CIR UPDATE...

*Thanks to those of you who are raising awareness of our Citizens Initiated Referendum through your local newspapers and radio stations - every bit of publicity helps!

*To succeed in our referendum we need 320,000 signatures - that's equivalent to the combined population of Wellington and Hamilton! We need to tell as many New Zealanders as we can about our CIR, so they can get behind it and help. With that in mind, here is the start of an email message that I am hoping you will send on to your contacts, so that they can send it on to theirs and so on. If you click "More" below, it will take you to the full message, which you can simply copy into a new email, add addresses and send - urging recipients to send it on of course!   

 
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THE NZCPR BLOG... 

• Gary Judd: Arresting a Dangerous Decline
• Frank Newman: Interest rate decision becoming clear
• Steve Baron: Council Rates System Unfair & Inequitable
• Mike Butler: Ninety Mile Beach tribe accepts $23.7m to end complaints

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DOES THE FOOD INDUSTRY NEED NEW REGULATION?

The Department of Trade and Industry describes the food and beverage industry as the “lynchpin of New Zealand's prosperity”. Representing a half of all New Zealand's merchandise exports by value, the industry has a “crucial influence on our economy”.

In his first major speech of 2012, Prime Minister John Key also highlighted the importance of food production to our national wellbeing: “Looking ahead, I am very confident about New Zealand's prospects. There are huge opportunities out there for New Zealand. We are a food-producing country in a world that is demanding more high-quality food. A growing middle class in China, India and across Asia is tuning in to the goods and services New Zealand can supply.”

With that in mind, the total revamp of the food industry that will take place under the government’s proposed new Food Bill, is an important issue for the country. This is legislation that was instigated in 2003 by a Labour government that was obsessed about regulating food, having poured hundreds of millions of dollars into a wide range of initiatives from policing school tuckshops to fast-tracking obesity reduction measures. However, given the country’s dismal experience of two other sweeping reforms that were prepared by former Labour governments to be passed by National (namely the hugely problematic Child Support Act and the Resource Management Act) additional care is surely called for regarding the Food Bill – especially as New Zealand already suffers from an over-abundance of stultifying rules and wealth-destroying regulations.

The food industry, which consists of 35,000 food businesses along with 200,000 part-time food traders, provides 1 in 5 New Zealand jobs. It is one of our most innovative sectors, which the growing popularity of Farmers Markets demonstrates, with their promise of fresh foodstuffs direct from grower to consumer. Successful entrepreneurs who produce world class foods and beverages - like Charlie’s Orange Juice or Lisa’s Hummus - often start in a family kitchen.

The Food Bill has been sitting on Parliament’s Order Paper since 2010 when it was reported back with unanimous cross-party support from a Select Committee, having attracted only 66 submissions.[1] As it stands, the Bill would introduce a new regulatory regime for food makers and suppliers by requiring businesses to tailor their food safety procedures to the level of risk they manage. The intention is to reduce the incidence of foodborne disease and further align our food safety requirements with those of our trading partners.

Under the Bill, high risk businesses such as restaurants or baby food manufacturers would be required to operate under a regulated “food control plan”, whereas businesses in the medium risk category such as bakeries or pre-packaged food manufacturers would be regulated under “national programmes”. Low risk businesses, such as those running roadside stalls, selling their own home-grown produce at markets, or operating charity sausage sizzles, would simply receive free information on “food handler guidance” describing how to ensure their foodstuffs are safe for consumers. Householders growing their own produce or swapping with others would not be affected.  

