Opening the Books: Without the Labour Reds BS!

[Chief Stipe]

Opening the Books | NZCPR Site

www.nzcpr.com

Posted on September 18, 2023
By Dr Muriel Newman

Back in 2017, when New Zealand’s economy was being described as a “rock star”, the opposition Labour Party railed against the role being played by immigration.

Figures at the time showed that under National, annual net migration had grown from just 5,000 in 2008, when they first took office, to 72,000, with Treasury forecasting the numbers would stabilise at around 50,000 a year.

Labour was highly critical of growth generated on the back of high immigration rates, and their 2017 election pledge was to reduce net migration by 20,000, to 30,000 a year.

It was therefore a surprise, to find in last week’s Pre-election Economic and Fiscal Update (PREFU) – the set of Government accounts released by Treasury ahead of every general election – that Labour has opened the floodgates to migration: “In the September 2023 quarter annual net migration is forecast to peak close to 100,000, about 33,000 higher than forecast in the Budget Update.”

No doubt it was the economic activity generated by tens of thousands of new migrants that have helped Labour claim the economy has turned a corner and that they are great economic managers.

As Prime Minister Chris Hipkins stated, “Economic growth is returning, the government’s books are heading back into surplus and we’re winning the battle against inflation. The forecasts are showing that unemployment will remain low and there is real reason for optimism about the future of the New Zealand economy and I think the pre election fiscal update shows that. I said when I became prime minister that I wanted to refocus the government on getting back to basics, that we were going to focus on issues like the cost of living, the inflation coming down shows that we’re starting to win that battle.”

But that’s not the whole story.

Treasury secretary Dr Caralee McLiesh noted in the PREFU that the “surge in migration” will make it harder for the Reserve Bank to reduce inflation because of the additional demand it is adding to the economy. As a result, interest rates will need to stay higher for longer – until at least December 2024 – and they may even need to rise further.

The PREFU spells it out: “Slow economic growth is forecast to continue over the next eighteen months as high inflation necessitates high interest rates. Domestic inflationary pressure has remained persistent, and with ongoing domestic demand pressure, interest rates are expected to remain at their current level over the next year in order to reduce inflation. High interest rates are expected to constrain economic growth to a quarterly average of 0.4% over the next year, and the unemployment rate is expected to rise to 5.4% while wage growth eases from a relatively high 6.9% in June 2023 to 3.7% in June 2027.”

In other words, by increasing pressure on inflation, the record rate of migration is ensuring interest rates remain higher for longer. This is expected to lead to business closures and rising unemployment, all of which flies in the face of the Prime Minister’s claims that Labour is managing the economy well.

The record levels of migration caught many people by surprise.

Jarrod Kerr, chief economist at Kiwibank, expected net migration to be running at around 40,000, not 100,000: “It’s much greater than anticipated.” He estimated another 40,000 or 50,000 homes will be needed: “we simply don’t have enough…we’re going to find ourselves with an even greater shortage in a year’s time. That’s something that worries me.”

Westpac’s chief economist Kelly Eckhold explained that as a result of the increased population growth, “Our forecast is for house prices to go up a shade under 8% in the next year.”

Clearly, the effect of record migration on house prices will be yet another challenge to confront the incoming government.

The July 2023 international migration data from Stats NZ provides some insight into what’s going on. It explains that present net migration levels are the highest on record and it identifies citizens of India, the Philippines, China, South Africa, and Fiji as driving this record immigration influx.

They also explain that this year’s migration gain is more than double the long term pre-Covid July year average. And when it comes to Kiwis leaving the country, they note there’s been an almost two-year exodus: “There have been 21 consecutive months of net migration losses of New Zealand citizens to July 2023, amounting to 55,600.”

What’s quite bizarre about all of this, is the fact while the Labour had approved the highest number of immigrants ever to enter the country, virtually no-one seemed to be aware of what was going on.

While the Minister of Finance was glowing about the state of the books, Auckland University’s Economics Professor Robert MacCulloch had questions: “I can’t make sense of the Finance Minister’s statements… He claims the country is in better shape than expected and that the ’forecasts showed New Zealand would avoid recession, with wages keeping ahead of inflation’.

