peter Dunne (1)
  • Maori Party – yet to be named (1)

It will be nice to hope there will be a some broad agreements on the best way forward, but I do note that National has a majority with any two of its three support partners.

The proposed terms of reference for the committee do not include an explicit review of the science, however as they look at issues such as mitigation vs adaptation, demerits of the science will no doubt be considered as the robustness of the scientific scenarios will influence decision making.

The House is underway now. Michael Cullen tripped Gerry Brownlee up on some procedural issue. While I am sure Labour liked tripping Gerry up, I have to say the absolutely patronising and condescending tone from Cullen was him at his worst, and would probably knock Labour down 5% in the polls if more people saw it. Cullen can be the funniest wittiest MP in the House, but he can also be the most offputting.

In response Gerry made the point that he did stuff up, but he can admit his mistakes, and the reason Labour is now on the Opposition benches is because they never could admit their mistakes. So true.

The House is adjourned until 2 pm when the address in reply will start.

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Who will be Speaker?

November 15th, 2008 at 11:27 am by David Farrar

The Herald reports four contenders for Speaker. They are:

  1. Lockwood Smith
  2. John Carter
  3. Eric Roy
  4. Richard Worth

They each have their own claims for the job. Lockwood is National’s longest serving MP. John Carter has been a Whip for many years, knowing Standing Orders well. Eric Roy was a very popular Assistant Speaker and Richard Worth would being a first class legal talent to the role.

This may dismay some, but I think Michael Cullen would also be a damn good Speaker. But I think his latest game playing over Treasury accounts has killed off any chance that he could be seen to make the transition from partisan player to referee.

As for the four candidates, it will presumably go to a National Caucus decision and then the preferred candidate checked with coalition partners.

But wouldn’t it be nice if it was left to the House as a whole to decide? If all parties would agree not to apply the whip and allow a free vote, then they could have a preferential ballot as allowed for in Standing Order 19. It would be fascinating to see all MPs vote from their seats.

I presume two of the unsucessful candidates will probably become Assistant Speakers and that Labour’s Ross Robertson will be Deputy Speaker.

UPDATE: Mallard is against Lockwood being Speaker. That probably helps Lockwood immensely.

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Cullen does not get it

November 14th, 2008 at 10:36 am by David Farrar

Michael Cullen is missing the point about his release of the Treasury update:

But Dr Cullen last night defended his action, saying he released the paper because Prime Minister-designate John Key, after his briefing from Treasury, was “pretending everything is all right with the world”.

It doesn’t matter what Cullen thinks is the justification. His job is to do what the incoming Government wants until they are sworn in. He was there in 1984 and should know better.

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Labour’s financial legacy

November 13th, 2008 at 3:25 pm by David Farrar

At Backbenches last night, Charles Chauvel said that Labour has left National a very good set of accounts with lots of money, and would be making sure they looked after it.

This caused some consternation in the audience and phrases like a decade of deficits emerged.

Anyway Dr Cullen has released the latest forecast from Treasury – as of Friday. So let’s see what National is being left with:

  • Unemployment now to peak at 5.7% instead of 5.1%
  • Nominal GDP to be $15 billion lower for 2009-2013 than in PREFU.
  • The OBEGAL deficit and cash deficit to both worsen by around $1.5 per annum from 2010
  • An extra $5 billion of debt up until 2013, compared to PREFU
  • Real market investment to decline by 13% in 09/10
  • GDP growth for 08/09 estimated t be just 0.4%
  • OBEGAL deficit to hit $5 billion in 2012/13
  • The cash deficit in 2012/13 to hit $9.1 billion

The nominal GDP figure puts it in perspective. The NZ economy will generate $15 billion less over five years.

The focus has to be on increasing economic growth.  Bill English is going to have a very hard time trying to get the Government out of a cycle of debt and deficit.

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Labour’s new lineup

November 11th, 2008 at 4:25 pm by David Farrar
  • Leader: Phil Goff
  • Deputy Leader: Annette King
  • Finance: David Cunliffe
  • Foreign Affairs: Helen Clark
  • Shadow Leader: Michael Cullen
  • Senior Whip: Darren Hughes
  • Junior Whip: Steve Chadwick

Congratulations to Phil Goff for achieving his long held ambition, and without even a ballot. He will be a very happy chap tonight. Annette is probably taking up the Deputy more through a sense of duty than ambition. She will be a key person in keeping people happy.