According to the Bill’s Regulatory Impact Statement the economic cost to New Zealand from foodborne illness in 2009 was estimated to be $86 million per year.[2] However, a new study commissioned by the Ministry of Agriculture and Fisheries has nearly doubled this estimate to $162 million![3] On closer examination, the new report, which provides an analysis of the total economic cost to the country of six foodborne illnesses - Campylobacteriosis, Salmonellosis, Norovirus, Yersiniosis, STEC and Listeriosis - during 2010, shows the breakdown of the $162 million as follows:

·         Cost of treatment - $6 million
          - $5 m cost of hospitalisation
          - $1 m in GP costs
·         Cost of food industry regulation and supervision - $16 m
·         Cost of business compliance - $12 m
·         Loss of work output due to illness - $27 m
·         Residual private cost - $100 m

In other words, out of the so-called $162 million cost of foodborne illness - that is being used to justify a massive re-regulation of the food industry - only $6 million is the direct cost of health care. The rest is made up of the cost of setting and complying with food hygiene standards, workforce losses caused when people are ill, with the lion’s share of the cost a guestimate of the value private individuals place on not getting sick! Put simply, the $162 million cost to justify the Bill is a gross exaggeration of what most people understand to be the real ‘cost’ of illness.

In 2006, as a result of the rising rate of campylobacter food poisoning - which peaked at almost 16,000 notified cases - various sectors of the food industry involved in high risk foods like chicken, entered into voluntary food control arrangements aimed at reducing the incidence of infection. This new methodology is largely responsible for having halved the incidence of campylobacter since 2006. With such voluntary arrangements showing the way, many in the food industry are now asking whether there really is a problem that needs to be solved through a massive re-regulation of the industry - or whether the necessary improvement could be achieved through minor tweaking of problem areas.

A question that springs to mind is how much food poisoning occurs as a result of poor food handling practices in the home, but recent figures are hard to come by. A report that covered the period from 1998 to 2001 found that 34 percent of food poisoning outbreaks originated in hotels, restaurants or other eating establishments, 32 percent in private homes, 9 percent in workplaces, schools or kindergartens, 6 percent in hospitals or residential institutions, 2 percent from retailers, 1 percent from caterers, none from food manufacturers, and 16 percent were either unknown or from other sources.[4] A 2010 study, which looked at the commercial origins of foodborne illness outbreaks, found almost 90 percent came from restaurants, cafes and takeaways, with less than 10 percent from caterers, supermarkets, and other food outlets. In other words, the way we handle food in our homes remains a crucial matter when it comes to the incidence of foodborne illness.[5]

This week’s Guest Commentator is Dr Eric Crampton, a Senior Lecturer in Economics at the University of Canterbury, who has also been looking into aspects of the Food Bill. He worries that the cost burden associated with the new Bill will become a disincentive to entrepreneurship: “Perhaps worse than my potential loss of choice as a consumer is the loss of an easy pathway to small-scale entrepreneurship. Even if the monetary costs of registration as a food producer are low, Wellington often weighs too lightly the discrete hurdle thrown in front of a potential entrepreneur who has never otherwise had to worry about compliance regimes. The dread costs of figuring out which forms to fill out, and the fear of getting something wrong, can be very real barriers to would-be new small-scale entrepreneurs. When you’re really not sure if you’ll be able to make a go of a new venture, adding a hurdle of having to seek permission can provide a burden much larger than the nominal $50 registration fee.” To read Eric’s article, click here>>>

In their submission to the Bill, Horticulture New Zealand explained that in spite of giving assurances that existing industry food safety programmes would be recognised, the government failed to do so requiring instead some 7,000 growers in a low risk industry - who have never needed to be registered before since they operate under an industry protocol - to register and be subjected to almost $8,000 in compliance costs.[6]

In her submission, pensioner Biddy Fraser-Davies, who makes cheese from her three cows (Sally, Emily and Molly) and has a turnover of under $20,000, explains how she only had to pay $100 to her local council for food safety compliance to set up eight years ago, but compliance costs would increase to nearly $5,500. She told how her application to make a new ‘raw’ hard cheese had been sitting with the regulators for over two years and that indications were of compliance costs in excess of $600 for each ‘batch’. She explained, “My ‘batch’, typically is a single wheel of cheese around 3 or 4 kilos! Even my most dedicated customer will baulk at this price being added to the cost of the cheese”.[7]