“So here’s my question – GDP growth up to June 2024 is forecast to be just over 1%. On the other hand, it is also stated immigration is now running at 100,000 a year, corresponding to an increase in 2% of our entire population. But if total GDP is only growing at a bit over 1% and the population is growing at 2%, then GDP per capita must be declining, since GDP per capita equals total GDP over population size.

“In other words, from an individual perspective, we are entering a deep recession. But the Finance Minister says Kiwis are getting better off since our inflation-adjusted incomes are rising, so everything is hunky dory. Have I missed something? It doesn’t add up… No one feels they are getting better off. I reckon the Finance Minister is telling a porker.”

As Professor MacCulloch points out, in spite of the Finance Minister’s own PREFU numbers showing GDP per capita is collapsing – from a 2.1 percentage increase in the year to July 2023, to negative 0.7 percent in the current financial year, before recovering to 0.6 percent increase in 2025, and stabilising at a 2 percent increase in 2026 – he’s telling 5 million Kiwis they are all better off!

This week’s NZCPR Guest Commentator, Dr Bryce Wilkinson, a Senior Fellow at the New Zealand Initiative and a former Director of Treasury, explains the PREFU raises serious concerns about Labour’s management of the economy:

“Treasury’s pre-election forecasts confirmed that Government spending exceeds revenue by more than what was forecast in the May 2023 Budget.

“Far too many commentators are concluding the increase is not too bad.

“Do not be fooled. The forecasts are not realistic. They are too optimistic.”

Dr Wilkinson points out that while Treasury must accept the advice given by the Minister of Finance that they have cut back on new spending through to 2027, he reminds us that Labour has a track record of seriously blowing their budgets:

“Labour’s Fiscal Plan in 2017 proposed to increase core Crown operating spending by just $11.7 billion. Two years later Treasury put the increase at $27.7b. That increase made a mockery of Labour’s fiscal plan.

“The subsequent spending response to Covid-19 took the increase to $77.4b. That additional blow-out would have been understandable were it temporary.

“It is neither temporary nor the full story. Spending in the year ended June 2024 was forecast to be $116b. This week, the forecast spending is $139b.”

Over the six years that Labour has been in office, Core Crown expenditure has blown out from just over 27 percent of GDP in 2018, to almost 34 percent in this current financial year.

The debt story is eye watering. From net core Crown debt of $57.5 billion when Labour took office, it is expected to be $181.6 billion by the end of this financial year, rising to an astonishing $195 billion by 2027.

Now that we better understand just how appalling Labour’s economic management really is, it’s worth remembering an important lesson from history.

Following the Second World War both Germany and Britain found themselves mired in economic crisis.

In 1948, West Germany’s Economics Minister Ludwig Erhardt introduced sweeping reforms. Virtually overnight, the bureaucracy was curtailed, taxes were flattened, and the country was transformed into a free market economy.

To encourage hard work, tax on earnings from hours worked over 40 hours a week was abolished, and to incentivise exports, taxes on all profits earned through exports, were eliminated.

Released from the shackles of an overbearing bureaucracy and excessive taxation, innovation flourished, productivity soared, and exports skyrocketed. The country prospered, and Germany, the vanquished, overtook the victorious UK to become one of the world’s strongest economies.

Meanwhile, in the years after the War, the British state assumed more power and virtually ran the country into the ground. Racked by stagflation and labour strife, when Margaret Thatcher became  Prime Minister in 1979, she promised to restore a culture of entrepreneurship: “I came to office with one deliberate intent: to change Britain from a dependent to a self-reliant society – from a give-it-to-me, to a do-it-yourself nation. A get-up-and-go, instead of a sit-back-and-wait-for-it Britain.”

Her reforms, which embraced the virtues of freedom, lower taxes, and less regulation, reinvigorated the British economy. 

History is clear. The best way to grow an economy is for the Government to get out of the way and let businesses do what they do best: create jobs and wealth. New Zealand’s future should harness the entrepreneurialism, energy, and expertise of Kiwis wanting to build a good future for themselves and their families.

