Treasury forecasts

Bill English will have a sound financial foundation to build his government on.  The latest Treasury forecasts were released today (by English).

  • Economic growth – 3% average over the next five years
  • Unemployment to drop to 4.3% by 2020/21
  • 150,000 jobs to be created
  • Average wage to increase by $7,500 to $66,000

Treasury forecasts solid growth, stable finances

Treasury’s latest forecasts show the Government’s programme of responsible economic and fiscal management is delivering benefits for New Zealanders, Finance Minister Bill English says.

“Economic growth is expected to average around 3 per cent over the next five years – considerably stronger than forecast in Budget 2016 – supporting more jobs, falling unemployment and higher incomes,” Mr English says.

“The more positive outlook for the economy is driven by high levels of construction activity, exports (particularly tourism), a growing population and low interest rates.”

The 2016 Half Year Economic and Fiscal Update forecasts unemployment to  drop to 4.3 per cent by 2020/21. Over the same period Treasury expects another 150,000 jobs to be created and the average wage to increase by $7,500 to $66,000.

“While the recent Kaikoura earthquakes have had a major impact on affected families and businesses, they are not expected to disrupt the overall momentum of the economy,” Mr English says.

“However, the earthquakes do highlight the importance of paying off debt in the good times so that the Government can support New Zealand communities in challenging times.”

Treasury estimates the total fiscal cost of the earthquakes will be about $2 billion to $3 billion, some of which will be funded by insurance proceeds or existing funds. Net costs of $1 billion have been included in this year’s forecasts.

The operating balance before gains and losses (OBEGAL) is forecast to be $473 million in surplus this year, rising to $8.5 billion over the forecast period.

The Half Year Update shows net debt peaked as a proportion of GDP in 2015/16 – a year earlier than previously expected – and is expected to fall to 18.8 per cent of GDP by 2020/21.

Mr English says the accompanying Budget Policy Statement confirms the operating allowance will remain at $1.5 billion for each of the next four Budgets.

The capital allowance for Budget 2016 has been increased from $900 million to $3 billion in Budget 2017 and to $2 billion in future Budgets to provide for a number of high quality infrastructure and investment projects.

Contributions to the NZ Super Fund are forecast to restart in 2020/21 once net debt falls below 20 per cent of GDP.

The Half Year Economic and Fiscal Update and Budget Policy Statement can be found hereand here.

Treasury delays Dunedin hospital rebuild

Last year the Government tried to speed up the process to rebuild Dunedin Hospital but Treasury slowed things down. Existing buildings are deteriorating, particularly the clinical services block which includes operating theatres.

ODT: Brakes put on hospital

The Treasury has managed to slow down the Dunedin Hospital rebuild, despite the  clinical services building being at risk of abrupt clinical failure. Advice released under the Official Information Act shows the Treasury warned Finance Minister Bill English that haste was a “major risk to a successful outcome”.

Last year, Health Minister Dr Jonathan Coleman told officials to try to speed things up. In response, health officials proposed shortening the lengthy Treasury-approval process by six months.

But the Treasury told Mr English: “The [Southern Partnership Group] and the Ministry [of Health] are coming under pressure to expedite timelines for the business case process. We see this as a major risk to a successful outcome.”

The March advice was not the first such warning from the Treasury, but the Otago Daily Times has ascertained that its advice meant a move to speed up the project was scrapped.

Late last year, the ODTreported  Treasury had warned both Mr English and Dr Coleman against speeding up the timeframe.

Southern Partnership Group chairman Andrew Blair, in a statement to the Otago Daily Times, said the group settled on a slightly slower timeframe which struck an “appropriate balance”.

A new hospital is more than seven years from completion. The ministry has said it is looking at the entire hospital campus, and it has not said exactly what will be built, nor the site.

An official assessment of the clinical services building says it is “crumbling” and at risk of a significant defect that causes its abrupt closure.

The clinical services block in particular has a number of problems. In 2014 there were major leak problems in the operating theatres.

ODT: Q&A: The Hospital rebuild

The clinical services building is crumbling and suffered years of maintenance neglect.

It does not meet standards for electrical wiring, infection control, and management of dirty laundry. 

Its asbestos problem means even though there’s a special budget now for deferred maintenance, some areas are no-go.

Built in the 1960s, it’s at risk of abrupt clinical failure.