Lisa Er, founder of Lisa's Hummus, believes that if the food bill had been around 15 years ago, the compliance costs would have prevented her from getting off the ground: “I had absolutely no money, nothing to invest at all. I had been on a benefit so I was starting from the ground up. Lisa's now has 123 employees, so that's made a difference to the country, but I couldn't even have started because I had no money whatsoever.”[8]

For a government that claims to be committed to encouraging wealth creation and reducing compliance costs on small business, the Food Bill could be a major step backwards. It appears to be being driven more by bureaucratic considerations rather than the need to encourage entrepreneurship in the food sector - within the bounds of stringent food safety imperatives. It is also not clear what the answer is to a fundamental question that should be asked of all new legislation: Is there a problem to be fixed and if so will this Bill fix it?

In light of the concerns that are now being raised about the Bill, surely the best course of action would be for the Minister to re-open submissions to let a new Committee of Parliament re-examine the issue. If more food sector operators were encouraged to share their views, they may identify better ways of dealing with problem areas that would not involve the total re-regulation of the whole food industry. This could lead to safer food, less disruption and lower costs – a win/win all around. If this were the case, the Bill could be withdrawn. 

That is essentially the message that the New Zealand Food and Grocery Council gave to the government in their submission – I will leave the last words to them: “As far as FGC can tell the current regime is adequate. There has not been widespread concern with the safety or suitability of food that is manufactured in New Zealand. In fact, New Zealand has a highly regarded worldwide reputation for producing high quality safe food. This is all achieved under a system that is largely self regulatory. Food manufacturers in New Zealand understand the importance of providing safe and suitable products and in a small market like New Zealand where there are only two major supermarket retailers, reputation and branding image are vitally important.”[9]

The FGC acknowledges that there are concerns - such as small pockets of unacceptably high levels of campylobacter - but they believe the New Zealand Food Safety Authority could deal with these through education and by enforcing current regulation: “In our view, if the current system of regulation is not broken there is no need to try to fix it. This is certainly the case if the fix will cost manufacturers and consumers more. We urge the Committee to consider whether there is actually a need to introduce more regulation in this area and if it is not justified to either leave things as they are or make minor changes where needed.”

NZCPR POLL
This week’s poll asks:
Do you see a need for further regulation of the food industry?
To vote click here>>>> 
(Readers comments will be posted here>>> daily)
View feedback on the last poll here>>>

NZCPR 
Commentary



THE FOOD BILL 

Dr Eric Crampton

Since moving to New Zealand eight years ago, I’ve really come to love buying odd startup food products from new food entrepreneurs at farmers’ markets like the weekly markets at Lyttelton and at Riccarton Bush. 

I first started buying Cassels & Sons’ beer at the Lyttelton Farmers’ Market; when they realized there was strong demand for their product, they expanded up and now have 
a thriving brewpub in post- earthquake Christchurch. 

I really hope that the regulatory changes won’t adversely affect the small upstart producers that supply me with the excellent cakes, breads, produce and free-range eggs and meat that form a relatively large proportion of my 
weekly menu. 

I choose to buy from those vendors because I trust them and I trust the markets from which they rent stall space. 

I’d hate for regulatory changes to take that choice away from me...
 
To read click here>>>
 

lDONATION FORM
Download the NZCPR donation form here>>

lPOLL RESULT
*Do you believe that sending children to school hungry amounts to child abuse?
*Results: Yes 90%, No 10% 
*Read comments here>>>
*Browse all previous poll comments here>>>

lTECHNICAL HELP
Visit our HELPDESK to
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CIR UPDATE...

A rush of iwi claims for customary title of the foreshore and seabed under the government's new Marine and Coastal Area Bill are expected over the coming months. The problem is that because the law allows the deals to be done in secret, the public may not know what is being claimed until it is too late!

