Not a great budget for sustainability
On the plus side, our pressure on public transport has had some effect with the electrification of the Auckland rail network proceeding and Wellington getting investment in rail. It is however still the case that state highways get all the money they need from central govt (with a bonus of $145m in the budget as encouragement for cost overruns by the road builders) while public transport has to raise money from regional fuel taxes.
And we got some investments in energy efficiency and conservation.
However, the big ticket item of business tax cuts rewards sustainable and unsustainable business equally. The big business tax cut is not linked to sustainability measures at all. And a great deal of it will simply flow overseas in increased dividends for foreign companies. How that helps the economy or sustainability is a mystery.
The KiwiSaver bonus is not all good either I reckon. It’s effect on overall saving is marginal as the govt expenditure on the incentives is expected to be $1.2b while the extra going into the funds is expected to be $1.3b. So overall makes no difference to national savings rate as trasnfers potential govt savings to private savings. And of course it is regressive because the welathier you are the more you benefit from the scheme. As Susan St. John from Auckland Uni put it, it will widen the gap between the poor and the rich in old age.
May 17th, 2007 at 11:33 pm
Russell
You are dangerously wrong to claim that state highways are getting all the money they need from central government. Labour’s contempt for human life means less money is spent on highway safety (see WHO global report
http://www.who.int/world-health-day/2004/infomaterials/world_report/en /
than on public transport, and less is spent on seismic retrofits than on walking and cycling. And we all know that almost nothing is spent on walking and cycling.
I’m not sure where you got the figure of $m145 for the bonus. The budget says $m85. Perhaps $m145 is the Crown’s contribution to the NLTP, on top of the approx. $b2.1 appropriated by SOLE AUTHORITY of s9(1) of the Land Transport Management Act. With the looming peak oil crisis we can’t afford to forget where LTNZ is currently getting 96% of it’s money from, otherwise the bad news for motorists will be even worse news for public transport.
I’m really surprised that the budget can include such a blatant abuse of the Land Transport Fund to buy votes from minor party leaders and the news media just ignores the ethical issues.
Frogbloggers can find Vote Transport at
http://www.treasury.govt.nz/budget2007/estimates/pdfs/est07trans.pdf
Just bear in mind that the revenue figure doen’t include petrol tax, based on previous NLTPs this adds approx $1billion to Transport revenues. The NLTP also funds $m277 of Vote Police, for traffic policing.
May 17th, 2007 at 11:46 pm
Russell
The bonus you mention is $85 mil not $145. Maybe $145 mil is the Crown’s contribution to Land Transport, its hard to tell since the budget never identifies the amount of petrol tax collected, we have to wait for the NLTP to be published to get that info.
The looming peak oil crisis means we can’t afford to ignore where the NLTP actually gets its money from. Total Crown Revenue and Receipts (from road users, excluding revenue from petrol but including refunds of petrol tax for off toad use) $1.067 billion. The 2005/06 NLTP includes petrol tax revenues of $748 mil. Therefore approx 1.8 billion has been appropriated to Land Transport NZ by SOLE AUTHORITY of s9(1) of the Land Transport Management Act 2003.
A further amount of approx 100 million has been appropriated by the government’s budget today, ie the Crown’s contribution amounts to less than 5 cents for every dollar contributed by road users.
Here are the actual allocations so everyone can see what Labour’s priorities are, and who’s support they are buying with your cars and buses petrol taxes, RUCs and rego fees. (Note: highways account for 10% of sealed road length and 50% of traffic) And I think there are 2km of highways for every km of railway, which is not at all obvious from these allocations.