There are concerns it would not withstand a significant earthquake.

What about the ward block?

Even though it’s younger (built in the 1970s and commissioned in 1980) the ward block has suffered from the same deferred maintenance as the CSB.

It needs “substantial renovation”.

A 2012 assessment deemed its remaining “service life” at just under 16 years.

It “needs systematic re-lifing or will otherwise stumble through with reactive upgrades as building systems fail” according to an official assessment.

Treasury: alcohol and tobacco more harm than cannabis

A Treasury document obtained after an OIA request be a Nelson lawyer gives estimated costs of policing cannabis and potential tax revenue, and says that “the harm caused by alcohol and tobacco was much worse than what’s caused by drugs like cannabis”.

NZ Herald: Cannabis tax could be $150m

An internal Treasury document on New Zealand’s drug policy shows the Government could be earning $150 million from taxing cannabis and saving taxpayers $400 million through reduced policing costs.

The brainstorming notes, from 2013, have been publicly released after an Official Information Act request from Nelson lawyer Sue Grey to Finance Minister Bill English.

Grey said the notes confirmed what was well-known in other sectors – that the harm caused by alcohol and tobacco was much worse than what’s caused by drugs like cannabis.

Relative harm of alcohol and tobacco compared to cannabis is fairly well known.

Drug Foundation executive director Ross Bell agreed, saying the reason there’s been no action is because politicians are too scared to talk about the “taboo” subject of drugs.

He said we should be willing to look at alternatives for New Zealand and admit, as the Treasury notes do, that the current system isn’t working.

Bell said the notes stated prohibition wasn’t working and cannabis was not a gateway drug.

He said while politicians did not like talking about drug policy, they were now misreading the public mood and people were ready to have this discussion.

I don’t think the National party and it’s leaders care about the public mood on cannabis. They simply don’t want to address the obvious issues and public sentiment.

English said the brainstorm notes were merely a discussion and were not official Treasury opinion.

That’s disappointing but predictable fobbing off by English. The document wasn’t anyone’s opinion, it was stating well known facts, and estimated costs and potential revenue.

It was advice that English and National don’t want to hear because they don’t want to do anything about the large cannabis problem.

Both medical cannabis products and recreational use are issues with growing profiles. Ignoring public opinion may be costly for National – as a third term Government they are facing rising dissatisfaction with a failure to take seriously issues of public significance.

It’s quite possible that next election cannabis could be the toke that breaks the Government’s back.

Treasury to cost election promises?

The highlight of Metiria Turei’s State of the Nation speech yesterday was a proposal to have a unit set up in Treasury to cost party election promises.

This was applauded by a range of people, but National don’t seem keen. This is a shame, because while Treasury gives the incumbent an advantage in costing policies National will be in Opposition again some time.

And even in Government national would benefit by keeping the other parties honest with their promises.

From Turei’s speech:

And the policy I want to talk about today is a small change to our political process that will have a big impact on our democracy.

During election campaigns there’s always a lot of conflict and shouting between politicians about whose policy costs what, and where the money will come from. Which party is going to get us into surplus ten minutes faster than the others, and so on.

We get criticised a lot for the supposed cost of our policies. But we do extensive work costing all of our policies before each election. We release fiscal statements. We get them audited.

National doesn’t do that. They don’t because there’s a perception that they’re sensible and trustworthy on economic issues. So the reality is they get to make it up as they go along. Money appears out of thin air and no one even blinks. The asset sales are a good example. John Key pitched it as freeing up $7-10 billion. They got $4.7 billion. Then Bill English promised to spend that money many times over, in completely different ways depending on who he was talking to. We got scammed. And no-even even blinked.

So what I’m here to announce today is a measure designed to bring a little more transparency and accountability into New Zealand politics. Today, the Green Party has sent a letter to each party leader, asking for support from across the House to establish an independent unit in the Treasury to cost policy promises.

Political parties could submit their policies for costing to this independent unit, which would then produce a report with information on both the fiscal and wider economic implications of the policy.

Instead of New Zealanders making their decisions based on spin and who can shout the loudest, they will have meaningful, independently verified information instead.

It will also ensure that policy promises are stable and durable because parties won’t be able to promise the earth unless they have the earth to give.