With that in mind, Dr Wilkinson warns against detractors who claim the PREFU shows lower taxes are not possible: “Some commentators argue that the forecasts mean tax cuts are off the table. That assumes all existing spending is sacrosanct. That assumption is absurd.”

And absurd it is.

Thanks to Labour the bloated Public Service is awash with taxpayers’ cash. Spending blowouts are everywhere – like the plan by the Ministry of Disabled Peoples to hold a two-day staff meeting at a cost of $88,000! Or the Ministry for Pacific Peoples, not only wasting $40,000 on a farewell party for their Chief Executive, but also spending $52,000 promoting Labour MPs at post-budget breakfasts.

And how much money will Labour have wasted on propaganda?

The revelation that last year they paid $500,000 for climate propaganda to be reported as news is undoubtedly just the tip of a very large iceberg.

What about the $1 billion Greens Jobs for Nature scheme, or the $3 billion Provincial Growth Fund, or the $50 million spent on consultants for a bike bridge that was never built.

Then there’s the $100 million Labour spent over the last six years on consultants for Auckland’s light rail – a project originally costed at $4 billion, that Treasury has now estimated at $30 billion, that hasn’t even been started!

Or what about the billions of dollars that have been spent implementing the divisive race-based objectives of He Puapua. That, of course, includes Three Waters, which has already suffered a billion-dollar blowout in establishment costs – a figure that could end up being many times higher by the time this senseless policy is reversed by a new government.

With Dr Wilkinson reminding us that core Crown spending is averaging $1 billion every three days and that the Auditor-General has expressed grave concerns over a lack of accountability for spending by Labour, there will be no end of wasteful projects that can be curtailed by a new government to make tax cuts affordable.

Finally, it is indeed ironic that in the days following the release of the PREFU, instead of the mainstream media holding the Government to account for the economic catastrophe they have created, their main focus appeared to be on helping Labour attack National’s tax policies.

Whether voters are still bothering to listen to such spin, will no doubt be revealed on October 14! 

[holy ravioli]

The facts say NZ is doing better than its peers...no recession and maintains its international credit rating.

NACT have been exposed as economic illiterates whose policies do not withstand scrutiny.

'Trust us we know what we're doing' is a joke ,but the loyal ,faithfools would vote for a donkey with a blue ribbon.

Credit to crACT for revealing they want to sell the family silver.

Their rationale that State assets are non performing begs the question...why then would private capital want to buy them!

The answer is of course because NAct will sell them to their donors ..real cheap.

NZ's richest became so..from cheap deals of Govt assets...crACTS main sponsor Allan Gibbs even bragged ..about it.🙈

 

[Freda]

I would suggest that many of N.Z's rich became so by 

a]  being smarter than the opposition

b]  working their asses off to achieve

note I said many, not all.    Inherited wealth doesn't imply any great intellect or work ethic - but retaining it may do!

[Chief Stipe]

13 hours ago, holy ravioli said:

Their rationale that State assets are non performing begs the question...why then would private capital want to buy them!

The answer is of course because NAct will sell them to their donors ..real cheap.

Clearly you have no understanding of markets or economics.

If an asset isn't performing due to mismanagement then of course it will sell cheaply.  Happens all the time in the private sector.

[Chief Stipe]

13 hours ago, holy ravioli said:

The facts say NZ is doing better than its peers...no recession and maintains its international credit rating.

No the facts don't say that.  How many countries also had a recession like New Zealand?

As you so eloquently (well not that much) pointed out NZ's recent growth (one quarter doesn't make a summer) measly that it is is based on immigration and property price surge.  Hardly sustainable.

You seem somewhat confused - on the one hand you will bag your Red friends for this bit then laud the growth figures.  A bob each way?

[holy ravioli]

1 minute ago, Chief Stipe said:

No the facts don't say that.  How many countries also had a recession like New Zealand?

As you so eloquently (well not that much) pointed out NZ's recent growth (one quarter doesn't make a summer) measly that it is is based on immigration and property price surge.  Hardly sustainable.

You seem somewhat confused - on the one hand you will bag your Red friends for this bit then laud the growth figures.  A bob each way?

Do keep up ,NZ is not in a recession....Nicola 'shriek' Willis...'it feels like a...recession!🤡

[holy ravioli]

7 minutes ago, Chief Stipe said:

Clearly you have no understanding of markets or economics.

