Archive for May, 2011

Election: John key in exuberant post-budget form

Have New Zealanders already made up their minds how they will vote in November?

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Ratings agencies pacified, but where’s the plan?

Govt cops Budget flak from the Left and Right: Phil Goff said the budget failed to deliver a “real plan”, while Roger Kerr could not find a “serious coherent economic plan”.

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UFB to deliver ‘step change’ in economic performance

The country now waits, as the NZ telecommunications market is transformed, to see if the economic benefits are as immense as suggested.

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Labour: Upbeat and shifting perspective

If about 500 delegates at Labour’s congress don’t think Phil Goff is the right man to lead the party into the election, they weren’t showing it.

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Economic debate: Is the Budget a “fiscal flop?”

Bill English gave us an easy way of benchmarking the Budget back in January. It would focus on savings and investment with none of the usual electioneering sweeteners, he said then. He was talking about national savings (or the serious shortage of them) and he was concerned about the threat this posed to our economic […]

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Minimum wage row pits unions against employers

A good old fashioned “them and us” row is raging over Labour’s pledge to raise the minimum wage to $15 an hour. It’s a $2 hike, which unions say employers can afford and the business lobby says they can’t. So does the Govt, citing Labour Department estimates 6000 young people would be thrown onto the […]

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Budget cements National in the centre

Moderate Budget contrasts with the harsh straitjacket Don Brash wants to clamp on the economy and the “let’s-spend-more” philosophy of Labour.

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Labour searching for issues to hang campaign on

Party’s congress maps out election strategies as Goff says there’s a belief Labour can win the election.

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Public service in the firing line

Key gives government departments cost-cutting targets, while the Pubic Service Association says they shouldn’t be ‘thrown on the scrapheap’.

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Economic debate: How do we make people save?

Hefty national debt makes us vulnerable, and increasing national savings starts by increasing household savings.

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Pretigious diplomatic properties may be sold

Two of NZ’s prestigious diplomatic properties – NZ House in London and the NZ Embassy and residence in Paris – may be sold. Foreign Minister Murray McCully has indicated disposal is under study as part of the development of the ministry’s long term property strategy. The pattern of NZ’s diplomatic activity has changed radically in […]

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Govt monitors Fiji-Tonga spat

The Govt is taking a cautious approach to the dispute between Tonga and Fiji and John Key says he doesn’t intend doing anything which could inflame a delicate situation. Fiji has issued a warrant for former military chief of staff Lieut-Col Ratu Tevita Uluilakeba Mara, who fled to Tonga after being charged with sedition and […]

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Budget priority: Avoid a credit rating downgrade

Standard and Poor’s and Fitch have already adopted a negative outlook while Moody’s is biding its time until after the Budget.

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By-election: Three-way fight in Te Tai Tokerau

Labour enters the fray and puts up Kelvin Davis as a challenger. If Hone Harawira loses, he’s history – and so is the Mana party.

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MMP set to survive referendum

MMP-proponent says ‘let’s take a fresh look at how it is working but not throw the baby out with the bathwater’.

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Bright future for trade with India

Tripling in trade from $1bn to $3bn by 2014 forecast after promising talks on bilateral free trade agreement.

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Offenders pay in victim support shake-up

Justice Minister Simon Power is changing victim support rules to give families of victims of serious crime more government assistance. They’re currently ineligible for the support given to the families of murder victims. Power says about 100 people are killed each year as the result of a criminal act which doesn’t lead to homicide charges […]

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Budget Preview

PricewaterhouseCoopers Chairman John Shewan has been looking at some other potential moves the Government might make in next weeks budget. Balancing The KiwiSaver Books The big challenge facing the Govt with KiwiSaver is how far it can reduce the burgeoning fiscal cost of the scheme without breaking its 2008 election promise to retain the “sweetener” […]

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Play of the week: Spinning yourself silly

Pakistani intelligence say they’re “embarrassed” they failed to notice Osama bin Laden was living in a fairly large compound in the middle of the country. In other news, truckies say they’re embarrassed they hadn’t noticed that long black ashfelty thing with the white stripes in the middle. It wasn’t the only silly thing we’ve been […]

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Winners and losers from the Brash reincarnation

Don Brash’s breathtaking political reincarnation sent an initial ripple of alarm through National’s backbench, but top party strategists took a more rational view of the impact Brash might have on the election outcome.