Last year under the official information act, it was revealed that Te Rarawa will seek title for Shipwreck Bay in the Far North. Shipwreck Bay is one of New Zealand's best surfing spots. On the East Coast Ngati Pahauwera has claimed the beaches north of Napier and south of Wairoa. And also on the East Coast, Ngati Porou Ki Hauraki wants customary title over Kennedy Bay and Mataroa Bay on the Coromandel. And Te Whanau a Apanui wants title over an area in the Eastern Bay of Plenty. Iwi that meet the test could charge commercial operators, veto developments and impose wahi tapu to ban public access. 

If you believe Crown ownership of the foreshore and seabed should be restored, then please help us gather the 320,000 signatures we need to force a public referendum. The petition form, instructions, and all other details are on our website at www.CoastalCoalition.co.nz. 
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THE NZCPR BLOG... 

• Peter Saunders: Nudge, nudge, here come the Germans
• Richard Epstein: In Private Enterprise We Trust
• Mike Butler: $105,400 for propaganda
• Steve Baron: The Media - Watchdogs or Lapdogs

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THE GOVERNMENT'S PLAN FOR NEW ZEALAND

The Speech from the Throne is delivered by the Queen’s representative, the Governor General, at the opening of a new Parliament. Traditionally, the speech sets out the reasons for summoning Parliament after a General Election by announcing in broad terms, the outline of the new government's legislative programme for the next three years.

This time around, the speech was delivered by Sir Jerry Mateparae, on behalf of Her Majesty Queen Elizabeth II, on Wednesday December 21^st 2011.[1] It marked the opening of New Zealand’s 50^th Parliament, providing an opportunity to celebrate our unbroken parliamentary democracy stretching back to 1854, when 37 MPs were elected to represent 24 electorates. Universal suffrage followed in 1893.

As could be expected, the speech reiterated many of the promises that were made by National during the election campaign. In addition, it touched on some of the initiatives adopted as a result of the confidence and supply agreements with ACT, United Future, and the Maori Party.

The backdrop to the establishment of this 50^th Parliament is the uncertain global outlook caused in part by the European Debt crisis. Last week our NZCPR Guest Commentator Prof Roger Bowden, former Professor of Economics and Finance at Victoria University, examined some of the main factors that have contributed to the ‘Euromess’. In the final part of his series, this week he looks at the threats to New Zealand caused by a slowdown in Asia:

“As a conscientious economist with the dismal reputation of our profession to uphold, I’ll start with the gloomy bit, which is the prospect of a Sino-mess. As with the Euro-mess, the Chinese version has its own generative forces, but causals are also involved from one to the other. For the Eurozone is a large market for Chinese exports, so any slowdown in the one will impact on the other. However, the Chinese story really starts with a colossal real estate boom, as migrants flooded in from rural areas to find work in the factories that supplied the burgeoning export industries, and for the infrastructure construction that made it all possible. The problems come when thing start slowing down, for the acceleration effect can just as easily go into reverse”. To read Prof Bowden's article click here>>>

The Speech from the Throne signals a new determination by National to seriously reduce government spending. In the last Parliament they supported ACT’s Spending Cap (People's Veto) Bill to limit the growth of core Crown expenditure to a rate that is no faster than the combination of population growth and inflation – unless the public agrees by way of a binding referendum. Submissions should be called on the Bill soon. This type of policy has been responsible for the success of the economy of Hong Kong, where a cap on spending of 20 percent of GDP has led to an average per capita income that is 75 percent higher than that of New Zealanders. In the US state of Colorado their spending cap was introduced through a Taxpayer Bill of Rights in 1992.[2]

These sorts of fiscal constraints are consistent with the idea of placing limits on government to not only restrict spending to say 29 percent of GDP (the level that the 2025 Taskforce indicated would enable New Zealand to start closing the income gap with Australia) but to also set the maximum level of the deficit as a percentage of GDP, and of Crown debt as a percentage of GDP.