If an asset isn't performing due to mismanagement then of course it will sell cheaply.  Happens all the time in the private sector.

NO,NO.....NO....the rationale is always....the private sector is more efficient and will improve performance.

The standouts in mismanagement are primarily in the private sector.

A great example the GFC....financial mismanagement exacerbated by naked greed and chicanery-as usual the taxpayers pickup the tab to bail out incompetency.

 

[Chief Stipe]

2 minutes ago, holy ravioli said:

Do keep up ,NZ is not in a recession....Nicola 'shriek' Willis...'it feels like a...recession!🤡

Keep up!  It was in a technical recession unlike many of "our peers"!  

Of course the way things were measured was also adjusted.

[holy ravioli]

3 hours ago, Freda said:

I would suggest that many of N.Z's rich became so by 

a]  being smarter than the opposition

b]  working their asses off to achieve

note I said many, not all.    Inherited wealth doesn't imply any great intellect or work ethic - but retaining it may do!

Bit of an anodyne statement there Freda.

There are some on the NZ rich list who succeeded through initiative,creativity and determination....not very many though.

Most on the list will involve acquisition of Govt/the commons assets for wholesale prices.

Care to present some..examples.

 

[Chief Stipe]

1 minute ago, holy ravioli said:

NO,NO.....NO....the rationale is always....the private sector is more efficient and will improve performance.

The standouts in mismanagement are primarily in the private sector.

A great example the GFC....financial mismanagement exacerbated by naked greed and chicanery-as usual the taxpayers pickup the tab to bail out incompetency.

 

Bollocks.  The GFC was triggered by large lending organisations being over exposed in the home property market.  House prices fell at the same time  housing supply had rapidly increased.  Some very large lenders were exposed on the subprime mortgage market.

Market forces prevailed.  

[Chief Stipe]

1 minute ago, holy ravioli said:

Bit of an anodyne statement there Freda.

There are some on the NZ rich list who succeeded through initiative,creativity and determination....not very many though.

Most on the list will involve acquisition of Govt/the commons assets for wholesale prices.

Care to present some..examples.

 

You go first.  

[holy ravioli]

7 minutes ago, Chief Stipe said:

Bollocks.  The GFC was triggered by large lending organisations being over exposed in the home property market.  House prices fell at the same time  housing supply had rapidly increased.  Some very large lenders were exposed on the subprime mortgage market.

Market forces prevailed.  

If being bailed out is 'market forces'😂...!get some help.

The lenders were private companies-comprenez,they indulged in teaser rates,robo signings,fraud,market manipulation and general chicanery in collusion with ratings companies and insurers.

You are out of your depth when you attempt to debate economics and geo politics.

[Chief Stipe]

17 minutes ago, holy ravioli said:

If being bailed out is 'market forces'😂...!get some help.

I suggest you read a bit more history.

Fanny Mae and Freddy Mac over exposure to the sub prime market precipitated the GFC.  They were both formed by Democratic Congresses in 1938 and 1970 respectively.  The Federal Government is obliged to bail them out.  They exist only because of a congressional charter.  Their purpose is to provide cheaper housing loans at lower market rates.  They are the classic example of market intervention by Government which stuffs everything.

 

According to Fannie Mae and Freddie Mac's congressional charters, which gave them government-sponsored enterprise (GSE) status, they operate with certain ties to the U.S. federal government that provide a financial backstop. For instance, in September 2008, during the height of the financial crisis, they were placed under the direct supervision of the federal government.

[Chief Stipe]

32 minutes ago, holy ravioli said:

The lenders were private companies-comprenez,they indulged in teaser rates,robo signings,fraud,market manipulation and general chicanery in collusion with ratings companies and insurers.

They are Government Sponsored Enterprises (GSE's).  A bit like our SOE's.  I'm surprised Beg, Borrow and Hope Robertson didn't create a Fanny Ardern and Robbie Son mortgage bank.

[Chief Stipe]

35 minutes ago, holy ravioli said:

You are out of your depth when you attempt to debate economics and geo politics.

Well you seem to reside in the Mariana Trench!