Overall looks pretty sensible to me.

We also have the unusual situation where Clark remains as Prime Minister for another week or so, despite no longer being party leader. I don’t thik there has ever before been a leadership change before the new Government has even been sworn in.

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Mood of the Boardroom

October 31st, 2008 at 11:30 am by David Farrar

I attended the Mood of the Boardroom Breakfast in Auckland organised by APN. The results of a survey of CEOs was presented, and then we had speeches from and questions to Dr Cullen and Bill English.

Now some may say why survey CEOs only? Well a CEO can and does have a massive impact on the sucess of a business. Just like a great principal can turn a school around, so can a great CEO. CEOs are where the buck stops. And the CEOs of our top businesses probably have more impact on our country’s economic prosperity than most Ministers.

The Herald reports from the survey (all scores are on a 1 – 5 scale so 3 is average):

  • Key 3.5 vs Clark 3.0 on overall campaign performance (Clark did better than Brash last election in the same survey  so CEOs tend to be quite fair while reflecting their backgrounds)
  • Clark leadership is 3.9 to 3.6 for Key
  • Vision and strategy has Key 4.0 to 2.5 for Clark
  • On trustworthiness Clark is 2.6 and Key 4.0
  • Put’s NZ interests over party has Key 3.8 to Clark 2.3
  • On experience Clark 4.4 vs Key 2.9
  • Economic management Clark 2.5 to 4.2 for Key
  • Overall 90% prefer Key to Clark (last time it was 72% Brash to 28% Clark)

Cullen spoke first and got a great laugh when he said “Welcome to both of my supporters in the audience, even if I had to pay your airfares to be here.”

He then spoke about the three Is and three Ss that he says are crucial:

1. Innovation
2. Infrastructure
3. International Connections
4. Skills
5. Savings
6. Sustainability

On the deposit guarantee scheme he said he doesn’t like doing it, in fact that it was the second worst option. But the worst option was to do nothing. He is worried about the moral hazard it creates.

Mentioned (ever so casually) that US Secretary of State Condi Rice would be calling him later that day to brief him on what is planned for the G20 meeting. The US incidentally is playing a real leadership role – even the US Federal Reserve is doing a $15 billion cash-swap facility with the NZ Reserve Bank – something not covered in much detail in the media considering how extraordinary it is. Uncle Dubya is helping Helen out :-)

Cullen did have a little snipe at some of the business leaders telling them that it was no time for the “top end of town” to be lecturing Government, when the Gordon Browns are bailing out the Gordon Geckos. Went on to say they need to work together, and wants to sit down with business groups after the election re the planned December mini-budget.

English started off with a scathing attack on Labour saying look at the front page of Herald as to whether Government is qualified to lead. That instead of focusing of helping economy they are working on smearing the Leader of Opposition by innuendo and influence. Said it was a disgrace and why Labour are not qualified, despite Dr Cullen’s best efforts.

Bill also asked what sort of strategy is it to say trust us and after the election we will tell you what we will do.

He said that National trusts business to innovate and to get through recession as they have previous ones.

He gave Cullen credit for include the Opposition in briefings on financial stabilisation and shares Cullen’s misgivings. He said the Australian guarantee is unravelling a bit and they should learn from that.

He said a National Government is not going to whip out rug from under people as we go into recession – people need security. Also that it was important not to over-react to fiscal outlook. The key is to get through the recession and lift long term prospects for economy.

He said the combined tax cuts would be the largest fiscal stimulus in 15 years.

Highlighted how Clark has said National’s borrowing for infrastructure was reckless, dangerous and gambling with future and then two weeks ago announced similar policy to National’s.

English said changes in attitude as important as policy and that having Key as PM will be important. Said he is the most relentlessly optimistic person Bill has ever met and that is why hundreds turned up in Invercargill to meet him (Winston got 50).

Bill concluded “That is why I’m voting National.” Cullen offered response and quipped “Well I’m not voting National.”. Was very funny.

Bill also called Cullen only economically literate member of the Labour Party.

Someone asked for a grand coalition and Dr Cullen said a recession is no reason not have give people a choice, and it is one of a moderate centre-left or a moderate centre-right Government. Nice to have him confirm National as moderate centre-right.