Furthermore, given the irresponsible spending promises being touted by some of the minor political parties in the run up to the election (most notably the Green Party, which was advocating extending Working for Families to welfare beneficiaries, introducing a generous universal child benefit allowance, raising welfare benefit levels, paying beneficiaries for doing voluntary work, writing off all student debt, introducing a universal student allowance, and eliminating student fees) political parties should be required to have their spending promises independently costed and audited so that voters can properly assess the true cost to the country of supporting these parties before voting for them!

As a part of its commitment to reducing government spending and waste, National will continue to lower the cap on the number of staff employed in the state sector bureaucracy. In 2000, the number of full time equivalent employees in the core public service was 29,000. In 2009 this peaked at 44,600. Currently the number is 43,600.[3]

Altogether the state sector consists of 41 departments and ministries, 84 statutory Crown entities (paying more than 450 board members!), 11 Crown entity companies, 17 state-owned enterprises, 31 tertiary education institutions and numerous "schedule four entities" like the Lottery Grants Board. A comprehensive review of the performance of the main government agencies is being carried out as a part of a state sector review process – see the Performance Improvement Framework results here>>>.

Welfare reform will feature heavily in the new government’s legislative programme. In particular the Prime Minister now appears committed to restraining the growth of the underclass – an outcome he signalled as Leader of the Opposition. The reforms will target unemployed teenagers and young parents to ensure they are in education and training. In addition, some will have their benefits managed by third parties who will also have a responsibility for their pastoral care. Overall the benefit system will be simplified, with more beneficiaries subjected to work testing. There will also be a crackdown, not only on benefit fraud, but on alcohol and drug abuse as well. 

While the jury is out on how effective these changes will be, they are extremely important since underclass dysfunction is at the heart of New Zealand’s child abuse crisis.

Since the ban on smacking was introduced in 2007 - which proponents claimed would virtually eliminate child abuse - some 30 children have been killed. Tens of thousands have been treated cruelly. There have been endless investigations and reports – in fact submissions on the Government’s Green Paper on child abuse can still be made until February 28 (see here>>>). But the reality is that until New Zealand’s legislative framework is changed to discourage single parent households, nothing will change.

The charter school pilot project is a new initiative signalled by the government in conjunction with ACT. Aimed at helping disadvantaged youngsters to reconnect with the education system, while not a panacea, there is no doubt that introducing competition in schools will help to focus School Boards on what they should be doing better to retain students – and good teachers. The resulting improvement in the achievement of students in the charter schools themselves - and in the wider education system - can only be beneficial.   

As part of their agreement with the Maori Party, National will establish a Ministerial committee on poverty led by the Minister of Finance, Bill English, and Whanau Ora Minister Tariana Turia, along with the ministers of education, health, housing, Maori affairs and social development. The committee, which is expected to issue its first report mid-2012 with six monthly updates, will monitor whanau ora as well as a number of grassroots social sector trials that are being undertaken around the country to find the best way of helping disengaged young people get their lives back on track.

The committee on poverty looks to be the Maori Party’s response to the social justice campaigns being run by Hone Harawira’s Mana Party - but his call for free breakfasts in schools to alleviate poverty raises serious concerns. If families that can afford cell phones and Sky TV can’t afford porridge for their children’s breakfast, then something is deeply wrong with the parents.

Meanwhile, at a time when many other state agencies are being disestablished or merged, a stand-alone Whanau Ora agency is being planned.

Having resolutely rejected the call by various groups over the last three years for the reinstatement of a youth wage to improve the dreadful youth unemployment statistics, National will instead introduce a new “starting-out wage” for 16 to 19 year olds. Set at 80 percent of the $13 an hour adult minimum wage, the starting-out wage can be paid for up to 6 months. 