Auckland Land Transport 50
ALPURT B2 93
Bay of Plenty Transport 10
Tauranga Harbour Link Project 50
Waikato Land Transport 14
Waikato Rail Funding 3
Wellington Land Transport 40
Wellington Land Transport (Western
Corridor) 20
Maintenance of Local Roads 182
Maintenance of State Highways 209
Management of Funding
Allocation System 70
New and Improved Infrastructure
for Local Roads 324
Passenger Transport Services 248
Promotion, Information and Education 33
Rail and Sea Freight 2
Regional Land Transport 210
Transport Demand Management, and
Walking and Cycling 28
New Zealand Railways Corporation-
Public Policy Projects 3
New and Improved
Infrastructure for State Highways 231
State Highway Construction
Programme Guarantee 85
New Zealand Railway Corporation
Capital Injection 0.5
State Highway
May 18th, 2007 at 12:59 am
Russell,
Sorry, thought the first post had disappered into the electronic never-never.
May 18th, 2007 at 9:50 am
What is really sad about this Fudget is there is nothing for the people that need it most, the poor. People struggling to survive on low wages who can’t afford to contribute to kiwi-saver, watch as govt gives tax cuts to their bosses, knowing that payrises wont be forthcoming because of employer contributions to kiwisaver. They can expect fuel prices to rise from 5c-10c litre, and electricity prices will rise as demand increases to power trains. House prices continue to rise at $7k/month and not a penny to alleviate the shortage of state housing. Only thing Red about this was the cover.
May 18th, 2007 at 10:42 am
Poorer people are also getting poorer at the other end> infill housing, increased traffic, quality of life, cheap living in our beautiful scenic spots.
jh
May 18th, 2007 at 12:35 pm
Brethren Farmer said: What is really sad about this Fudget is there is nothing for the people that need it most, the poor. People struggling to survive on low wages who can’t afford to contribute to kiwi-saver…
Indeed, another very good reason to vote Green! A Green vote is a vote for increasing the minimum wage (which will have relativity effects on lower-end wages generally) and a vote for the first $5000 of your personal income to be tax-free.
Another concern in the Budget is that the employer contributions for Kiwisaver will create cash problems for many community groups. Most of these are unable to pay market rates to staff now, so it will be even more difficult when the contributions start. These groups will not get the savings from company tax announced in the Budget because most have charitable status so don’t pay tax anyway. They depend on grants from Lottery or charitable trusts together with some government contracts for their income, so don’t have many options to increase their income either.
May 18th, 2007 at 3:24 pm
Toad, a hypothetical question if next years election resulted in % of MPs as follows National 49%, Labour 36%, Greens 10%, Maori 5%. Would the Greens consider forming a Govt with National or with Labour and Maori parties?
May 18th, 2007 at 3:34 pm
“People struggling to survive on low wages who can’t afford to contribute to kiwi-saver, watch as govt gives tax cuts to their bosses, knowing that payrises wont be forthcoming because of employer contributions to kiwisaver. ”
While this may possibly happen, when people start a new job they will be automatically enrolled, and would have to choose to opt out of KS. If they do that they will lose the employer contribution immediately, so presumably they won’t. You would have to be mad to turn down free money.
As for the labour market, there are a lot of jobs out there currently. Fulltime workers now get 4 weeks leave, the minimum wage has been raised, and the opportunity for upskilling has never been better. The lowest unemployment rate for a generation IIRC.
With fuel, the international oil market is responsible for the current high prices- and NZ still has some of the cheapest fuel in the OECD. If this levy can actually improve the PT network that will benefit the poor immensely. There are also plenty of cheap efficient smaller cars around, even though NZers now much prefer their large vehicles.
The reason for expensive electricity is the deregulation of the 1990s, which led to massive profiteering by National’s mates. Trains use a laughably small amount by any measure.
House prices I 100% agree with. They should have abolished the tax loophole that lets you claim a rental against your income, as this is now totally distorting the economy. However a housing market crash is bad for election chances presumably!
May 18th, 2007 at 3:44 pm
Think that one might depend on which Party or Parties the Greens could persuade to implement the most Green policy.
Think it’s fair to say that at the moment the Maori Party are closer to the Greens policywise (although there are significant differences, like work-for-dole) than either Labour and National are.