So we are going to work with the other political parties in Parliament to try and make this a reality for the 2017 election. And it’s going to be very interesting to see which parties support it and who opposes it. Hopefully everyone will support it. It won’t cost much. It’s good for our democracy. It’s good for New Zealand.

Political power can transform the country for the better, and make a positive difference to the lives of generations to come, if that power is exercised with responsibility and caution. So the first things we should ask of those who seek to wield that power is what they’re going to do, how they’re going to do it, and what it’s going to cost.

So we call on the other political parties to welcome this idea and to work with us to make next year’s election more accountable and democratic. To close this gap we have between perception and reality, the gap between what political leaders say and what we actually do.

The Taxpayers’ Union was quick to back Turei’s proposal:

The Taxpayers’ Union is welcoming the proposal from Green Party co-leader, Metiria Turei, in her state of the nation speech today for a policy costing unit inside Treasury that would independently cost the policies of political parties.

Taxpayers’ Union Executive Director, Jordan Williams, says “We agree with the Greens that an independent office to cost political promises would be good for democracy and public policy debates. While our preference is to have the office as one of Parliament, rather than Treasury, the Green’s policy has real merit.”

“Seldom does the Taxpayers’ Union call for new spending of taxpayers’ money but here we think the benefits to transparency and democracy far outweigh the cost.”

“This tool would make it harder for politicians to make up expensive policy on the hoof with taxpayers bearing the costs of the wish-lists. It would likely prevent the fiasco we saw with the Northland by-election bribes.”

Having Treasury cost policies would save the Taxpayers’ Union from having to do it, but I agree that “the benefits to transparency and democracy far outweigh the cost”.

More positive coverage:

Isaac Davison: Metiria Turei chooses perfect issue to kick off the year

Metiria Turei chose a perfect issue to kick off the political year.

In her scene-setting State of the Nation speech today, the Green Party co-leader focused on the need for political parties to be economically credible.

Also from Davidson: Party policies costing plan could fly

Speaking at her State of the Nation speech yesterday, she said she had written to all party leaders to seek their support for the policy.

National appeared to oppose the proposal yesterday, though ministers gave different views on the issue.

Prime Minister John Key said it was “not a terribly good idea”. He said it would require a funding boost for the Treasury and would not achieve the Green Party’s goal of greater transparency because the results would be manipulated for political gain.

“They would just ignore it if they didn’t like the numbers,” he said.

That contrasted with comments by Acting Finance Minister Steven Joyce, who said National “did not have a strong view either way” on the policy.

Mr Joyce said that if all Opposition parties were interested in it, then National would consider it.

“I’d say we’d be open to it, but let’s see what other Opposition parties think,” he said.

I hope Key thinks this one through. It will benefit voters, and it will also benefit parties proposing sensible and affordable policies.

Labour leader Andrew Little…

…said he supported the idea because it would improve transparency and help parties to understand the impact of the Government’s policies.

Act Party leader David Seymour…

…said it was a politically smart move by the Greens because it would allow the party to “sanitise itself in the eyes of the business world”. But it would have problems in practice because the Government department might not be able to provide the definitive numbers the Greens were seeking.

Incoming Business New Zealand head Kirk Hope…

…said the policy would make it easier and better for businesses to understand the costs of party policies. He said the system was already used in other countries.

“It’s not something that is new or unusual and it could make a very useful contribution to be able to analyse policies.”

There is already a means of costing policies:

Parties are already able to request the assistance of a full-time Treasury official for policy costings, but must pay for it out of their parliamentary budget.

Most parties opt not to use this resource, preferring instead to outsource their costings to private firms.

This gives the Minister of Finance a chance to see what other parties are proposing in advance so it is avoided by opposition parties.

It needs to be independent of any Government oversight.

Stacey Kirk at Stuff also thinks it’s a good idea (it will be very useful for journalists to have policies costed) – Greens throw out reasonable policy in speech to rebut ‘radical’ claims:

OPINION: It’s not a radical policy at all.

In fact, having Treasury cost the political promises of all parties not only seems fair, but really rather reasonable.

At her State of the Nation – the first in a series from all political leaders – Green Party co-leader Metiria Turei was at great pains to rebuke criticisms from some that their policies represent a shift to the “radical” left.

Treasury already has a small budget to do that if parties wish – it’s smaller than the $1million to $2m in a normal year, and $3m in an election year that the Greens estimate it would cost to make the system workable.

