Robertson ‘best case’, Joyce ‘worst case’

It looks like the fiscal hole issue will continue to get a hammering today. Patrick Smellie says that it is a conflict between best case and worst case scenarios, with reality likely to be somewhere in between.

It has highlighted more than a hint of desperation in the National campaign, which is being led by Steven Joyce, but also shows that Grant Robertson doesn’t have a lot of money to play with.

Pattrick Smellie: It’s arithmetic, stupid!

Election campaigns mixed with forecasts of the future are a dangerous combination.

Now that the dust is settling, a somewhat banal conclusion is emerging: they’re both wrong, and the truth is likely to be somewhere in the middle.

Labour’s numbers are nothing like as compromised or wrong as Joyce claimed, but it requires some heroic assumptions about Labour’s ability to control all spending outside health and education to believe the numbers it’s published.

In other words, Joyce has claimed a worst case scenario. Robertson is claiming best case.

On that basis, it’s entirely reasonable to split the difference in the interests of trying to explain what’s at stake here, and to conclude that Labour’s forecasts will turn out to be anything between $4b and $6b short of its published fiscal plan, should it form a government after September 23.

If Labour turns out to be a spendthrift government, then Joyce’s alleged $11.7b miscalculation could prove to be too little.

Alternatively, if Labour turns out to be an unexpectedly tight-fisted government in a time of endless forecast Budget surpluses, its spending under-estimation might be far less than my punt of a $4b to $6b shortfall.

However, it is hardly unreasonable to expect Labour to end up spending more than forecast to stop the ship of state from springing politically unpalatable leaks. Public sector wage pressure, demographic demands on other public services and even the small amounts of inflation still pulsing through the economy will severely test the fiscal track that Labour has outlined.

That’s still a long way short of what Joyce claimed, but a problem for Labour’s fiscal credibility nonetheless.

So it looks like Joyce has sacrificed his own economic credibility, deliberately or not, in order to put the spotlight on Labour’s money manipulations.

However, it’s also likely to be a problem that a returned National-led government would face. National has already pledged about $400 million a year of the $1.8b a year it has available for new initiatives in each of the next four years, and on Joyce’s own admission, health and education routinely take the “lion’s share” of those new spending buckets.

In other words, National has probably just about run out of extra money to spend too.

That’s only a real problem for national if they want to keep throwing around election bribes. If they had stuck to ‘steady as we go’ they would be on stronger ground, relatively.

If Joyce now comes out and concedes he over-egged Labour’s fiscal pudding he could reduce the damage on National, leaving the spotlight on Robertson’s fiscal tightrope.

But if Joyce quadruples down he may drag National down with him.

Here is Joyce explaining his claims on RNZ yesterday:

Leave a comment

40 Comments

  1. Reply
    • chrism56

       /  September 6, 2017

      There is an interesting nuanced view by Michael Riddell on his blog. Basically, Joyce is wrong, but the assumptions in Robertson’s plan are unrealistic. Among other things, he graphs that spending on Health and Education under Labour will be lower than they have been under National. He notes “It is a curious spectacle to see a party campaigning on serious structural underfunding of various public services and yet proposing to cut government spending as a share of GDP.”
      That never came out in any other analysis.

      Reply
      • chrism56

         /  September 6, 2017

        I spelt his name wrong. It is Michael Reddell and the post is at https://croakingcassandra.com/2017/09/06/thoughts-prompted-by-joyce-vs-robertson/ 

        Reply
      • Blazer

         /  September 6, 2017

        this says it all….’Basically, Joyce is wrong’….good post Chrism56

        Reply
        • chrism56

           /  September 6, 2017

          If you read the post, which I know you haven’t, Robertson is even wronger.
          His start was
          :If Steven Joyce had simply noted that the Labour Party appears to have made so many specific policy promises that if they were to form the next government it would be very hard to deliver on those specific policy commitments, meet ongoing increases in the cost of normal government activities, and yet at the same time meet the specific spending, surplus, and debt numbers they’ve outlined in their fiscal plan, a useful and constructive exchange might well have followed.  My summary stance: I think that looks like a reasonable conclusion.  “

          Reply
          • Blazer

             /  September 6, 2017

            futile defence.Joyce can say he has a full head of hair…and you and he would be the only ones that believed..it.