And Labour and National are much closer to each other than either are to the Greens. The scariest prospect is a Labour-National Grand Coalition with the Greens and the Maori Party being the Opposition. Would be great for building support for both the Green and Maori Parties, but some of us would like a chance to prove that our policies will work before there’s even more ecological and societal degradation.
May 18th, 2007 at 3:48 pm
uk-kiwi While this may possibly happen, when people start a new job they will be automatically enrolled, and would have to choose to opt out of KS. If they do that they will lose the employer contribution immediately, so presumably they won’t. You would have to be mad to turn down free money.
Or extremely poor, even if your new cleaning job did pay an extra 50c/hr I think you would have no choice but opt-out. $20/week is a huge amount if you are on the bread-line.
May 18th, 2007 at 3:48 pm
jh
Can you clarify two things.
How does increased traffic make poorer people poorer? Do you mean the only affordable housing is on the busiest roads, or that increased traffic hurts those who cant afford cars?
How does infill housing make poorer people poorer? Increased population density reduces infrastucture costs per capita. Infill housing helps to stop the urban sprawl that creates suburbs instead of communities and makes cars a daily need rather than a weekend luxury. Infill housing is one important step in reversing the appalling housing policies of the last century. Terraced housing like in Sydney or Chelsea would be a good second step. As long as we avoid “concrete jungles” high density makes the poor richer not poorer, at least in quality of life if not in material wealth.
May 18th, 2007 at 4:04 pm
Good answer Toad, a Nat-Lab Govt would rattle a few cages of the traditionalist type (I always vote..) voters.
May 18th, 2007 at 4:11 pm
uk-kiwi
I agree with everything you said except the simplistic reason for expensive electricity. You overlook the fact that during the 80s and 90s it was possible to add extra generating capacity very cheaply by replacing worn-out turbines and generators with newer more efficient designs. This was done when the old equipment needed overhaulling so it was very cost-effective. In fact the Lake Colleridge power station now generates twice as much power from the same amount of water using half as many turbines.
There are also a number of other reasons for higher power prices including the RMA, and resistance to damning every river in the country. And, of course there has been profit gouging. But it isnt the only reason and it may not even be the main reason.
May 18th, 2007 at 4:16 pm
Russell: I thought you’d be pleased. The government has just effectively revived the carbon tax, at up to triple the rate of the original, with up to half the revenue recycled into public transport. IMHO that’s a pretty big win on the climate change front, and one which plugs a big hole in current policy.
May 18th, 2007 at 5:59 pm
Kevyn Says:
May 18th, 2007 at 3:48 pm
jh
Can you clarify two things.
How does increased traffic make poorer people poorer?
——–
I mean, since Christchurch is over run with cars and only the bravest people cycle, the noise, the visual polution… We are poorer as our environment is poorer.
=======
How does infill housing make poorer people poorer?
———
For those who live amongst it the ambience of the nieghbourhood is destroyed. Older people who live in older areas find property investors adding garages with a room for a tenant with a stereo etc. The problem is that the developers are trying to maximise their profits (minimum in, maximum out).
Queenstown is worth many time$ more than it was 20years ago, but it is worse (over-developed)
jh
May 18th, 2007 at 6:43 pm
jh
Good points, thank you.
There does seem to be a conflict between what we need to be doing to prepare our cities for peak oil and dealing with income disparity. Peak oil could increase demand for inner city housing so quickly that recent housing price rises will seem modest. House prices on the outskirts might slump placing the poorest people at an even bigger transport disadvantage.
May 18th, 2007 at 6:46 pm
And don’t forget cheap electricity was made possible by cheap gas.
Bye bye cheap gas … bye bye cheap ‘tricity.
May 18th, 2007 at 6:48 pm
jh said I mean, since Christchurch is over run with cars …
Nah .. it’s a “car infested swamp”.