No party taps into the existing fund.

Indeed, at the last election, the Greens paid for independent audits of their policies themselves. It was in their interests to; many voters would flinch at the idea of a Green Party with a hand in Government spending.

But the reason parties don’t use the money available to reinforce their policies is because it’s accountable to the Finance Minister of the day.

And in the dirty game of politics, you bet that Government would use the information for their own election designs.

That’s the problem now, so opposition parties don’t use Treasury.

Turei has written to all leaders asking for cross-party support of this particular policy. Labour have indicated their support, but the big fish to land is National.

For them to do so would be to give up a significant advantage, which seems unlikely. Even in the face of claims that opposition to the Green policy would clearly be for their own election interests.

After all, this seems like a policy that would appeal to political party, and policy wonks in Wellington (whose votes are often already decided), but few through mainstream New Zealand are likely to take a great interest.

A shame. Because after a year of increasingly rising barriers to the access of public information, surely the national interests lie in making the next election more democratic, not less.

That’s certainly in the national interest but it may not happen if it’s thought to not be in the National interest. Which would be a shame.

More confusion between Treasury and Inland Revenue

In his Breach of Privilege complaint to be laid against PM Grant Robertson has claimed Key has misled Parliament, saying “Inland Revenue told John Key” and “Inland Revenue actually said” – but there’s no evidence of what Inland Revenue told Key despite confusion connections being made by Robertson and The Standard.

Robertson’s press release linked to a Treasury report:

RobertsonBreachofPrivilege

As I show in Breach of privilege complaint against Key this doesn’t show any specific Inland Revenue statement, it just says that Treasury consulted with IRD for their report.

However Greg Presland at The Standard quotes in Another #Keyfib about Kiwisaver:

Yesterday’s Treasury dump of papers included the advice from the IRD to the Government about Kiwisaver.  The IRD paper included this advice on the likely effects to Kiwisaver providers:

Lower numbers of KiwiSaver members (particularly among the self-employed and children) and therefore lower revenues from fees and/or a greater number of dormant accounts (if affected individuals stop contributing)”.

Can anyone reconcile these statements?  I have tried to but I cannot stretch the language sufficiently.

That’s word for word the same as from the Treasury statement, but Presland links to an Inland Revenue publication. That’s a virtual replication of the Treasury Impact Statement but can give the impression it’s a statement from IRD.

I say “virtual replication” but it’s not identical. I haven’t checked right through but the first paragraphs differ:

Treasury version:

1. This regulatory impact statement has been prepared by the Treasury in close consultation with Inland Revenue.

IRD version:

1. This regulatory impact statement has been prepared by the Treasury in consultation with Inland Revenue.

But regardless of how close the consultation was there is no clear statement directly from Inland Revenue.

Roberston has claimed:

“Budget documents released yesterday show the Inland Revenue told John Key the exact opposite of what he told Parliament.“Inland Revenue actually said the impact of scrapping the kickstart on KiwiSaver providers would be a ‘lower numbers of KiwiSaver members (particularly among the self-employed and children)’.

The Treasury statement does not show what Inland Revenue told Key, nor does it show that they actually said anything at all to him.

Breach of privilege complaint against Key

Grant Robertson has made a formal breach of privilege complaint against John Key for allegedly misleading the house a week after the budget in May.

It appears that both Robertson and Key may have made mistakes.

Breach of Privilege complaint to be laid against PM

The Labour Party will today lodge a breach of privilege complaint against the Prime Minister for misleading Parliament over advice he received about scrapping the KiwiSaver kickstart.

Labour’s Finance spokesperson Grant Robertson says John Key misled the House on May 26 during the following  exchange:

Tuesday, 26 May 2015

Mr Speaker took the Chair at 2 p.m.

Prayers.

Questions to Ministers

Prime Minister—Statements

1. METIRIA TUREI (Co-Leader—Green) to the Prime Minister : Does he stand by all his statements?

Rt Hon JOHN KEY (Prime Minister): Yes.

Metiria Turei : Does he stand by his reported statement that no one had been disadvantaged by the move to scrap the $1,000 KiwiSaver kick-start payment?

Rt Hon JOHN KEY : The member might want to table the source for that because I cannot recall it.