Herald Economic Editor Brian Fallow asked a great question to English on why this recession is different from previous recessions that one needs to intervene for people who have ignored all the warnings about inflated house prices, and don’t take on a mortgage you can’t afford. His column yesterday makes the same point.

He also asked what is the point of ghettoizing the Cullen Fund? I thought Bill was rather unconvincing in his reply to both points – probably because he somewhat agrees with Fallow privately – but in politics you never get the luxury of agreeing with 100% of your party’s policies – not even the Leader. Holyoake once said he only agreed with 80% of what his Government did. Mind you with Muldoon it might have been 100% :-)

Cullen said that once you break that line of non involvement in the Super Fund, you have no defence to further involvements. Highlighted how the Greens support National’s policy on the Super Fund and they would like to invest it in many pet projects – none of which probably have much of a rate of return.

English did well though on Fast Forward and he had even Cullen nodding as he said the private sector is yet to commit a dollar for fast forward. English said the fast forward fund is borrowing money to then reinvest it in bonds. The structure is stupid. He supports actual research and National will put more money into fast forward projects, but not through the structure of a dedicated fund.

Overall both did very well I though. Both knew their stuff, agreed with each other on a bit but also exposed the weaknesses on both sides.

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The Hive on the Deposit Scheme

October 16th, 2008 at 1:00 pm by David Farrar

The Hive is very worried about the flaws in the Government’s deposit scheme:

Why, if our hand was forced by the Aussies did we not adopt the same policy as the Aussies?

In particular – why did we not match Australia’s guarantee for bank lending in the international wholesale market?

Those countries that are running large current account deficits – NZ, Australia, US etc are in competition for an increasingly scarce amount of funds on the international wholesale markets. Most of the money on offer is from Asia. Now if you were an Asian investor with $100 million to invest who would you invest it with? An Australian bank which has this loan guaranteed by the Australian Government, or a New Zealand bank that has no guarantee from the New Zealand or any other government? The answer is obvious. The money will be loaned to Australia. Why would you take a risk on New Zealand when there is no risk in lending to Australia.

I imagine we could still get some credit, but have to pay more for it.

… we are a nett borrower economy. We are not at present (maybe Key’s 40% plan for the NZSF will help right this) able to generate the funds we need to keep our economy working from domestic savings. So we are dependent on a funding stream that looks as though it is about to dry up. Before too long the banks are going to have to literally stop lending. And this will mean chaos across the economy. New activity will stop and existing loans will be affected also. Don’t expect your fixed term loan to be rolled over when it expires, even on your house.

Does Cullen know what to do? He’s done okay when faced with the best economic weather since WWII, but does he have the answers now? The fact he has reversed his stance of increased borrowing for infrastructure suggests an element of making it up on the hoof.

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Cullen talks depression not recession

October 15th, 2008 at 11:00 am by David Farrar

Does Dr Cullen know something we don’t?

The Dom Post reports:

Finance spokesman Michael Cullen said: “The Government is not going to allow the economy to slip into a depression because it has some fear of lifting its short-term borrowing position. That is not sensible fiscal economic management.”

The Government is already facing a debt blowout after the Treasury forecast a decade of deficits.

So Dr Cullen is worried about a full scale depression, yet he is handing out free cash to students.

But Dr Cullen said he would borrow more if necessary to fund road, infrastructure, forestry, housing and rail projects, including expanding the electrified network to Auckland’s North Shore and a rail tunnel under Waitemata Harbour.

His plan marks a U-turn from Labour’s scathing attacks on National’s plan to borrow more to spend on infrastructure.

In August, Prime Minister Helen Clark said: “I just think it’s mind-bogglingly stupid. You go out and borrow at a time when the international markets are in crisis.”

National pleding to borrow more when debt was at 20% of GDP was called reckless and stupid, and now Labour says that increased borrowing is the answer with debt projected to hit 30% of GDP.

Which Dr Cullen should we listen to?

Is this the biggest economic flip-flop ever?

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PREFU: Ten years of deficits

October 6th, 2008 at 3:41 pm by David Farrar

The PREFU is far worse than anyone could imagine. Thank God St Ruth and National changed the law in 1994 to force the Government to open the books up before an election – otherwise it would be a repeat of the last time a Labour Government left office – a fiscal mess for the incoming Government.