[holy ravioli]

1 minute ago, Chief Stipe said:

Well you seem to reside in the Mariana Trench!

Repeating yourself constantly does not give your jaundiced opinion any gravitas!😄

Freddie and Fannie were but two institutions that were fuelled by naked greed for bonus that became basket cases.

You seem to have forgotten,Lehmans,AIG,C/Wide,Citi,and most of the other big private banks who had their hands out for taxpayer..rescue.

Hank Paulson who lobbied succcessfully to bail out Wall St at the expense of mainstreet was of course a former Goldman/Sachs big wig.

It was an absolute debacle and an indictment on the very foundations of western Capitalism=a shameless,sham.🦨

 

[Chief Stipe]

16 minutes ago, holy ravioli said:

Repeating yourself constantly does not give your jaundiced opinion any gravitas!😄

Freddie and Fannie were but two institutions that were fuelled by naked greed for bonus that became basket cases.

You seem to have forgotten,Lehmans,AIG,C/Wide,Citi,and most of the other big private banks who had their hands out for taxpayer..rescue.

Hank Paulson who lobbied succcessfully to bail out Wall St at the expense of mainstreet was of course a former Goldman/Sachs big wig.

It was an absolute debacle and an indictment on the very foundations of western Capitalism=a shameless,sham.🦨

 

You are sounding incoherent now.  The Fanny Mae and Freddie Mac over exposure in the sub prime market precipitated the GFC.  The rest was a domino effect.  Once again conclusive evidence for Government to stay out of markets the shouldn't be in!!

[holy ravioli]

23 minutes ago, Chief Stipe said:

You are sounding incoherent now.  The Fanny Mae and Freddie Mac over exposure in the sub prime market precipitated the GFC.  The rest was a domino effect.  Once again conclusive evidence for Government to stay out of markets the shouldn't be in!!

All fact!Nothing incoherent at all.

You don't know what you're talking about.

Get your google eyes working and do some research.Start with Lehmans,then A.I.G,then ratings agencies,then the big banks,then Tim Geithner,Paulson,Jester.

🙄

[Chief Stipe]

53 minutes ago, holy ravioli said:

Get your google eyes working and do some research.Start with Lehmans,

It didn't start with Lehman's - that's a myth.

Bear Stearns was six months before and the Fed bailed them out.  Of course Fanny Mae and Freddie Mac can't be ignored.  They held 60% of the home mortgage market and were well in the crap before Stearns and Lehmans.  The Fed was obliged to keep propping the FM's up.  Arguably the Government screwing with the home mortgage market precipitated the Financial Crisis.

60% of the home mortgage market is measured in trillions.  Lehmans had $639 billion in assets and $613 billion in liabilities but the Feds chose to let it fail afterall it had bigger liabilities with Fanny Mae and Freddy Mac and the millions of home owners who through their own greed were over stretched.

It's a classic case of Central Government getting over involved in a market that they shouldn't be to supposedly deliver some social good.  In this case cheap and easily available home mortgage loans.

[holy ravioli]

1 hour ago, Chief Stipe said:

It didn't start with Lehman's - that's a myth.

Bear Stearns was six months before and the Fed bailed them out.  Of course Fanny Mae and Freddie Mac can't be ignored.  They held 60% of the home mortgage market and were well in the crap before Stearns and Lehmans.  The Fed was obliged to keep propping the FM's up.  Arguably the Government screwing with the home mortgage market precipitated the Financial Crisis.

60% of the home mortgage market is measured in trillions.  Lehmans had $639 billion in assets and $613 billion in liabilities but the Feds chose to let it fail afterall it had bigger liabilities with Fanny Mae and Freddy Mac and the millions of home owners who through their own greed were over stretched.

It's a classic case of Central Government getting over involved in a market that they shouldn't be to supposedly deliver some social good.  In this case cheap and easily available home mortgage loans.

Complete drivel.

I said start your research with Lehmans,not it started with Lehmans.

You brush over the role of the banks in bundling mortgages and selling them off as AAA securities,and insurers like A.I.G who were severley over exposed.