Metiria Turei : Has the Prime Minister seen that New Zealand ranks 22nd out of 24 countries in the OECD for savings, and will his removal of the $1,000 KiwiSaver kick-start contribution make this poor savings record better or worse?

Rt Hon JOHN KEY : Firstly, savings records have improved under this Government. Secondly, there are multiple ways of measuring those things. And, thirdly, the removal of the $1,000 kick-start contribution will not make a blind bit of difference to the number of people who join KiwiSaver.

Metiria Turei : What evidence does the Prime Minister have that the sign-up rates for KiwiSaver will not be affected?

Rt Hon JOHN KEY : That is the formal advice from the Inland Revenue Department, and it is supported by the view that the people who are joining KiwiSaver are essentially doing so because it is now well organised within the workplace. Some of the big scheme providers are extremely well organised. We have got about 15,000 to 20,000 people joining in a month. I would be very, very surprised if it changes at all as a result of this.

“Budget documents released yesterday show the Inland Revenue told John Key the exact opposite of what he told Parliament.“Inland Revenue actually said the impact of scrapping the kickstart on KiwiSaver providers would be a ‘lower numbers of KiwiSaver members (particularly among the self-employed and children)’.

“Instead of reflecting this advice, the Prime Minister simply made a blanket statement claiming the IRD backed his position.

“The Prime Minister has a fundamental requirement to tell the truth to Parliament. Blatantly misrepresenting advice he receives brings the integrity of Parliament into question.

“John Key must lead by example by having the highest standards of integrity. If he can’t be trusted to be truthful in Parliament, how can the public have confidence in any of his statements or those of his ministers?”

The Regulatory Impact Statement was “prepared by the Treasury in close consultation with Inland Revenue”.

KiwisaverRegulatoryImpactStatement

The section on impacts:

KiwisaverRegulatoryImpacts

(44. a.) is what Robertson is referring to. He claims: “Inland Revenue actually said the impact of scrapping the kickstart on KiwiSaver providers would be a ‘lower numbers of KiwiSaver members (particularly among the self-employed and children)’.

I can’t see anything that shows what “Inland Revenue actually said”, just that the statement was prepared “in close consultation” with Inland Revenue.

The Regulatory Impact Statement was signed by James Beard (Manager, Financial markets) from The Treasury.

It looks to me that Key could legitimately respond that this doesn’t prove Robertson’s claim against him.

Key claimed “That is the formal advice from the Inland Revenue Department” – Robertson doesn’t appear to have proved that wrong.

I would be surprised if Inland Revenue formally advised Key that “the sign-up rates for KiwiSaver will not be affected”.

I think both Robertson (now) and Key (in Parliament) have made loose claims.

I wouldn’t be surprised to see Key ‘clarify’ by saying that he meant that the sign up rate of the ‘target population’ wouldn’t be affected – that’s employees who are automatically enrolled and who have to de-enrol if they don’t want to be in KiwiSaver.

The self employed and children seen as ‘leakage’ enrolments outside the ‘target population’.

Overall Treasury

They recommended removing the Kickstart to achieve “significant fiscal savings” from a “costly and poorly targeted savings scheme”…

KiwisaverRegulatoryExecSummary

…but also said it would “marginally (at best)” improve the target effectiveness:

KiwisaverRegulatoryTargeteffectiveness

See the related post More confusion between Treasury and Inland Revenue.

Unequal posts on inequality

Anthony Robins has posted an unusually detailed economic analysis in Inequality – Treasury reportnot his usual style at all.

Last week Treasury came out with a detailed and interesting report, Inequality in New Zealand 1983/84 to 2013/14. The web page is here, and the full document (pdf)here. From the summary:

The results indicate an increase in the inequality of market and disposable income per adult equivalent person (using the individual as the unit of analysis) from the late 1980s to the early 1990s. Subsequently, inequality has – with some variability – remained either constant or has fallen slightly.

It wasn’t widely reported. What coverage there was repeated the message of the The New Zealand institute, that inequality is supposedly not rising.

Dig beneath the surface however.

Someone has certainly done some digging.

One could almost suspect he could have help from his local MP, who happens to be the Opposition spokesperson for economic development and small business. But they say at The Standard that authors only ever post their own personal opinions without any party or Parliamentary input.

