Everything I am hearing anecdotally within the economy is pretty disastrous.
The neoliberal economic House of Cards that NZ has been built upon over the last 40 years is imploding from never ending insurance rate rises generated by worsening catastrophic climate change events, $3litre petrol and an unelected Treasury hellbent on crashing the economy to save the economy.
We have under estimated how poor many Kiwis actually are. Having a million dollar debt for a house worth $300k isn’t the recipe for wealth we all told ourselves it would be.
Hooton’s column highlights how likely a Liz Truss run on economy will occur in wake of Austerity Budget in 3 weeks…
Matthew Hooton column: Can Act support a Budget that borrows and spends more than Labour?
Government debt-servicing costs are now higher than expected even when Finance Minister Nicola Willis produced her Budget Policy Statement in March.
Lenders are now demanding yields of 5 per cent on 10-year government bonds, up from 4.5 per cent at the beginning of the year.
But Willis’ cost of borrowing is going up by much more than that.
On Wednesday week, for example, $14 billion of Covid-era government bonds mature, which were paying a coupon rate of just 0.5 per cent, or $70 million a year.
Let’s say they were refinanced at 5 per cent, not unreasonable given that’s the 10-year government bond yield, then the cost of servicing that $14b will leap tenfold, costing taxpayers another $630m a year.
It then gets worse.
Between now and the next election, Willis has another $15.1b of bonds maturing at 2.75 per cent, $4b at 2 per cent and $9.3b at 0.5 per cent.
Even if Willis ran balanced budgets next year and every year in the future – which she had explicitly ruled out until 2027/28 at the earliest – the cost of servicing existing debt will rise rapidly for the rest of this decade.
According to Treasury’s now too-optimistic Half-Year Economic and Fiscal Update in December, debt-servicing costs were expected to rise from $6.2b last year to $11.5b in 2027/28.
Those numbers will be worse when the Budget comes out in four weeks. Willis needs to borrow more just to pay the interest.
Unfortunately, the Government’s cost-cutting programme probably won’t generate much more than a billion a year, and much of that – according to the Prime Minister – will now be spent rather than used to pay off debt or fund tax cuts.
Ministers are demanding extra spending for health, education, housing, law and order and vulnerable children, and the Prime Minister keeps confirming those areas will indeed receive more funding next year than ever before.
On Wednesday, Foreign Minister Winston Peters joined in, saying he wants the Ministry of Foreign Affairs and Trade’s budget increased “massively”.
…once the market realises Nicola is going to borrow $15b for tax cuts, there will be a run against our market as the speculators bet against the Government being able to get away with borrowing for tax cuts.
That’s when ACT will come in and tell us we need to saw huge parts of the State off to cope with the crisis they have manufactured with their free market ideology.
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*WARNING* AUSTERITY IS HERE
*WARNING* AUSTERITY IS HERE
For the middle classes. Austerity is what the poor have called life for decades.
Yip….it’s pretty that Clusterfuxon, Can’t Seymore than past the end of his nose and On the Wane Winston , commonly known around the world as ‘The Coalition of Chaos’ are the Lizz Trusses of the South Pacific…
I think in years to come they will be used in Universities as a case study on what not to do when running a country.
How they Took N.Z. from Hero to Zero in 6 months….
That’ll be a bestseller
NZ Labour needs to issue a grovelling apology, fully abandon Rogernomics, and form an alliance with Greens and Te Pāti Māori.
Even with low membership density–thanks to Natzos in 1991–unions need to take strategic direct action, involve families, non members and communities, and help kneecap this CoC vandal Govt.
Yes 1000% Tiger Mountain. It obvious that the coalition of chaos is planning to bring the private sector into governing by cutting government spending off at it knees so government no longer functions.
Yes Labour started the downhill trajectory with neoliberalism, but National and ACT have continued the insanity. Even that nut job Winston doesn’t pretend to support this ideology, despite who he is currently “in bed with”. In fact, the National government of the early 1990 and Ruth Richardson’s “mother of all budgets” ended up being the nightmare of all budgets (if you were low income, dare to be unemployed, not supportive of the neoliberal jabberwocky). At least Labour (once they realised the damage of neoliberalism) jettisoned Douglas and his mate Richard Prebble. Both ended up working with the ACT party which is not surprising as they are the neoliberal party in NZ – although National qualify as neoliberal lite and Labour as neoliberal slightly lighter than National.
No wonder Cluxon was trumpeting on his overseas junket that NZ is “now open for business”.
He obviously meant the Fire Sale of our remaining assets when they enact this economic harikari.