May 18th, 2007 at 6:59 pm
idiot/savant
Yes this is defacto carbon tax, but so was the 4cent increase in 2002, and so was Bill Rowling’s 45cent (in todays money) increase in early 1975, and so was the 10cent urban transport tax introduced a few years before that. None of them seem to have had any measurable effect on urban traffic growth. The EU experience, and Britain in particular, suggests the tax needs to add at least a dollar to the price of petrol before it impacts on urban traffic. And even then it may be other factors that actually reduce the traffic such as a commitment to removing traffic from town centres and investing in light rail and reclaiming inner city wastelands for combined housing and commercial developments, ie a return to cities comprised of “walking” communities linked by public transport.
May 18th, 2007 at 7:33 pm
fastbike
Its not a swamp its a wetland refuge.
Even Transit agrees with jh that the Christchurch is overrun with cars.
http://www.transit.govt.nz/content_files/travel-time/results-200603.pd f
May 19th, 2007 at 1:29 pm
Toad
For you to even suggest that the Greens would consider a coalition with National is laughable.
The Greens are Hard left, you only have to read the garbage on here about how the budget has done nothing for beneficiaries or the poor to understand that.
The Nat’s stand for hard work and personal responsibility while the hard left prefer to blame everybody else (usually the rich) and adopt the politics of envy.
Having said that I think all this talk of a coalition could well become meaningless, the way the polls are tracking the Nat’s and Act will be able to govern on their own.
We should all hope and pray that this happens, only then can we as a nation throw off the suffocating cloak of political correctness, do something about the generational welfare problem, take a hard (zero tolerance) approach to crime, repeal the electoral act to do away (or shift the benchmark to 10%) with MMP and most of all pass legislation that means that ALL Kiwi’s are equal in the eyes of the law, the days of one race receiving preferential treatment must end.
May 19th, 2007 at 6:05 pm
why is it laughable to suggest that there could be a National-Green coalition?
we saw after the last election that National would do whatever it takes in order to govern, even courting the Maori Party.
but you are right that it all depends on the result and there really is not point talking about it until the after the election.
meanwhile I’m intrigued, what “garbage on here about how the budget has done nothing for beneficiaries or the poor” are you referring to? I can’t see what you can possibly be referring to.
May 19th, 2007 at 6:37 pm
stuey
I have to agree with you. Labour and National will coalesce with any party if it gets their bums onto the government benches.
That might explain why the economy has continued to perform so well. MMP is like driving on a motorway with no offramps. You can choose between the left lane or right lane but either way you know where you are going to end up. FPP was like a country road, plenty of sharp turns to the left and right. Now businesses can have the confidence that their long term planning wont be stuffed up by political idealogues running amok.
Now it’s Mother Nature’s precociousness that the should be worrying about and planning for, and most of them (politicians and business folk) haven’t woken up to this new reality yet.
May 19th, 2007 at 7:02 pm
big bro hasn’t quite yet worked out that key has worked out that not only does he have to take national back to the centre..
in some ways..to win government/power..he has to take it ‘past’ labour..
and there are two ways i am picking he will do that..
one..is that he will reach out to those who labour has steadfastly ignored/neglected..
the poorest/..but esp. sole parents..
and how he will do this..(and capture their vote..?..)..is to offer them a real financial ‘hand-up’ in the form of a tax policy that will offer..(like the green party advocates)… a tax-free base…
(what’s not to like there..?..)
cos’ labour are going to continue their steadfast policy of ignoring those much in need..
i wrote/commented earlier today on cullens’ appearance on agenda this morning..
there he was emphatic that ..no..there was nothing in his budget for sole-parents etc..
and that kiwisaver would not be extended to them..
and that the best they can hope for from labour is increases to match inflation…
so..they are there for key to ‘take’..
and easy for him to do..by just including that in his tax-cut-package..so it wouldn’t piss off the rednecks/beneficiary-bashers in his party…
key can easily sell that to them..as a logical/hands-spread..”..well..we have to..!..”
and key would be able to sell that to (traditionally) pool of labour voters.?..)
another way key will ‘move past’ labour..is in green/environmental policies…
he will emphasise the ‘conserve’ component of conservative..
and will ‘out-do’ labour..