As we all know inequality increased sharply with the neoliberal reforms of the late 80’s – early 90’s. From the report:

It appears that the 1980s reforms – involving cuts in the top income tax rate along with benefit cuts and the ending of centralised wage setting [i.e. the ECA] – are associated with increasing inequality.

The measures level out (damage done) during the late 90’s. They begin to fall with Labour’s increase to the top tax rate in 2001, and Working for Families in 2004. The momentum of this fall continues until 2010, when there is another sharp upturn in inequality following National’s reduction of the top rate and increase in GST.

In short, the last Labour government acted to reduce inequality, the current National government has acted to increase it. Because of the slow (but cumulative) nature of such changes, it is almost certain that the full effect of National’s changes have not yet been measured.

In short, Labour good, National bad.

But there’s an unequal post by David Farrar at Kiwiblog – Despite the rhetoric, inequality not increasing in NZ – this looks at the Stuff article that Robins tried to refute.

New Zealand needs to “change its tune” on , think tank The New Zealand institute says.

The group, which is supported by many leading business people, made the call following the publication of a Treasury paper which found inequality in this country has, with some variability, largely remained constant for the past 20 years. …

The new Treasury report acknowledged inequality in this country did rise from the late 1980s to the early 1990s. But it said that since then inequality had – with some variability – remained either constant or had fallen slightly. (Read the report in full here)

In a statement on Friday, NZ Initiative head of research Eric Crampton said “New Zealand simply has no problem of rising inequality”.

In contrast, income inequality had risen in may parts of the world and New Zealand seemed to have imported the narrative that the gap between rich and poor in this country had been widening to the same degree.

“The most striking finding in the latest Treasury work is that inequality in consumption is lower than it was before the reforms of the 1980s. While salary-based measures of income inequality have not declined as dramatically, a lot of work ignore the fact that the tax and transfer system already works to equalise incomes,” Crampton said.

“In the end, it’s consumption-based measures that give us a better picture of real differences in how people live.”

Farrar concludes:

So when you take account of the tax and welfare system, there is less inequality in NZ than the early 1980s when for some bizarre reason socialists hark back to as a golden era.

There’s lies, damn lies, statistics, economic analysis, bloggers and political proxies.

Hickey’s housing slant

The official description of ‘Bernard Hickey’s Opinion’ column says that  ‘Bernard is an economics columnist for the NZ Herald’.

In his column today, Use that power, renters, Hickey has strong words about Auckland’s housing problems

Finally, Auckland’s Generation Rent has found someone who is talking about the elephant in the room – rampant speculative demand for housing by landlords.

Everyone worried about Auckland’s astonishing house prices should read Reserve Bank deputy governor Grant Spencer’s speech.

He spelt out in the plainest language yet that property investors are taking advantage of tax incentives to use cheap debt to buy as many houses as they can.

The Reserve Bank has exhausted its toolkit, having put up interest rates and set limits on high loan-to-value ratio (LVR) lending. It is looking to increase capital requirements for landlords’ mortgages, but it knows it’s not enough.

Exasperated, the Reserve Bank has asked for help to control the risks to New Zealand’s banking system, which relies on house values to back 60 per cent of its loans.

Spencer called for the Government to revisit the tax incentives for landlords.

Fair enough listening to and quoting the Reserve Bank Governor.

The Government’s top economic adviser has said landlords’ tax incentives should be reduced and central Auckland apartments should be built in defiance of the Nimbys controlling Auckland politics.

Council and Government politicians are refusing to take that advice.

What I find interesting about this is the apparent one-sidedness of Hickey’s column. It seems that he has used the Reserve Bank Governor to support a hobby horse.

Now this column may have been written before yesterday morning.

But at 9 am yesterday Hickey participated on a Twitter discussion for The Nation about their interview with Treasury Secretary Gabriel Makhlouf who has different views on housing than the Reserve Bank Governor.

Join our Twitter panel and at now!

Those alternatives weren’t mentioned at all in Hickey’s column – and he should have been well aware of them before listening to the Makhlouf interview.

On the panel Hickey displayed what looked like a pre-decided slant. He has a clear preference to Reserve Bank advice to Treasury Advice.

Here’s another view on China for ‘s Gabs Makhlouf to read after

He tries to educate Makhlouf on his angle.

Big gap there between @nztreasury & @ReserveBankofNZ. Gabs Makhlouf sceptical about CGT just 3 days after bank called for debate.