Liars loans,teaser rates,robo signings and blatant fraud was the M.O of the big financial titans....whether you choose to believe it...or not!⛈️

[Chief Stipe]

1 hour ago, holy ravioli said:

Complete drivel.

I said start your research with Lehmans,not it started with Lehmans.

You brush over the role of the banks in bundling mortgages and selling them off as AAA securities,and insurers like A.I.G who were severley over exposed.

Liars loans,teaser rates,robo signings and blatant fraud was the M.O of the big financial titans....whether you choose to believe it...or not!⛈️

The red haze over your eyes prevents you from being open minded and unbiased.

At one stage the pseudo government agencies held 90% of the at risk home mortgage market totalling at least $5 trillion.  Lehmans had net assets and less than $700billion in debt by comparison.  Bear Stearns got bailed out by the Feds 6 months earlier but Lehmans weren't afforded the same privilege even though there was an expectation that the Fed would be even handed.

But the Feds had a far bigger problem with the GSE's Fanny Mae and Freddie Mac.  Their problem was accentuated by political mismanagement and being directed to ensure the home loan market remained "affordable" to Mum and Pa Kettle.

Suggest you read a bit wider.

[holy ravioli]

11 minutes ago, Chief Stipe said:

The red haze over your eyes prevents you from being open minded and unbiased.

At one stage the pseudo government agencies held 90% of the at risk home mortgage market totalling at least $5 trillion.  Lehmans had net assets and less than $700billion in debt by comparison.  Bear Stearns got bailed out by the Feds 6 months earlier but Lehmans weren't afforded the same privilege even though there was an expectation that the Fed would be even handed.

But the Feds had a far bigger problem with the GSE's Fanny Mae and Freddie Mac.  Their problem was accentuated by political mismanagement and being directed to ensure the home loan market remained "affordable" to Mum and Pa Kettle.

Suggest you read a bit wider.

Suggest you stop repeating the pathetic excuse trotted out by the establishment and dig deeper...as I have already pointed out to you re the securitisation of mortgages and the corruption of ratings and..insurance.

You can never accept ..reality.The truth is unpalatable to your indoctrinated mindset.🙄

[Chief Stipe]

22 minutes ago, holy ravioli said:

Suggest you stop repeating the pathetic excuse trotted out by the establishment and dig deeper...as I have already pointed out to you re the securitisation of mortgages and the corruption of ratings and..insurance.

You can never accept ..reality.The truth is unpalatable to your indoctrinated mindset.🙄

Bollocks.

Let's take you through this in baby steps.

Was Bear Stearns the first bank to be bailed out 6 months before Lehmans?  Yes.

Were the two public/private institutions Fanny Mae and Freddie Mac run under Congressional Charters to facilitate access to affordable home loans under severe financial stress to the tune of trillions of dollars in 2007-08?  Answer is yes.

Did the Fed have to bail them out? Yes.

If the biggest holders of home loan mortgage risk were exposed when the housing bubble burst and they were public/private agencies under the control of central Government who was responsible for the crash?

It all comes back to Government playing in a market that they shouldn't be active in other than as a regulator.  

Now who was to blame for the GFC?

Just as who is to blame for the current economic mess?  It wasn't Covid but the stupid policies of rampant money printing, artificial closing down of markets and their supply chains and gross handouts without any discipline.

[holy ravioli]

For you

-were AAA rated  mortgages bundled and sold to various financial institutions?

-was the biggest mortgage insurer A.I.G deemed insolvent?

-was T.A.R.P directed at bailing out over stretched private businesses?

3 simple questions.

If you want to learn about who caused the GFC...try a readily available and highly rated doco-'Inside Job'.

Cherry picking a couple of coys who were bailed out ,you neglect to mention the homeowners  that they provided credit to all got stiffed and lost their homes!

Hopeless.🙄

I'm guessing you are blind because you were born into...privelege.

 

[Chief Stipe]

2 hours ago, holy ravioli said:

Cherry picking a couple of coys who were bailed out ,you neglect to mention the homeowners  that they provided credit to all got stiffed and lost their homes!

FFS two GSE's (SOE's) had 90% of the market!  Government playing in a field they shouldn't have stuffed it up and the taxpayer is still paying for it.  

BTW I certainly wasn't born into privilege!