(thus accurately reading the public ‘green’ mood/urgencies..something labour have failed to do..
and he won’t have to try very hard..eh..?
going on the ‘greeness’ of labour/this last budget..?
when writing on this budget..i noted that if you used shades of green..from light to dark..
that it was a whitewashed wall..that if you looked closely ..in a certain light..you could see a very very pale greenwash through it..
of course key will be targetting/courting the greens as a potential coalition partner..
and he will be sure to make the pot ’sweet/green enough’…
eh..?
(and if sweet/green enough..?..hard for the alliance/left-cabal in the greens to argue for rejection..?..
eh..?..)
and once again..(.like with sole parents..etc..)
there is a long-neglected’ by labour constituency…
cos’..y’know..!
when you boil it all down..
the greens have got s.f.a./kicked f.a. goals..for their long years of service/support to/for labour..
eh..?..
benign neglect..leavened with the occaisonal crumb..would pretty much sum that relationship up..
eh..?
phil(whoar.co.nz)
May 19th, 2007 at 7:52 pm
Phil
Labour probably collects a damn site more in GST on coal than it spends on the EECA.
It definitely collects more GST on petrol than it spends on land transport of any discription. The petrol tax has only ever gone into the consolidated account to allow refunds for non-road use to be paid so its playing with words to call roading revenue “government funding”. Since it doesnt affect Cullen’s bottom line the road fund has been a happy hunting ground for Labour to find as much money as it wants for public transport. The fact that it hasn’t found all that much extra money suggests a woeful lack of commitment.
May 20th, 2007 at 9:56 am
Phil
Thanks! That was worth the effort of reading… and I think you are dead right. Key is moving his party towards center and he’s going to push Labour into opposition. This will likely push Greens UP because there’s some as vote Labour who would vote Green if they weren’t convinced that Labour was the only way to keep Nats out.
If the value of keeping National out is diminished because National has moved to center, the result will likely be an improved Green polling at the expense of Labour.
Interesting times lay ahead of us.
I should add my comment here, though I placed it also in another thread, that the Minister of Finance is keeping money out of circulation intentioanally. We would have a hell of an inflation problem if he actually delivered any relief to the middle class workhorses that he’s so intent on whipping to death. Whether or not that is fair, “it is what it is”, and the global glut of hot money and carry trades shifting inflation from its source in the USA to every other currency in the world, is impossible to combat with simple adjustments to the OCR. Cullen has to participate in that constructively, and the only thing he’s thought of to do is hang on to as big a surplus as he dares to keep.
Just my opinion, but he’s got his own rock and hard-place problems.
respectfully
BJ
May 20th, 2007 at 2:28 pm
BJ,
Very perceptive comment about Cullen there; he has definitely painted himself into the corner now, and must sit there watching the paint dry until he can deal with the consequences of his actions.
There aren’t going to be too many friends for him amongst the working-classes either, if he keeps punishing unions and low-income initiatives run by beneficiaries and low-income workers.
A lot of these measures are sending messages to corporations that profit is to be made by skinning wage bills, not by being efficient in any other area, as inflation’s rising faster than oil shipments can be unloaded at the refinery in Whangarei.
No-one’s considering the options of changing how business is done (less sales rep’s on the road, more sales rep’s using the internet…) or how goods are distributed, where using rail over road haulage would create immediate cost savings and environmental benefits. (But represent a huge blow to our deregulated transport industry.)
The net sustainable approach is to reduce consumption. A major market crash seems to be the only tool that some sectors of the market respond to, however, as an examination of the conditions leading up to both the ‘31 and ‘87 crashes would illuminate. We are at the same point of greedy speculation and over-promising of results that harbingered the stocks crash, and slower, but subsequent, property crash, in 87-92. Without intervention by the Treasury in housing market parameters, the market is just carrying on the fight to accumulate as much wealth in as few hands as it can, and devil take the hindmost.
May 20th, 2007 at 8:47 pm
BJ,
The way that Cullen has attempted to keep money out of circulation and hence keep the lid on inflation has been by using the surpluses to pay off the governments foreign debt and the super fund investing off shore.