            Reply
  2. Reply
    • Blazer

       /  September 6, 2017

      How can we seriously entertain anyone this incompetent as the New Zealand Minister of Finance…what an..embarrassement.

      Reply
  3. Gezza

     /  September 6, 2017

    The Fire Service has probably been on call for the last couple of weeks to regularly go in & pump the sweat out of Steven’s office.

    Reply
  4. I don’t think its damage at all – people are now looking at Labours costings more… and look Mr Smellie isn’t sure there is not a hole!

    National has 9 YEARS of costing and delivery as the Government. They have reversed Cullens Legacy of Structural Deficits through careful management….. Nationals record is creditable. Robertsons is not….

    Sorry – I have now triggered Blazer….. cue rant : )

    Reply
    • robertguyton

       /  September 6, 2017

      Chicane’s cartoon captures Joyce’s stuff-up in one perfect image.

      Reply
      • PDB

         /  September 6, 2017

        Maybe for simpletons who don’t realise this isn’t a straight yes/no answer?

        Reply
        • Blazer

           /  September 6, 2017

          is there an 11.5 billion hole in Labours budget.For simpletons,-I assume you include Joyce and yourself here…the unanimous answer is…NO!

          Reply
          • PDB

             /  September 6, 2017

            Is there a hole in Labour’s budget? Appears so. How big is it? We don’t know – at least $6-8 billion though based on National’s previous allowances for the govt depts. that Labour have not allocated any extra funding to.

            Considering Labour always spend more on govt depts. when in govt $11.7 Billion isn’t out of the question.

            Reply
      • Gezza

         /  September 6, 2017

        Chicane’s cartoon captures Joyce’s stuff-up in one perfect image.
        Can’t find it. Where is it?

        Reply
    • Blazer

       /  September 6, 2017

      yes they reversed Labours run of budget surplus,and hydrauliced Govt borrowing to record levels.Starting to get sick of hearing about the GFC,and the Chch rebuild, which any Govt would have addressed.Nationals new’ strategy…use the word billion’ as much as possible…for and against…before they came to power million’ would suffice,but that became redundan,t because apparantly with such low inflation,a dirty old,3 bedder in Auckland,is now worth a…million.

      Reply
      • High Flying Duck

         /  September 6, 2017

        The left are all sick of hearing the “reasons” for the need to borrow for Government spending to retain core benefits and services while unwinding the Cullen “decade of deficits” as well as dealing with the GFC & earthquakes.

        They are just inconveniences – rather like the operating contingencies that don’t exist in Robertson’s Budget.

        Visionary policies to come from Jacinda will fix everything and all departments outside of Health and Education will be funded using Pixie dust and “Lets Tax This” windfalls.

        Reply
        • Blazer

           /  September 6, 2017

          so its all Cullens fault,the GFC.EARTHQUAKES,and all the deficits National ran.Have you been working for ‘FAKE NEWS INT’?

          Reply
          • High Flying Duck

             /  September 6, 2017

            Why do you always respond with a non-sequitur?

            Cullen left a “decade of deficits” in his last budget – he spent up large without any funding in place. So Labour were responsible for the need to borrow when National came to power – but also for the low level of borrowing in place at the time.

            The GFC happened.
            The earthquakes happened.

            You can be as sick of hearing about it as you like, but that does not change the circumstances NZ were in when National took power.

            In the end Key and English took a decidedly radical approach compared to most countries in dealing with the situation. They spurned austerity – so they had to borrow.

            Instead of wasteful QE policies they instigated tax cuts and restructured to reduce Government expenditure and as such managed to get through the recession with far less debt than forecast, regained surpluses before almost any other country, maintained very low unemployment rates (comparatively) with the rest of the world and grew the economy faster than almost any other country.

            Few, if any people doubt the strength of the economy as it stands today.

            That doesn’t give them a free pass to be elected again, although they deserve credit for what was achieved in the last 9 years.

            And while National are blamed for the high house prices, that argument ignores the fact it is a worldwide issue and the high price inflation includes places with all the policies Labour want to bring in already in place.