The Secretary of the Treasury, John Whitehead, did a presentation before we got the books. The room was silent as he wound out the bad news. The problem isn’t our financial markets – they are much better structured than in the US. It is the flow on effects of lower GDP growth and increased spending. So we don’t have a crisis, but we do have a very bleak fiscal situation.

The Crown accounts are going into deficit, and will remain in deficit until 2018 – yes – a decade of deficits on the medium term projections. The deficit is forecast to be $31 million this year and up to $3.2 billion in 2012/13 – returning to surplus only in 2017/18. This is the OBEGAL excluding Super Fund Revenue.

Dr Cullen and Helen Clark are going to be very red faced over debt. Do you recall how they attacked National’s plan to borrow 2% more of GDP for infrastructure as an economic calamity and reckless as it would push debt up to 22% of GDP – 2% in excess of Dr Cullen’s ceiling of 20%

Debt is forecast to peak at 30.1%!!! It will be 24.3% by 2012/13 and 30.1% by 2018/19. After wailing about how the world would end if debt went to 22% of GDP, Dr Cullen is leaving NZ with a forecast rise to 30%.

The cash deficit next year is now forecast to be $6 billion and over five years a cash deficit of 31.7 billion.

Incidentally PREFU was done around five weeks ago so doesn’t take account of the very latest in the US such as the bailout. They do not expect this to change PREFU significantly but it does increase the risk of a sharp slowdown.

Treasury are forecasting close to 0% annual GDP growth until June 2009.

Some changes to the annual predictions are

  • KiwiSaver costs up $280m by 2012
  • Tax take down 900m
  • Benefit costs 500m up
  • Early Childhood Education Costs up 200m
  • Debt servicing up 500m

The annual contingency for extra spending is $1.75 b per annum plus 2% inflation. But most of this is already allocated and for the next four years only $500 to $600 million a year is available for genuine new spending.

So what to do? Well the Treasury Secretary says if one can manage an average real GDP growth of 3%, then the long-term debt (2022/23) will reduce by 10%.

This for me is what the election must now be about. The status quo in terms of economic growth is not acceptable – a decade of deficits must not happen. So voters should ask which party will have the best policies and best people to boost economic growth.

I have previously given Dr Cullen pretty high marks for his fiscal management. Those marks were seriously downgraded today as he leaves us with ten years of deficits forecast and a 50% forecast increase in debt as a percentage of GDP.

There will be some focus on National’s response and their tax plans and infrastructure plans. The tax plans will be credible if they are largely fiscally neutral with reductions elsewhere in expenditure. And a lower tax economy will lead to higher economic growth – which is what it is all about.

The infrastructure plans will add 2% of GDP to gross debt – a small amount now compared to the 10% extra on these projections. The rationale is unchanged for them though – if they will add to economic growth by increasing productivity, then that is a good return on investment. Not all infrastructure investments will lead to higher economic growth, so the focus should be on the quality of the investment.

Bill English is about to inherit what may be the toughest job in New Zealand – turning around a projected ten years of deficits and 50% increase in gross debt as a percentage of GDP.

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Voting now open

September 30th, 2008 at 3:54 pm by David Farrar

Voting is now open in the 2008 Kiwiblog Awards. They close at 3 pm Friday 3 October. You can vote in the sidebar.

The most popular nominations in each category are:

MP of the Year

  • Rodney Hide – not even a finalist last year but a popular nominee for his campaign to expose Peters, amongst other things
  • Bill English – a repeat nominee – his year of picking apart the EFA was often cited
  • Pita Sharples – has become the Maori MP, Pakeha love to love, and helped position the Maori Party as Kingmakers.
  • Phil Goff – a China FTA plus a possible United States FTA endears Goff to many readers

Labour MP of the Year

  • Phil Goff was nominated by many but disqualified as the 2007 winner
  • Michael Cullen cited by many for his mastery of the House
  • David Cunliffe also impressed several with his determination to improve the Health sector
  • Winston Peters was nominated multiple times in this category, so who are we to stand in the way of the public!