Unfortunately the way taxpayers have responded to the loss of individual spending power inherrent in these surpluses has beento borrow money (from offshore) to make up for the loss personal income. Ergo, the amount of money circulating in the New Zealand economy has not been reduced by anything like the amount of the surpluses. In effect, households have borrowed back the money that the super fund has lent to overseas financial markets and the government’s foreign debt has simply been transferred to households.
Worse still, to avoid contributing too much to the surplus many households have resorted to property investment purely for the tax/income advantages thus increase accomodation costs which seems to be the single biggest underlying cause of inflationary pressue in the New Zealand.
Therefore, we should expect that tax cuts will not lead to inflation but should actually lead to greater affordability of housing and a reduction in household debt. However this theory does assume that householders are well-informed and reasonably rational.
Bill Birch’s last tax cuts included a transfer of tax from the Crown to the road fund. If Cullen took a similar approach and made student loan repayments fully tax deductible this would hasten the reduction of personal debt considerably without placing any more money into circulation in the short term, the effect would be to shorten the loan repayment period rather than reducing the current weekly loan repayments of each former student.
The wage-price spiral appears to be the result of the herd mentally whereby businesses and unions expects this to happen therefore businesses put up prices to take advantage of the extra cash that they think will be in circulation when wages increase, and unions demand bigger wage increases to cover the higher prices. Because there isn’t any extra money actually in circulation to support the higher wages and prices the result is many businesses fail and many workers become unemployed. This can deteriorate into stagflation. Governments often make matters worse by using deficit financing to supply the “missing” money thereby perpetuating the wage-price spiral.
Perhaps Cullen should investigate the perceptual countermeasure technique used by traffic engineers to make roads safer. This involves finding out what actually works and doesn’t work, and what the public thinks works and doesn’t work. Then do what is proven to work while appearing to do what the public thinks doesn’t work and you will get a dramatic reduction in crashes. Mind you, it is easy for engineers to do these studies because roads are physical systems that are easy to study. Economies are value systems and much harder to study because money is only a representation of value not a thing in itself.
Regards Kevyn,
PS I got my highest marks on my economics papers, just had to know what the “right” answers were supposed to be, even though it was obvious the various bits of theory didn’t work when you put them all together and none of them really worked well with real world situations, simply because they all assume we are well informed, totally rational and totally value-for-money oriented. The only people I’ve ever met who fit that discription seem to have all been economists.
May 21st, 2007 at 1:07 pm
Kevyn
“If Cullen took a similar approach and made student loan repayments fully tax deductible this would hasten the reduction of personal debt considerably without placing any more money into circulation in the short term, the effect would be to shorten the loan repayment period rather than reducing the current weekly loan repayments of each former student”
Why should the tax payer subsidize your university education?, If you (or any other student) takes out a loan you should be made to pay it back at market rates.
I would make an allowance for those undertaking a medical degree as we need to retain as many as possible in NZ, for these people I would make it tax delectable as long as they graduate and practice in NZ.
May 21st, 2007 at 1:55 pm
big bro,
For the same reason the taxpayer subsidises other business expenses such as machinery and corporate boxes. As it is student loans are only a small part payment by students cost of tertiary. This way the subsidy is only paid to graduates when/if they work in this country.
May 21st, 2007 at 4:38 pm
Kevyn
Apart from Doctors there is no other profession that I as a tax payer should be subsidizing.
I am not interested in subsidising social workers nor am I interested in subsidizing teachers, lawyers or accountants.
May 21st, 2007 at 6:35 pm
so big bro..
i guess as a (self-regarded) ‘purist’ ..
you take no govt money/subsidies/wff..?
eh..?..
phil(whoar.co.nz)
May 21st, 2007 at 7:13 pm
Phil
No, No and No.
May 21st, 2007 at 7:48 pm
your education..?
your childrens’ education..?
phil(whoar.co.nz)
May 21st, 2007 at 9:45 pm
Kevyn
Yup, borrowed money is every bit as inflationary as printed money.