They believe instead of crashing to oblivion ACT will now survive and the biggest loser as a result of ACT taking up Brash themes (such as “one-law-for-all,” with its appeal to the red-neck element in the population) will be Winston Peters.

ACT’s revival ensures John Key will be able to campaign hard on the centre ground of NZ politics (the subtext of which is he won’t be held hostage by minority groups, either on the right or the left). This may be crucial in 2011, when as polls show Phil Goff will be able to talk of forming a coalition only with the help of not just the Greens, but the Maori Party, NZ First and possibly Hone Harawira’s Mana Party.

While Brash has talked of lifting ACT’s support to 10% or above, those who have previously worked with Brash as a leader note his tendency to be accident prone, and believe if he gets above the 5% threshold, he will have achieved a minor miracle.

Epsom could provide a safety net if ACT doesn’t make the threshold. Brash and his backers are almost certainly misjudging the mood of the bulk of voters who have no appetite for the kind of harsh economic medicine of the type administered by Ruth Richardson and before her, Sir Roger Douglas.

Meanwhile, within ACT’s Parliamentary group, there seems to be unalloyed joy Parliamentary careers heading for the dustbin may be given a new lease of life. How else can the easy acceptance of Brash’s commands be explained?

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Baby boomers a ‘benefit not a burden’

A Govt report on NZ’s aging population, released this week, says in less than 20 years more than a million people will be over 65 compared with about 560,000 today. And in 40 years, one in four will be over 65 compared with one in eight today.

Senior Citizens Minister John Carter says aging baby boomers – those born between 1946 and 1964 – should be seen as an economic benefit rather than a burden. Carter says “they want to stay active and keep working. Flexible work options could drive job growth and help us respond to projected skill and labour shortages.”

The report, published by the Ministry of Social Development, says over the next 40 years older people will become one of the most significant consumer groups in the country. Its findings show their earnings will increase from just over $1bn now to about $10bn and the taxes they pay will grow from about $200m now to about $1.8bn. And they will be spending much more – up from about $11bn now to more than $45bn.

Carter says “we need to think outside the square to maximise the opportunities which come with an ageing population that is like no other before it…baby boomers will be healthier, better educated and have more spending power than any other generation reaching 65 in NZ’s history.”

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Key buoyed by French rendez-vous

John Key returned home from his first major European diplomatic foray buoyed by the reception he received.

In Paris, he secured top-level briefings and discussions with President Nicolas Sarkozy, Prime Minister Francois Fillon, Economics Minister Christine Lagarde and Foreign Minister Alain Juppé. Topics ranged from strategic issues – France is employing
muscular diplomacy in Cote D’Ivoire and Libya – to Afghanistan where France has a sizable presence, global economic concerns, Eurozone, trade and climate change issues.

Key was keen to hear France’s experience in attempting to broker an accord among G20 members on economic stabilisation and currency stability. They also exchanged views on Pacific issues including the future of France’s territories.

NZ’s relations with France are currently on a high and observers note the priority Paris accorded the visit by squeezing all his calls into one day at a time when EU issues are pressing.

The day before the visit, President Sarkozy flew to Rome at short notice to defuse a row with President Berlusconi after Italy decided, unilaterally, to issue temporary migrant visas to thousands of Tunisian refugees who promptly began flooding across southern Europe.