National MP of the Year

  • Simon Power had the most nominations, having impressed with his constant highlighting of law & order problems, and also superb Chairmanship of the Privileges Committee.
  • John Key is still the country’s Preferred PM
  • Bill English was disqualified having won this category last year
  • Gerry Brownlee also often nominated for his take no prisoners methods in the House

Minor Party MP of the Year

  • Rodney Hide a popular nominee for many
  • Pita Sharples had 12 nominations in this category – will it be Minister Sharples in a few weeks?
  • Sue Bradford has had a quieter year than 2007 when she was runner up, but still gained some nominations
  • Hone Harawira also gained multiple nominations – the once reviled radical has been impressing a few people

Press Gallery of the Journalist

  • Audrey Young – Winston still has not apologised to her, but she was a favourite nominee amongst Kiwiblog readers
  • Duncan Garner – his “straight talking” doesn’t always win friends in Parliament, but has proven popular with some readers
  • Guyon Espiner – cool, clam and collected – the most viewed gallery reporter has some fans
  • Colin Espiner – the blogging journalist has many online fans

Public Servant of the Year

  • Grant Liddell – the SFO Director was a multiple nominee for doing what was right, regardless of what the Government wanted.
  • Owen Glenn – okay not technically a public servant, but many nominated him for having performed a public service.
  • Helena Catt – the Electoral Commission CEO wins the sympathy and nominations of many for having to try and work out what the Electoral Finance Act actually means, and for her willingness to criticise the law she has to enforce.

Enjoy voting.

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Will Cullen cancel the tax cuts?

September 30th, 2008 at 2:48 pm by David Farrar

Bill English has raised the issue of whether Michael Cullen will, if re-elected, cancel the 2010 and 2011 tax cuts.

This is far from impossible. Consider the evidence:

  1. Michael Cullen promised tax cuts in 2005 and then cancelled them after the election on the basis of economic conditions.
  2. He has said that the level of debt has now passed his comfort zone
  3. His party is promising extra spending such as a pay jolt in education, a move to universal student allowances and longer period of paid parental leave, at a time when the economy is shrinking.

They probably won’t cancel them, but one could imagine if Dr Cullen delivers the 2009 budget, him announcing the 2010 tax cuts have had to be delayed due to the weak economy – probably until 2012 – after the next election again.

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Political Awards by Steve Braunias

September 28th, 2008 at 1:19 pm by David Farrar

Steve Braunias hands out his awards for 2008 viewing on Parliament TV. Some of them are:

  1. Biggest Wretch: Winston Peters
  2. Biggest Flirts: Margaret Wilson & Rodney Hide
  3. Best Valedictory Speech: Katherine Rich
  4. Best Smile: Sue Bradford
  5. Best Impersonation of Eternal Youth: David Parker
  6. Cruellest Wit: Michael Cullen
  7. Best Debater: Michael Cullen
  8. Most Acute Ears: Bill English
  9. Best Reply: Tau Henare

That reminds me I must start the traditional Kiwiblog poll for Best MP shortly.

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Cullen breaks his own debt target

September 27th, 2008 at 8:41 am by David Farrar

Michael Cullen has admitted that the opening of the books the week after next will reveal he has broken his own gross debt target of 20% of GDP. And this is after all the hysteria about the end of civilisation if this happened under National.

Dr Cullen said there was room for only “very modest” new spending commitments from Labour during the campaign.

I suspect Dr Cullen’s idea of very modest may not be what anyone else calls modest!

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QC backs SFO Director against attacks

September 25th, 2008 at 10:00 am by David Farrar

QC Jim Farmer has criticised Helen Clark and Michael Cullen for their attacks on the Director of the Serious Fraud Office. Farmer is a past president of the Bar Association.

Jim Farmer said criticism of Mr Liddell’s judgment by Prime Minister Helen Clark and her deputy, Michael Cullen, was wrong and unwarranted.

Mr Liddell’s evidence was uncovered in the SFO investigation and showed that Mr Peters had a $40,000 debt paid for him by the Spencer Trust, contradicting his version that he paid it himself.

Dr Farmer said Mr Liddell had a simple choice: whether it was responsible to “sit on” relevant information, or to hand it over.

And Labour wanted the information supressed, because it reveals that Peters broke the Cabinet Manual and Register of Interests even more blatantly than in the Owen Glenn case.

“He has obviously taken a responsible decision. It is very defensible on its merits and it doesn’t warrant attack from politicians, particularly personal attacks in the form of saying he has poor judgment.”

