Bank economists confirm forecasts of 2-3 more rate hikes by RBNZ after 'more expansionary than expected' Budget; Orr's view will be crucial in the debate over the politics of inflation; S&P not happy
R/e Standard and Poor's and our credit rating - it's annoying anyone still listens to them after they stamped subprime mortgage backed securities with a AAA credit rating prior to the GFC...
Maybe if we had a financial system with more fiscal policy options than one giant button that reads “RUIN LIVES TO RESTRAIN INFLATION(?)” and one guy thumping the button repeatedly? Just a thought.
The future "contractionary" budgets are a plan only, we haven't yet seen Robertson and Labour deliver contractionary budgets (yes in the sense of not spending covid money, but not otherwise) and future plans continue to be a mirage in the distance, so one can only assume that their plans are to tax their way to surplus.
Their problem is that as the economy slows, so too will the GST, personal and corporate tax income. I don't believe Robertson will ever deliver a surplus, even if Labour retains the treasury benches at the election.
You talked about the need to borrow to invest in infrastructure, but we are borrowing even more to maintain general spend items, so room for infrastructure borrowing is tightening.
Thanks Bernard, another salient appraisal of our “churn and burn” as you call it. Labour has shortened its leash to its banking masters, guaranteeing no meaningful investigation into their rapacious profits. As you note, a mild further rebuke from Orr and his acolytes in October will see Labour in the opposition benches. Poor things 🙄. LP voter who feel the least motivated to indulge in the coming election farce will have forgotten the lollipops handed out in Budget 23 by then. And rightly stay at home. One wonders how National and its ragtag cast of offspring can lose in October but I’m sure their bag of self-immolating tricks is not empty yet. 🥳
"And it’s all because these median voters cannot kick their addiction to leveraged and tax-free gains on residential land, and therefore won’t (or can’t) choose the alternative of taxing those gains and having higher public debt to invest more in public infrastructure and services, R&D and business investment that would improve our productivity, real wages, health, housing affordability and climate emissions, and reduce poverty."
ain't right. Given the other factors you've laid out in this newsletter, it isn't so much voters that are responsible - last election, they voted overwhelmingly for an interventionist government committed to actively doing what was needful, and there are consistent if slim voter majorities in favour of climate action, capital gains and wealth taxes - it's the fiscal/economic system we've had entrenched in its current form since the 1980s. The Reserve Bank's remit is to keep inflation low, and it punishes measures that its economic orthodoxy thinks *might* be inflationary, no matter how needful they might be. State-owned enterprises, another relic of the 80s, are required to turn profits rather than invest in much-needed infrastructure - see Kiwi Rail and its sole goddamn track-checking machine. Treasury too is completely enslaved to neoliberal economic orthodoxy, with its constant warnings that much-required climate action is too expensive (ignoring, of course, the colossal expense of *not* taking action.) And powerful private interests, such the big overseas banks, corporations, and lobby groups, will (as you've carefully laid out) use their power to check any government that might do too many things that actually adapt to climate change or otherwise improve people's lives. It is, to cut a long story short, why we cannot have nice things: the apparatus of government is utterly aligned to a false economic orthodoxy so entrenched it's become invisible to the average voter.
The latest Labour government could have changed all that. It was absolutely its mandate to do so. But, out of cowardice and a desire to stay in power (for what?) it refused. This was not a failure that can be laid at the feet of selfish voters; it was a failure of governance.
Kia Ora Bernard once again a good analysis. I especially liked National falling into the trap by removing the $5 for prescriptions, child care assistance and probably school lunches. They are obviously targeting voters who wouldn’t vote for them anyway. So much for their mantra of looking after all New Zealanders. Yeah right.
I feel a bit sick when I sit here and listen to Grant Robertson and Megan Woods churning out their weasel words in reply to your challenging questions Bernard. They must spend quite a bit of time learning off pat how to answer a perfectly reasonable question with a spew of bunkum. And don't worry about the background echo, I was being exposed to ghastly music, half listening for ASB Fastnet Business to pick up the phone, and just about into my first hour. Amazing that they don't spend any of their profits hiring a couple more people to facilitate a timely phone answering service for customers.
Different subject: Why are renters, paying $150 to $240 for a service-less room in a multi-storeyed converted office building, exposed to danger on top of that rort, by having no fire-proofed walls to protect them from the actions of others? I also worry about the personal safety of the nurses sheltering there. Readers may not realise that there used to be two high rise dorms on the Wellington Hospital grounds (Nurses' Homes 2 & 3), until they were pulled down along with the historic brick Nurses' Home with the dining room (Nurses' Home 1). It certainly had fire escapes. We used them to sneak in and avoid the Matron on Duty from spotting us during the early hours of the morning. With hospitals, 50 years later, relying on imported nursing staff who have a great deal of trouble finding affordable accomodation while working shifts, it would seem a shame that these buildings were not retained. They hadn't been up that many years before they were demolished.
R/e Standard and Poor's and our credit rating - it's annoying anyone still listens to them after they stamped subprime mortgage backed securities with a AAA credit rating prior to the GFC...