Traitorous scum.
Now I know Winston wants to increase the MFAT budget to use it to pay gangs in the Solomon Islands to attack Chinese people… but could we just NOT DO THAT?
I’m glad Martyn has highlighted the Hooten column. It spells out the costs of holding lots of extra Government debt as interest rates go up.
And how that ties the hands of whoever is in Government.
Or just don’t give f’ing tax cuts. It is non sensical to proceed with them.
Or accept an increase to your own ministerial salaries whilst axing thousands of others jobs.
It’s crazy. The OECD has warned the government of NZ not to borrow to pay for tax cuts. We will crash and burn like Lizz Truss did to Britain, with exactly the same policies. How can this be allowed to happen.
Sounds to me like the kind of crisis the hard neoliberals like Seymour love to have. Every time we have faced these situations in the past , 1984 , 1990 , 2008 its been followed by the call to tighten the belt , cut back has hard as you can with all public services and protect the wealthy of which now there are a large number with policies to protect their entitled position because only protected wealthy people can help turn the economy around and make us a wealthier country apparently.
Well a wealthy country for them !
” All of that is secondary to having a useful bogeyman to blame for the ongoing failures of a political and economic system that prioritises accumulation of wealth over the lives and livelihoods of people.
No amount of deflection or obfuscation, however, can change the fact that successive National and Labour governments have offered no transformative political vision or programme, settling instead for piecemeal tinkering around the edges and jockeying for the moral high ground in identity politics.
” POLITIK understands from reliable and well-placed Beehive sources that there is a growing realisation that the slowdown, along with the proposed tax cuts, will now severely restrict the choices open to Willis and Ministers as they consider next year’s departmental budgets. Those budgets are under intense pressure as the Government unveils more unfunded future commitments made by Labour and areas of neglect within departments. But National and ACT cannot back off the tax cuts if they want to maintain their political credibility. Thus, they are trapped into either making deeper spending cuts than they planned or conceding that a larger deficit might have to be tolerated. ”
Continue reading at https://www.politik.co.nz/why-willis-is-talking-the-economy-down/ | Politik
Willis will be regretting not implementing her foreign buyers tax to help pay for tax cuts , bribes and the hugely irresponsible ( LTIWC ) landlord tax incentive wealth creation scheme and a generous rebate because they need all the help they can get.
“Today, CTU economist Craig Renney releases a report concluding the lost revenue cost of accelerating the restoration of interest deductibility will be about $900 million for the new Government – that’s on top of National’s original $2.1b costings, and a new hole in its tax package. ”
https://newsroom.co.nz/2023/11/29/govt-plans-retrospective-cut-in-taxes-on-landlords/
Reagans playbook as history repeats again and again.
“Without fail these approaches lead to massive upwards transfers of wealth and large gaps between the wealthy and the working class.
This in turn increases disparities across the board, including in health and mental health services, and leads to increased poverty and precarity among the already at-risk.
If history repeats itself, this is what New Zealand has coming under the new coalition government.
https://newsroom.co.nz/2024/02/27/luxon-uses-reagans-playbook-in-blaming-welfare-recipients/
I said they are coming for us before the last general election with their friendly faces and the knife hidden up their sleeve.
Cluxons Natzo are turning our country into a banana republic
Complete rubbish stephen that’s where the irresponsible,financially illiterate,reckless vandals called the Labour Government had us on a fast track to.
” On Wednesday week, for example, $14 billion of Covid-era government bonds mature, which were paying a coupon rate of just 0.5 per cent, or $70 million a year.
Let’s say they were refinanced at 5 per cent, not unreasonable given that’s the 10-year government bond yield, then the cost of servicing that $14b will leap tenfold, costing taxpayers another $630m a year. ”
We’re are right now paying .05% rate on our bonds not .005 as you mistakenly claim! So there’s no jump from 70mil a year to 700mil a year interest payments!? We are already paying 700 mill!
What??
If only more people could be honest with themselves and admit we are in a financial mess legacy the recent Labour Government.
NZ’s economy is a mere footnote in the US budget. If you want an economy that is borrowing and spending to burn the planet in another world war or ecoloogical collapse, the US is the model, and all of its white supremacist settler state allies are trapped in this decline and fall.
The left needs to be talking not of capital gains, but capital expropriation. Capital is nothing more than the accumulated labour time of those who produce the wealth, as opposed to the parasites who live off our labour and bet on the assets we produce.
As the capitalist economy implodes those who labour to live have to be prepared to take over what wealth is lefrt and allocate these resources to our species survival.