Dr Farmer may not understand that for Clark and Cullen, a public servant exercises poor judgement if they do not act in the best interests of the Labour Party, as opposed to acting in the public interest. You see they have convinced themselves that nothing is more important for the public good than them remaining in power, so anything that may damage that is automatically poor judgement by the public servant involved.

Dr Farmer said there was no formal requirement for Mr Liddell to consult Crown Law and he had “no idea” why Helen Clark and Dr Cullen were suggesting this.

“In carrying out the investigative duties, the SFO and the director are intended to be independent and operate without influence from anyone,” he said.

“Running off to Crown Law or the Solicitor-General to get advice – or approval, if that’s what Dr Cullen is suggesting – doesn’t seem to be obvious or even right.”

Indeed. And in fact a growing number of Government Departments no longer even use Crown Law for their legal advice or representation in court.

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Espiner on the Vote

September 24th, 2008 at 6:37 pm by David Farrar

I missed an update Colin Espiner did on the vote yesterday. It is worth repeating in full:

Labour and NZ First voted against the privileges committee motion to censure, but every other party in Parliament – including independents Philip Field and Gordon Copeland – voted in favour, so the motion passed comfortably.

This was a relief, as it meant Labour and Winston Peters failed to pervert the cause of justice and will of the majority despite the most underhand of tactics. As I’ve said below in this post, Labour’s attempt to politicise the committee and discredit its findings was shameful – amongst the worst things the party has done in the past nine years, in my opinion.

That is really strong language, but justified. This is why lifelong Labour voters are saying they can stomach no more. You had the Attorney-General of New Zealand repeating Winston’s conspiracy theories about how Owen Glenn was coached by his Fay Richwhite supplied lawyer. Yes, seriously. I will blog the Hansard when it is available.

As for Peters, his utter lack of contrition, humility, and failure to show even the slightest respect for the judgment of his peers was nauseous. He has become a parody – a caricature of belligerence, contempt, hubris, and narcissism. His address to Parliament last night was ugly, brutal, and sad. The shame of it all is that if just 5% of New Zealanders either believe him or feel sorry enough to vote for him he will be back triumphant.

It was ugly. There was not even a small fraction of contrition from Winston. Quite the opposite. As MPs such as Russel Norman were making dignified serious to the point speeches, Peters was barracking them almost non stop. It was an insight into how truly ugly this man is. Muldoon was benign by comparison.

Labour have chosen to put all their eggs in with Winston. There is no less deserving person. It wasn’t even that Peters has no respect for the judgment of his peers. He has no respect for anyone but himself. He does not accept in any way he is bound by rules or accountability or obligations. Sadly this is partly because Helen Clark has freed him from all the normal Ministerial obligations such as telling the truth, disclosing interests, following the Cabinet Manual.

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Reaction to Privileges Report

September 23rd, 2008 at 1:51 pm by David Farrar

I’ll start with Colin Espiner:

On the privileges committee report, I think the committee did an excellent job. It cut through all the Peters verbiage and red herrings and bluster. It simply didn’t believe him and rightly found him guilty of misleading Parliament. It recommended his censure. That is an extremely serious step, and any minister of the Crown would be sacked for such a finding.

Indeed. Someone commented the last Mp to be censured was in 1975. Could the historians amongst us find the last time a Minister of the Crown was censured and lost his job.

Except Winston Peters. Labour’s handling of this crisis has been nothing short of shameful. Every day Prime Minister Helen Clark and her deputy on the committee, Michael Cullen, have found a different excuse for why Peters should not be sacked. There is simply no wiggle room left. So instead they’ve started attacking the committee itself. And this is perhaps the most shameful approach of all. The privileges committee used to be seen as beyond reproach – powerful, elite, Parliament’s highest body. Its decisions were unquestioned.

Labour claims the committee has been politicised and it has – by Labour and NZ First. The only attempt to hijack its findings was made by those members, not those who questioned Peters and found his answers wanting. How Labour can say it is National that has hijacked the committee when its own support parties – the Greens and United Future, and the Maori Party – all sided with National and Act beggars belief.

I think it is the maxim that if you repeat a lie enough time, then some people will believe it.

If, in Parliament today, Labour again attacks the committee and tries to vote down its findings, Parliament will have reached a new low in my opinion. Labour should accept that it lost the fight at the committee and respect its majority verdict. That’s what happens in our justice system when you’re found guilty by a jury of your peers.