Maybe if we had a financial system with more fiscal policy options than one giant button that reads “RUIN LIVES TO RESTRAIN INFLATION(?)” and one guy thumping the button repeatedly? Just a thought.
The future "contractionary" budgets are a plan only, we haven't yet seen Robertson and Labour deliver contractionary budgets (yes in the sense of not spending covid money, but not otherwise) and future plans continue to be a mirage in the distance, so one can only assume that their plans are to tax their way to surplus.
Their problem is that as the economy slows, so too will the GST, personal and corporate tax income. I don't believe Robertson will ever deliver a surplus, even if Labour retains the treasury benches at the election.
You talked about the need to borrow to invest in infrastructure, but we are borrowing even more to maintain general spend items, so room for infrastructure borrowing is tightening.
None of these forecasts or reactions should be surprising anymore.
Thanks Bernard, another salient appraisal of our “churn and burn” as you call it. Labour has shortened its leash to its banking masters, guaranteeing no meaningful investigation into their rapacious profits. As you note, a mild further rebuke from Orr and his acolytes in October will see Labour in the opposition benches. Poor things 🙄. LP voter who feel the least motivated to indulge in the coming election farce will have forgotten the lollipops handed out in Budget 23 by then. And rightly stay at home. One wonders how National and its ragtag cast of offspring can lose in October but I’m sure their bag of self-immolating tricks is not empty yet. 🥳
Is the RBNZ likely to increase interest rates based on theoretical forecasts for inflation or actual inflation?
This article rings really true for me, and also stings since I just took out a large mortgage. Might be time to reevaluate some things...
Actually, no, I'm not done. This quote:
"And it’s all because these median voters cannot kick their addiction to leveraged and tax-free gains on residential land, and therefore won’t (or can’t) choose the alternative of taxing those gains and having higher public debt to invest more in public infrastructure and services, R&D and business investment that would improve our productivity, real wages, health, housing affordability and climate emissions, and reduce poverty."
ain't right. Given the other factors you've laid out in this newsletter, it isn't so much voters that are responsible - last election, they voted overwhelmingly for an interventionist government committed to actively doing what was needful, and there are consistent if slim voter majorities in favour of climate action, capital gains and wealth taxes - it's the fiscal/economic system we've had entrenched in its current form since the 1980s. The Reserve Bank's remit is to keep inflation low, and it punishes measures that its economic orthodoxy thinks *might* be inflationary, no matter how needful they might be. State-owned enterprises, another relic of the 80s, are required to turn profits rather than invest in much-needed infrastructure - see Kiwi Rail and its sole goddamn track-checking machine. Treasury too is completely enslaved to neoliberal economic orthodoxy, with its constant warnings that much-required climate action is too expensive (ignoring, of course, the colossal expense of *not* taking action.) And powerful private interests, such the big overseas banks, corporations, and lobby groups, will (as you've carefully laid out) use their power to check any government that might do too many things that actually adapt to climate change or otherwise improve people's lives. It is, to cut a long story short, why we cannot have nice things: the apparatus of government is utterly aligned to a false economic orthodoxy so entrenched it's become invisible to the average voter.
The latest Labour government could have changed all that. It was absolutely its mandate to do so. But, out of cowardice and a desire to stay in power (for what?) it refused. This was not a failure that can be laid at the feet of selfish voters; it was a failure of governance.
Gary Dyall
Kia Ora Bernard once again a good analysis. I especially liked National falling into the trap by removing the $5 for prescriptions, child care assistance and probably school lunches. They are obviously targeting voters who wouldn’t vote for them anyway. So much for their mantra of looking after all New Zealanders. Yeah right.
I feel a bit sick when I sit here and listen to Grant Robertson and Megan Woods churning out their weasel words in reply to your challenging questions Bernard. They must spend quite a bit of time learning off pat how to answer a perfectly reasonable question with a spew of bunkum. And don't worry about the background echo, I was being exposed to ghastly music, half listening for ASB Fastnet Business to pick up the phone, and just about into my first hour. Amazing that they don't spend any of their profits hiring a couple more people to facilitate a timely phone answering service for customers.
Different subject: Why are renters, paying $150 to $240 for a service-less room in a multi-storeyed converted office building, exposed to danger on top of that rort, by having no fire-proofed walls to protect them from the actions of others? I also worry about the personal safety of the nurses sheltering there. Readers may not realise that there used to be two high rise dorms on the Wellington Hospital grounds (Nurses' Homes 2 & 3), until they were pulled down along with the historic brick Nurses' Home with the dining room (Nurses' Home 1). It certainly had fire escapes. We used them to sneak in and avoid the Matron on Duty from spotting us during the early hours of the morning. With hospitals, 50 years later, relying on imported nursing staff who have a great deal of trouble finding affordable accomodation while working shifts, it would seem a shame that these buildings were not retained. They hadn't been up that many years before they were demolished.
Pun forgiven! As a purveyor of finely crafted Dad jokes I enjoyed it!