            Reply
            • Blazer

               /  September 6, 2017

              what on earth does this mean?…’ he spent up large without any funding in place. ‘He is not a clairvoyant and National admitted he had done a good job…sort of.

            • PDB

               /  September 6, 2017

              2008 – Labour in power – a decade of deficits forecast under Labour – National get in power late 2008 – National get us into surplus far earlier, even with the earthquakes.

            • High Flying Duck

               /  September 6, 2017

              It means Cullen introduced $23B of new spending in the 2008 budget, much of it unfunded and told National there would be no room for tax cuts because he had spent all the money:

              From NBR Apr 2009:
              _________________

              “Michael Cullen was gleeful in the hours after his final budget. He smirked and gloated that he had left no money for National. In fact he agreed in an interview with Gordon Campbell that his budget was a booby trap for National.

              At the time of the 2008 budget, the country had been in recession for 5 months. Despite that Dr Cullen both increased spending as a % of GDP by 1.2% and introduced tax cuts which saw revenue reduce by 1.7%. He reduced the operating surplus to a mere $200m or 0.1% of GDP – no margin at all. He didn’t even leave any money to be paid inot the Cullen Fund to help pre-fund future superannuation. In fact after years of lecturing about the cash surplus, Dr Cullen did a budget that had cash deficits of almost $7 billion over 4 years.”
              ___________________

              Grant Robertson doesn’t have a big hole in his budget, he just has a very large sum of un-costed necessary spending he decided not to include in it.

            • Blazer

               /  September 6, 2017

              I tend to agree with running deficits and not going the austerity route.As I have mentioned the Keen/Hudson brand of economics makes perfect sense.
              This needs to be brought to the attention of…some…’ introduced tax cuts which saw revenue reduce by 1.7%. ‘…TAX CUTS!!!Btw the deficit forecasts were made by Treasury,and we know National have very little faith in..them.Not guilty to the non sequitur allegation….(excepting this one)-there is always a strand that binds the thread.

      • Yawnnnnnn

        Reply
  5. David

     /  September 6, 2017

    Robberson has no contingency for any extra spending and yet Joyce has the blow torch on him, Labour,s answer so far is we expect effciencies and growth to cover extra spending.

    If the UN want us to go peace keeping somewhere how are we going to cover that cost.

    Reply
    • robertguyton

       /  September 6, 2017

      Joyce’s “blow-torch” has burned a huge hole in his own trouser-seat.

      Reply
      • Joe Bloggs

         /  September 6, 2017

        along with his dismal failure studying economics at University – takes 11 economics papers, fails 8, is hardly inspirational…

        Reply
        • High Flying Duck

           /  September 6, 2017

          I think he dropped out because he was busy creating a business that sold for over $6m…

          Reply
          • Blazer

             /  September 6, 2017

            that business became part of a basket case,that he kindly loaned bridging finance to ,compliments of the NZ taxpayer.Unheard of.

            Reply
            • High Flying Duck

               /  September 6, 2017

              Many many left wing journo’s would have lost their jobs without that funding – and the money was repaid if I recall correctly.

            • Blazer

               /  September 6, 2017

              probably some right wing journos too,to be fair.Oh for the chance for a soft loan like that,some would say.Jolly good they paid it back…not really the way the much vaunted ‘free market’ the right extoll,is meant to..work.

  6. It appears that TV1 breakfast are now the attack dog for liebor with their two ‘front persons’ trying to shout Joyce down.
    Evidently liebor have altered their original claims 🙂

    Reply
    • robertguyton

       /  September 6, 2017

      Joyce was on TV1 explaining…and as you know, George, explaining is _ _ _ _ _ _ .

      Reply
    • Joe Bloggs

       /  September 6, 2017

      your tacky “liebor” meme does you no favours, and is clearly a meaningless dogwhistle in light of the slew of economists who’ve confirmed Joyce told an $11.7 billion lie

      Reply
      • PDB

         /  September 6, 2017

        Only if one can only answer a simple ‘yes’ or ‘no’. Otherwise as pointed out the true answer is somewhere in between.

        Reply

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