I predict Labour will spend most its time attacking John Key and not taking the censure seriously.

Next we have John Armstrong:

Winston Peters’ letter of resignation as a minister ought to be on the Prime Minister’s desk this morning.

It won’t be. However, the damning report of Parliament’s privileges committee demands nothing less, even though its finding that Peters is in contempt was not unanimous.

You really have to wonder sometimes why Helen Clark refusesto take any meaningful action against Peters. Instead she runs attack lines on his behalf against the Privileges Committee and the SFO.

But he cannot get such accusations to stick when it comes to the Greens, United Future and Maori Party representatives who made up the remainder of the majority view. Those parties had no axe to grind with Peters. They simply reached the only conclusion that could be drawn from the evidence – that Peters had “some knowledge” of Glenn’s intention to make a donation.

The next time Clark runs the line that the Privileges Committee finding is politically motivated, ask her why Peter Dunne (one of her Ministers) and Russel Norman support the finding?

The big question is whether she can ever trust him again. With National not wanting a bar of him, it would now seem inconceivable that Peters could again become a minister even if Labour wins the election.

Not at all. If Peters makes it back and can give her a fourth term, of course she’ll have it back. Why else would you go through all the pain now, if not to do a deal later.

Labour’s reluctance to upset Peters with rigorous questioning during his appearances in front of the committee was understandable given Labour’s dependence on him for the past three years and conceivably for the next three as well. But it is to Labour’s eternal shame that it behaved thus.

In the end, the majority verdict is a victory for principle over expediency and for the integrity of the privileges committee.

Eternal shame is a good phrase.

We also have Frog from the Greens:

It does make me wonder weather the Team LPG fanboiz should really be getting so grumpy at Green supporters for not wanting to declare our undying love to Helen Clark and Labour. Because it seems from its recent behaviour that Labour has already found its preferred coalition partner, and it’s Winston Peters, come what may. But then I guess Labour doesn’t have so much to gain from a internet campaign for Team LNZF?

Can one imagine Helen Clark defending a Green MP to the extent she has defended Winston?

You also have comments from two of the MPs on NZPA. First Peter Dunne:

United Future leader Peter Dunne said he had gone into the committee with an opinion: “I entered the committee thinking this was probably a beat up.”

But after hearing evidence he changed his mind.

Mr Dunne said Mr Peters had repeated opportunities to give his side.

“Really I think the committee genuinely tried to get to the bottom of what went on and reached its conclusions accordingly.”

Mr Dunne said crucial for him was contradictory evidence and then “cute” recall of events by Mr Peters’ lawyer Brian Henry after evidence was presented.

So Dunne went from thinking it was a beat up, to deciding on the evidence that Peters knew about the donation and should have declared it.

Green Party co-leader Russel Norman disagreed [with Helen Clark]. He said he went into the inquiry with an open mind and based his decision on the evidence put before him.

So is Helen calling Russel tainted or unfair?

Dr Norman said the committee’s chairman, National MP Simon Power, ran a fair process.

In fact even Michael Cullen went out of his way to say that Simon Power was very fair as the Chairman. I think that is a huge credit to Simon for the way he has conducted himself.

As one minor example of his integrity I was talking to him on an unrelated issue a few weeks ago. I had heard on the radio that Owen Glenn would be testifying but not whether or not it would be in person or by video conference. So I just asked Simon whether it was in person or not as I happened to be speaking to him. Simon, just to avoid even the possibility or suggestion of having an inappropriate conversation, just referred me to the press release the Committee had put out. Now I wasn’t asking for anything which wasn’t public, but Simon erred on the side of caution by not even answering my question but just referring me to the press release. He has bent over backwards to be fair and impartial in this matter.

Finally, I note that Jim Anderton is going to show a tiny amount of spine and abstain rather than vote against the Privileges Committee recommendations. Don’t give him too much credit though as he repeat the bullshit from the PM that the process has been unfair to Winston. He does at leats ping Peters for his hypocrisy:

“NZ First was clearly accepting donations at a time when it was attacking everyone else for taking money from big business. For that the party has some explaining to do to the voting public,” Mr Anderton said.

Perhaps Mr Anderton could offer an opinion on whether he, as a member of the Cabinet, felt he should have known about the donations from the Velas to Peters, when he voted to go along with Winston’s generous funding for the racing industry?

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