21 June 2006

I got a letter in the mailbox

I got a taxpayer-funded postcard which told me that a National-led government would borrow in order to deliver $9 billion worth of income tax cuts a year.

National says people have been over-taxed by $9 billion this year and it is apparently on this basis that it would reduce government revenue by up to $9 billion a year, every year.

National isn't very good with numbers

In reality, revenues will be $6 billion ahead of operating spending this year, dropping to $2 billion in 2008-09 when the operating surplus will stand at 2% of GDP.

The cash balance, what is left of the operating surplus after you take into account investment spending such the annual contribution to the Super Fund, is currently forecast to be in deficit for years: a deficit of 1.5% of GDP in 2008-09 alone.

With up to $9 billion less revenue in 2008-09, the mind boggles at how big a cash deficit a National-led government would be prepared to inflict on the country should it win in 2008 but the postcard is about as enlightening on this matter as Dr Brash's beloved People's Action Party of Singapore is on human rights.

"National = higher mortgage rates;" It's as simple as your ABC

The postcard makes no mention of the size of the borrowing programme that underpins this anti-Kiwi policy. It's a form of contempt toward readers because we deserve to know that key information so that we can make up our own minds as to the merits of the proposal.

But there is no doubt a National-led government would cover the short-fall to deliver expensive income tax cuts with big borrowing: When governments start flooding the market with NZ-dollar bonds, interest rates rise for anyone with a NZ-dollar loan compared with where interest rates would have been in the absence of the extra State borrowing. It is as simple as your ABC.

Key lets cat out of the bag

But while Dr Brash isn't straight on what his party has planned for us, the party's next leader, John Key, told journalist Kevin List in an interview that a National-led government would raise gross government debt back up toward 25% of GDP (five percentage points higher than Lab-Progressive target).

This year, 4% of all government spending goes on debt-servicing. National proposes a higher proportion of government spending go on servicing higher levels of debt.

It’s the opposite policy of the Lab-Progressive government which has reduced relative spending on debt-servicing, while dramatically increasing the proportion of State spending on health services.

These issues are very important ones and will form an important part of Progressive members' work in election year. We can't relax when we know that National threatens to trash the country again like it did in the 1970s and 1990s.

We have to get out and talk to people about what is at stake: First it would be financial (higher mortgage costs under National) but in no time it would also be social (reduced investment in education, health and National Super).

Then, when the crunch comes, it would be asset sales to raise a bit of dosh.

National's mate, United Future, is very keen on part-privatisation of SOEs - a peculiar policy that both shreds the price taxpayers get for selling their assets and also manages to leave the State with big capital investments in companies over which it has no control (look at 83% State-owned Air NZ over which the government has no power to direct to act in the national interest because it is a listed company).

That's why we mustn't give Tories any excuse for asset sales

I don't remember Trev being a vocal supporter of Jim's campaign to set-up the Ministry of Economic Development in the 1999-2002 Cabinet, nor was there anything but reluctant acceptance of our campaign to permit NZ Post to establish Kiwibank. In those days, Labour begrudgingly agreed to "boring" economic transformation as the price they'd have to endure to lead a coalition government.

Now Labour is signalling the greenlight for SOEs to play a larger role in economic development and will look, case-by-case, at individual proposals to expand outside of their core activities - the way NZ Post was allowed to establish Kiwibank in 2001.

But we have to be extraordinarily careful here. Everyone in the country now has an interest in Kiwibank's parent company, NZ Post, for example, remaining the solid, well-run commercial success that it is. Protecting the value of the people's assets is paramount. Any misadventure by any SOE or SOE subsidiary will be used as an excuse to resume the 4th Labour Government's asset firesales programme.

Associate Culture Minister Vs Dancing Party Leader

The ACT leader, who is on the State payroll, is now back at his desk after an extended period of dancing with the stars. From his desk, he's crafted Parliamentary Questions about the associate culture minister's workload which have taken a small army of public servants' precious time to answer. Perhaps Trev's Expenditure Reviews could do an analysis into whether taxpayers are getting value for their spending on the ACT Leader's budget.

Everyone pays price of failed Iraq War policy

When the British Labour Party and U.S. Republican Party decided to illegally invade Iraq under false pretences, some people suggested their motivation was to lower oil prices by increasing global oil production.

If that was their motivation, then they've failed spectacularly and working families are paying the price in the form of mushrooming consumer prices. Unless your wages go up by 4% this year, then Mr Blair and Mr Bush just cut your families' living standard.

ENDS

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