But Hickey doesn’t seem \want debate, he wants to promote his views which happen to side with the Reserve Bank advice.

Got a feeling the @ReserveBankofNZ would have liked a bit more support from @nztreasury on housing taxation than that.

Ok, he has ‘a feeling’ he and the reserve Bank are right.

In Muldoon era it was the @nztreasury offering the freest and frankest and most critical advice. Now it’s the @ReserveBankofNZ

Is that because it’s the freest and frankest? Or because it’s ‘most critical advice’ that happens to fit his opinion?

For #nationTV3 viewers wanting an alternative housing view, here’s the speech from @ReserveBankofNZ’s Grant Spencer http://www.rbnz.govt.nz/research_and_publications/speeches/2015/action-needed-to-reduce-housing-imbalances.html … …

Diverting viewers to something he prefers to the Nation interview.

Another example here of how NZ’s leaders today are pushing the costs of current consumption onto their kids/grandkids http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11433784

He’s not discussing the Makhlouf interview at all, he dismissed it and is linking to alternatives he agrees with.

Counter-factual for a CGT is what happened to Auckland house prices post-election after buyers realised no CGT. Up 20%

Has Hickey got any evidence supporting that ‘counter-factual ‘? House prices almost certainly didn’t go up 20% solely because the election result meant no wider Capital Gains Tax. Did it have any effect at all?

Unless Hickey can produce facts I will remain very dubious about that claim.

And I’m very disappointed he simply dismissed Makhlouf  and made no attempt to lead any discussion. In his The Nation panel tweets and in his Herald column he looks more like an economic activist than a balanced economic columnist.

The elusive surplus threatens poverty measures

It looks like the Government won’t make their promised surplus next year due to reduced tax take and pressure from reducing milk prices.

NZ Herald reported No surplus this year – Treasury

Treasury this morning delivered a body blow to the Government’s hopes of returning to surplus, saying it now expects a deficit of over half a billion dollars for the June financial year.

At this morning’s Half Year Economic and Fiscal Update, Acting Treasury Secretary Vicky Robertson said despite solid growth in the economy, the Crown’s finances would take a hit from lower than previously forecast tax take.

That had seen Treasury change its forecast operating balance before gains and losses (Obegal) for the 2014-15 year from a slim surplus of $297 million to a deficit of $572 million.

Treasury said softer outlook for economic drivers of the tax such as lower dairy prices and interest rates had seen the expected tax take for the year fall by $600 million.

The changed forecast isn’t a big deal on it’s own, changing economic conditions and revisions are to be expected.

Unless there’s a significant turn around and the surplus is achieved this is embarrassing for National and Bill English who have put a lot of emphasis on reaching a surplus after some very difficult years since the Global Financial Crisis.

Generally English deserves a lot of credit for managing the country’s finances prudently, this played a significant part in National doing so well in the election.

But English has not been so prudent on two counts – staking so much of his reputation on reaching a surplus by 2015, and leaving no room for mistakes or unexpected changes in his last budget.

English cut the surplus too fine, leaving virtually no margin for a negative change. Mr Reliable gambled and looks like losing this bet.

It isn’t a major problem for National at this stage of the electoral cycle. But it will make their promise to address poverty in next year’s budget challenging.

Economic improvement

Is this a sign that the economy is finally picking up again?

Opinion: Bigger tax take puts doubt on Treasury figures

(Dene Mackenzie @ODT): Doom and gloom merchants may have to take a back seat for a month or two after the Government accounts released yesterday showed an improvement in both corporate tax and GST for the 11 months ended May.

The accounts show that core Crown tax revenue in the 11 months was $50.54 billion, up 1.3% on the Budget economic fiscal update figure of $49.87 billion.

More startling was that the tax take in the year to May was 6.7% higher than the $47.4 billion collected in the previous corresponding period – again throwing doubt on the accuracy of Treasury figures.

‘Encouraging’ but not free of uncertaintly…

Finance Minister Bill English has been one of the most conservative commentators on his own figures but was moved yesterday to call the reduction in the operating deficit “encouraging” – with a caveat.

“But the global environment remains uncertain, leading to a number of fluctuations in the tax take from month to month.”

But these gives hope that our economy and employment are on the way up again.

I’ve noticed signs that business is showing signs of cautious confidence and increased investment in progressing too.