Key was also able to reinforce the high standing enjoyed NZ in the Somme Valley where the NZ Army fought in World War I by attending Anzac Day commemorations at Le Quesnoy and Longueval. Expressions of sympathy for the Christchurch earthquake featured prominently in all his calls.

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TTP agreement could damage Pharmac

Free trade opponents are claiming the Govt’s drug buying agency, Pharmac, could be severely damaged by the Trans Pacific Partnership FTA which is under negotiation.

The Greens say the US pharmaceutical lobby is pushing hard for changes to the rules which would give companies more access to the NZ drugs market and force Pharmac to buy their products.

Pharmac buys cheap generic drugs when it can and Green’s trade spokesman Kennedy Graham says “forcing Pharmac to buy a greater range of pharmaceuticals will increase the health bill to all NZers and means costs are likely to rise for consumers…the only winner will be the US pharmaceutical companies.”

Graham says most Kiwis think free trade deals are about milk and butter, but the TPP is really about investment rights for foreign companies.

Anti-free trade campaigner Jane Kelsey says drug lobby submissions to the US Govt negotiators carry “vitriolic attacks” on Pharmac which is described as “an egregious example of a lack of transparency and due process in pharmaceutical pricing and reimbursement decisions.”

Kelsey says submissions even imply NZ’s low OECD ranking for avoidable death rates can be laid at Pharmac’s door.

The multilateral FTA, about to go into a second round of negotiations, aims to integrate the economies of the Asia-Pacific. The existing TPP, which came into force in 2006, links Brunei, Chile, NZ and Singapore. Five more countries – Australia, Malaysia, Peru, the US and Vietnam – are negotiating to join it.

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Government department round-up

The State Services Commission is being kept busy as the exodus of public service CEOs continues unabated. It is currently actively recruiting for people to head the Ministry of Education, Ministry of Social Development, Canterbury Earthquake Recovery Authority (where a deputy State Service Commissioner is currently filling the gap) and the Customs Service. There are […]

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Budget message: NZ doesn’t need Brash

This year’s budget, already billed as a huge economic challenge for the National-led coalition, is now presenting itself as an equally critical political test for John Key. Will it be tough enough to blunt the threat of Don Brash hiving off National voters who believe Key has strayed too far from fiscal orthodoxy?

Given this year’s fiscal deficit will be a “bloody monster” as one Minister put it this week, Brash’s call for harsh fiscal measures resonates with a crucial segment of National’s support.

But if the budget shows Key has “hardened up,” Brash’s appeal (either as leader of a new right-wing party, or through ACT) to right-wingers will be negated.

Finance Minister Bill English has redoubled his effort to lay out a fiscal track which brings the deficit under control within 4 to 5 years. This points to measures being announced in the budget for which the Govt will seek a mandate in November, and will come into effect if the Govt is re-elected.

Despite uncertainty stemming from weak growth in the economy in recent months, which has made forecasting revenue flows hazardous, the central scenario in the budget is for economic growth to quicken later this year and become more solid next year.

The budget will also show how the drive for public sector savings has been remarkably successful, with hundreds of millions being carved off the expenditure which had been earmarked in future years.

So the message out of the budget to National’s right-wing will be “the country doesn’t need Don Brash.”

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Play of the week: A Brash move

It takes a certain cheek to demand the leadership of a political party when you’re actually a member of another political party. To do so publicly is even cheekier. In fact, it takes the definition of cheek to a whole new level.

But Don Brash has chalked up a historic first this week. Still a National Party member, his public bid for the ACT Party leadership broke National’s rules, which state no party member can be a member of another political party. He breaks ACT’s rules as well, which only allow for a leader outside Parliament if the party has less than three MPs.

Breaking the rules of two parties at the same time is a rare and noteworthy feat, but Brash did not seem worried. One ACT board member grumbled Brash doesn’t seem to think the rules apply to him. The board member, a Rodney Hide supporter, asked
“what happened to one law for all?”

