Tag: John Key

What Rudd should be doing

Posted by – 8 March, 2009

At least there is someone on one side of the Tasman with their head screwed on right, from the WSJ:

These days, you have to travel far to find a national leader who is talking about market-based approaches to the global recession. All the way to the other side of the world.

“We don’t tell New Zealanders we can stop the global recession, because we can’t,” says Prime Minister John Key, leaning forward in his armchair at his office in the Beehive, the executive wing of New Zealand’s parliament. “What we do tell them is we can use this time to transform the economy to make us stronger so that when the world starts growing again we can be running faster than other countries we compete with.”

That idea — growing a nation out of recession by improving productivity — puts Mr. Key and his conservative National Party at odds with Washington, Tokyo and Canberra. Those capitals are rolling out billions of dollars in stimulus packages — with taxpayers’ money — to try to prop up growth. That’s “risky,” Mr. Key says. “You’ve saddled future generations with an enormous amount of debt that then they have to repay,” he explains. “There is actually a limit to what governments can do.”

Sanity somewhere in the world still exists.

Mr. Key says his biggest fear is rising inflation on the back of rising money supplies. “Economic theory will tell you that inflation is going to rise — and that inflation will be exported around the world. . . . In the short term, I’m not criticizing U.S. policy: I think inflation is probably the thing that’s going to be necessary to get them out of the current issue. [Federal Reserve Chairman Ben] Bernanke sort of signaled that. But longer term, inflation is cancerous to your economy.”

The market verdict on Rudd’s packages

Posted by – 19 February, 2009

As much as Rudd hates to admit it, Australia remains a market-based economy. So to gather an early judgement on Rudd’s $85 billion multiple ‘stimulus’ packages, we shouldn’t look to journalists or even economists, but the market. Below is a graph displaying percentage changes to the ASX 200 and NZ 50 over the past year. You’ll notice a growing divergence between the two indices around August and then in November, when the ASX 200 went south and the NZ 50 started to level out.

Chart

This movement is incredibly significant. It is the first time ever that the NZ 50 has out-performed the ASX 200:

Chart

So it seems the market’s verdict on the many packages announced over the last eight months is, they are bad for markets. Now remember that $85 billion could soon grow by another $60 million, with Rudd having lifted Commonwealth borrowing restrictions to $200 billion. Markets know this, but it has had no effect. The massive growth in Commonwealth debt will likely hurt markets by drawing capital away from stocks and into Federal bonds to fund programmes that have little to do with getting markets and the economy going north. Rudd’s changes to deposit insurance and his botched changes to short-selling regulations have also compounded the situation. The more consideration I give to the issue, the more I realise that Rudd has actually provided incentives for people not too invest in the markets. This will ultimately hurt the capacity of the economy to invest in capital, jobs and therefore future growth.

By contrast, New Zealand has adopted a set of measures which aim to support business, markets and therefore the economy. I’ve previously covered this article from the WSJ, but here it is again:

While the U.S., Australia and Japan spray cash in every direction to “stimulate” their economies, New Zealand has a novel idea: Why not grow one’s way out of recession?

….a package of regulatory reform and tax initiatives aimed at making it easier for companies to do business…provisions to allow companies to retain their taxable income for longer periods, reduce penalties on underpayments…simplified tax-deduction rules for business-related legal expenses…harder for small companies to be sued in certain courts…a series of income-tax cuts and eased unfair dismissal laws….streamline the Resource Management Act, an environmental protection statue that has blocked or slowed business developments across the country….

If Rudd cannot deliver in the next six months – as reflected by dramatically improved market performance – then we will be able to say with this measure alone, that his many packages have a been a definitive failure. It’s heading that way already.

Here’s an idea

Posted by – 6 February, 2009

From the WSJ:

While the U.S., Australia and Japan spray cash in every direction to “stimulate” their economies, New Zealand has a novel idea: Why not grow one’s way out of recession?

Prime Minister John Key declared yesterday that “during this global downturn, we can work to improve the performance of our economy relative to other countries, and we can emerge better off.” He then announced a package of regulatory reform and tax initiatives aimed at making it easier for companies to do business — and keep Kiwis employed. While the total benefit, at NZ$480 million ($246 million) is small, the positive message it sends to business is much greater.

The Witch is Dead!

Posted by – 8 November, 2008

Helen Clark is gone, replaced by the National Party and John Key as New Zealand Prime Minister. And the even better news is that the Maori Party will not hold the balance of power – so looks like their apartheid arrangement of reserved seats based on race will come to an end, as promised by Key. The final make up is as follows:

SEATS (% vote)
National 59 (45.4%)
Labour 43 (33.7%)
Green 8 (6.4%)
Act 5 (3.7%)
Maori 5 (2.2%)
Progressive 1 (0.9%)
United Future 1 (0.9%)
(likely coalition partners in bold)

How it works in NZ’s preferential system is, a party has to achieve at least 5 per cent of the vote or win a electoral seat to win a seat in parliament. NZ First (4.2%) and Progressives (0.9%) failed on both counts. So party time!