National's Financial Fantasy Land | The Jackal

30 Aug 2011

National's Financial Fantasy Land

The National party made a press release today concerning an increase to the estimated liability for the Canterbury earthquakes.

Despite the huge increase of around $3.1 billion, Bill English is down playing any negative impact to the government's growing debt crisis, saying that they still expect to return to surplus by 2014/15 and will keep net debt below 30% of GDP. It's really just more National party bullshit!

The official government debt was 9.4% of GDP in Sept 2008 under Labour. It was 18.2% in March this year. Effectively National's doubled the government's debt as a percentage of GDP in two and a half years. Ignoring that 100% increase, National is all too prepared to reside in their rhetoric:
"Despite the increased liability, which will have a one-off impact on the Government's operating balance for the 2010/11 year, the Government remains on track to meet Budget forecasts of a return to surplus in 2014/15 and to keep net debt below 30 per cent of GDP," Mr English says.
National's predictions are akin to Bill English cutting open a chicken and looking at the entrails. Not only has National got the country in hock by $17.6 billion dollars, they've failed to produce even one job of the 170,000 they predicted in their first budget. The economy has stalled and National have no answers apart from cutting deeper.

Believing that New Zealand will return to surplus and net debt will be kept below 30% of GDP under a National government with these additional costs and no plan, is akin to believing the earth is the centre of the universe. In my opinion, the three budget's National dreamed up should be classified in the fantasy section of the library, or better yet chucked in the rubbish.
"At the time of the Budget, Treasury put the total earthquake damage bill – to all property owners and insurers - at $15 billion, or about 8 per cent of GDP, making it the worst natural disaster in recent memory to hit a developed nation – relative to the size of its economy. The Government has asked Treasury to update this estimate based on new information available since the Budget," Mr English says.
$3.1 billion dollars doesn't just magically appear out of thin air. So if there's not going to be increased borrowing, which would automatically make the Budget 2011 predictions incorrect, where is the money coming from?

National says that the increased EQC liability will be partially offset by higher than forecast tax revenue and lower than forecast costs in other areas. However they're not forthcoming about what additional taxes have been gained or where cuts to social spending are greater than forecast. It stands to reason then that National's projected tax take and savings from budget cuts appears to be completely inaccurate.

For Bill English to claim there will be no change to the budgets forecast and net debt will be kept below 30% of GDP is simply bad management, especially considering the Government hasn't even received the Treasury's updated estimates yet.

National's press release is simply more feel good propaganda without any substance from the so called Minister of Finance, Bill English. To make matters worse, David Farrar then entirely contradicts National's press release by writing:
Basically this means an extra $3b to $4b of borrowing. There is no choice about this – it is just what the costs are.
This is just lazy blogging. Basically Farrar is an idiot and hasn't even bothered reading National's press release properly before commenting. His pea brain automatically turns to using the information to attack Labour, who to date haven't made a statement regarding the increased costs. He goes on to write:
But it is worth reflecting that even by their own calculations, Labour’s tax plans require greater Government borrowing for at least the next seven years. And that is before we even get to their spending plans. Will these extra costs make Labour reconsider their policy of tax cuts and boosting benefits?
Well they sure as hell aren't lying about the impact of additional costs like Bill English. Here's a run down of Labours proposed policies. Looks like they actually have a plan, and one that doesn't involve looking at entrails.