Brash has a penchant for clumsy coups – his takeover of National from Bill English in 2003 was similarly clumsy, similarly public, and so knife-edge Brash himself did not think he had the numbers when he went into the caucus room.

Brash has talked much of Hide’s “tainted brand” – something which is unarguably true, but the Brash brand itself is not without its blemish or three.

The manner of the coup adds a blotch. Even if successful, it is going to have a major knock-on effect.

Labour will have its bogeyman – Brash is a hate figure on the Left in a way which John Key, or even Rodney Hide, are not. This will help Labour get out some voters who stayed at home in 2008. It may have a similar effect on the Maori Party vote.

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Labour ‘not relevant’ in current climate

Longtime Labour acolyte Brian Edwards is the latest in a line of commentators attempting to diagnose why voters have left the phone off the hook to Phil Goff. Edwards notes Labour’s chances of winning under Goff are being written off even by many of Labour’s own supporters.

He lists 3 strikes against Goff: he’s been around too long, lacks the common touch, and doesn’t have any personal charisma. Like many who have voted for Labour all their lives, Edwards doesn’t see the real problem for Labour, and for Goff: they don’t have any relevance in 21st century NZ.

The breakdown in one opinion poll, shows only 17% of males polled say they would vote for Labour, while 67% favour National. Labour’s mix of trade unionists, gays, teachers and feminists, while it speaks of the diversified society NZ has become, doesn’t appeal to the hard-working, Kiwi families which are the core of that society.

Labour is failing to communicate a relevant message in the current political climate. The country has moved on from the Helen Clark era during which, to many NZers, there was too great an emphasis on policies related to social justice and feminism, and too little on NZ paying its way in the world.

Finance Minister Bill English reckons there hasn’t been a time in NZ’s recent history when the need for change in how the country is run has been more widely understood by the public. Get spending down, cut out waste, make the country more efficient, lift exports, start paying off debt: it’s a simple plan which every household understands.

In particular the plan resonates with male voters.

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Economic debate: Is the Rugby World Cup really valuable?

ANZ economists (they are not alone) expect consumer spending to flatten as people save more than they earn over the next few months, but say the economy may “turn on a dime” later in the year. The Rugby World Cup in September is among the stimulatory factors they identify.

They should have a better feel for the strength of this stimulation in June when they get the results from an ANZ survey to gauge the potential impact of the RWC on privately-owned businesses and seek their views on economic activity and plans for growth ahead of the cup.

Junk Figures? RWC boss Martin Snedden couldn’t wait. He has disparaged analyses which cast doubts on the tournament’s economic worth to NZ. The NZ Herald estimates more than $1.2bn will be spent to host the event but the RBNZ expects it to score just $700m in direct economic returns. Auckland University economics professor Tim Hazledine is among several
economists who contend the benefits will be much less, if normal tourism spending for the period is discounted. All up, he reckons on around $150m of money-in-the-pocket benefits to NZ. Snedden dismisses this as “a piece of junk” and challenges the way several costs and income streams have been analysed. Hard data to support his rebuff would be helpful.

Stadium Case Weak. Much of the expense has gone to stadium upgrades costing $555m. But a Business Roundtable report in 2006 found the case for stadium and event subsidies is “weak;” its evidence suggests Govt support for stadiums and events is unlikely to contribute to economic growth. Andrew Zimbalist, a professor of economics in Massachusetts, has said the impact of stadiums on output or employment can be negative, because families and individuals who pay to attend sports events spend less on other forms of entertainment than they would have done in the absence of a stadium.

Economic Speculation. Rugby World Cup Minister Murray McCully says the event will be “way bigger than anything we’ve ever done before.” But he seems to be kicking a speculative high up-and-under when he says success is a matter of convincing more tourists to come here, convincing more businesses to do business with NZ companies and entering partnerships with them. He is counting on “those legacy values.” And Bill Birch – a former National Finance and Energy Minister some years back – would be able to advise McCully on the fiscal folly of thinking big.

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