That’s why something like a “Tobin tax” that limits the profitability and ease of lending money to Kiwis would do Cullen a bit more good than the current nonsense he’s been spouting. There ARE ways to keep the money from coming in, that’s why it’s called a government, and we give it the power to do exactly that sort of thing. Moreover, since it is MONEY we are dealing with the WTO can’t stick its beak in.
He’ll never do it though… I suspect that Westpac has ear-flappers in his office to ensure that he never hears what’s actually going on out here.
respectfully
BJ
May 21st, 2007 at 11:33 pm
The Greens should be pushing for the money in Kiwi Saver being available for solar water heating, home insulation and efficient heat systems such as heat pumps.
No tax on the first $5000 is c$600 per tax payer or c$10 a week for all?
Why not replace the 20 cents tax rate with one of 10 cents for the first $20,000, then apply the 30 cents rate at an earlier point? (still a $10 a week tax cut a week from the average wage and above, but from the minimum wage about $30 a week and 25 to 20 to 15 dollars a week as one moves on up from here to the average wage.
One can cover the cost by increasing GST to 15% (reducing tax on food to zero so there is no impact on the poor).
May 21st, 2007 at 11:42 pm
We are spending on the cheap imports because of the high dollar. So some disincentive to purchase the imports should be made - such as higher GST. This also improves out BOP (if consumption drops).
To complete the “savings” policy we need to reduce tax on interest income (given some is not real income but only compensation for inflation). Why not a low flat rate (once and for all) withholding rate of 20 cents.
And also a capital gains tax of 20 cents on residential rental property.
To influence the market - allowing this tax to be written off if landlords sell to first home buyers or sell to build a new property (increase supply).
May 21st, 2007 at 11:50 pm
bjchip
We can only hope that the tax break to the OZ banks of $90 million a year (a profit of over 3billion) is to sweeten them before the RB goes regulatory. Presumably Telecom is expected to reinvest all of it’s tax cut and more besides or …
May 22nd, 2007 at 12:34 am
big bro
90% of what doctors do could be done by you or I using a computeised expert system. More cheaply and more accurately too. I suspect this fact underpins the medical profession’s abhorence of managers. The biggest increase in hospital spending during the 1990s was on salaried medical professionals. The comparisons of spending on managers and medical staff were actually comparing waged workers and salaried workers as this was what the RHAs were actually reporting in their accounts.
It must be all or nothing, big bro. Allow one exception and everybody will want one.
May 22nd, 2007 at 1:59 am
BJ
Borrowed money isn’t inflationary on it’s own, as long as the borrowed money is being spent on imports the amount of money in circulation will not inflate.
Prices doubled between 1946 and 1953 because the country was flooded with the money from Britiain’s deferred war materiael payments at the same time that imports were severely restricted and domestic production was restricted due to full employment. The supply of money had inflated but the the supply of goods and services did not inflate, and the productivity of the workforce could not inflate fast therefore prices had to inflate to absorb the extra money.
Governments at this time were fixated on the balance of payments and largely ignored inflation. Today they are the exact opposite.
It was this fixation on the balance of payments that seems to have triggered the stagflation of the 1970s. The drop in commodity prices, relaxation of import restrictions and increased oil prices should have led to deflation due to the deflated money supply or noflation due to a fall in the value of the dollar. Unfortunately the dollar was pegged to the pound sterling so it rose instead of falling. And government borrowing increased to fund its gauranteed commodity prices arrangements with the producer boards so the actual money supply didn’t deflate as much as it should. The government did such a good job of blaming the BoP crisis on higher oil prices that unions and employers became convinced that inflation would be inevitable and this conviction became a self fulfilling prophecy. Of course stagflation is when you get high inflation despite there being no economic growth to cause the inflation. Essentially there was so much “noise” in the economic disruption that nobody could read the correct pricing signals so they were basically flying blind Which pretty much gaurantees a crash or a very hard landing.