Other policy changes signalled in the Speech from the Throne include the partial sale of state assets, the establishment of new environmental reporting systems for fresh water management, competition in ACC’s Work Account, reforms to the Resource Management Act, and an overhaul and simplification of the local authority planning process. In addition, even though the economy is tight and households and small businesses are struggling, National has indicated that there will be more increases in the cost of power and fuel due to Emissions Trading Scheme subsidies being phased out.

During the next three years, the settlement of historic Treaty of Waitangi claims will be prioritised ahead of the 2014 final settlement deadline. With over 20 claims in the pipeline ready to be passed into law, and dozens more waiting in the wings, the NZCPR Treaty project led by Mike Butler - to bring greater transparency to the settlement process - has its work cut out.

The Maori Party’s Constitutional Review will be progressed this year. The advisory committee is expected to provide six monthly reports to the government, with a final set of recommendations by the end of next year. Unless New Zealanders wake up to the imminent threat, by next year the Treaty of Waitangi could be well on the way to becoming the cornerstone of a new New Zealand constitution, which would elevate anyone claiming Maori heritage to a status above that of all other citizens. If New Zealanders do not want to become second class citizens in their own land, then I would urge them to register their concern here>>>.

And in line with an escalation of race-based rights – as a result of the Maori Party being a coalition partner in the new government - the next few months will undoubtedly see the emergence of a progression of indigenous rights claims for our coastline. The problem is that we probably won’t “see” anything until the deals are done as the whole process has been designed to be secret. By the time the deals are finally reported it will be too late - what has always been a public Crown-owned reserve, will be under agreement to become the private property of corporate iwi.

While some aspects of the government’s legislative agenda have been spelt out in the Speech from the Throne, there is much that has not been signalled. Just as President Thomas Jefferson said the price of freedom is eternal vigilance, so too is the price of democracy! We need to keep a close eye on what’s going on and we must not be afraid of letting our representatives in Parliament know what we think!

NZCPR POLL
This week’s poll asks:
Do you believe that sending children to school hungry amounts to child abuse?
To vote click here>>>> 
(Readers comments will be posted here>>> daily)
View feedback on the last poll here>>>

NZCPR 
Commentary



THE EUROZONE MELTDOWN 
Part 2: New Zealand exposures 

Prof Roger Bowden

When companies borrow, they generally try to preserve a desired debt to equity ratio in their balance sheet. 

Should the same be true for governments? 

The ‘economic problem’ is how to distribute resources in limited supply. 

In a political context one could add ‘amid the clamour of claimants’, and of course the silent claims of the generations to come. 

Here in NZ, MMP coalitional imperatives have reinforced the influence of pressure groups in public spending.  

If there is a single lesson from the shocks and crises, it is the chaos that can result from insufficient attention to elementary economic prudence. 

There is nothing wrong with public debt. But it has to be backed by public equity in the form of financial reserves...
 
To read click here>>>
 

lDONATION FORM
Download the NZCPR donation form here>>

lPOLL RESULT
*In a year’s time do you think the NZ economy will be stronger, weaker, or about the same?
*Results: Stonger - 10%, Weaker 64%, Same 26% 
*Read comments here>>>
*Browse all previous poll comments here>>>

lTECHNICAL HELP
Visit our HELPDESK to
solve problems with the newsletter here>>>

Hi there,

Compliments of the season - I hope you and your family had a great Christmas and New Year … in spite of the weather!

Thanks so much to those of you who so kindly supported the New Zealand Centre for Political Research’s end of year fundraising appeal - having your backing means a great deal to me. It is especially encouraging to see an increase in monthly support since this not only helps to sustain our work programme throughout the year, but it also enables us to plan ahead with greater confidence.

If you would like a better overview of what we have achieved and where we are heading, you may like to read our newly released NZCPR 2011 Annual Report - you can find it here>>>.

As you know these weekly newsletters and the significant resource of information that is available on our NZCPR.com website are all provided free of charge. This venture works on the basis of reciprocity - if enough of the people who value the information we provide send in donations, then the NZCPR remains in a strong position to be an effective agent for change.

If you value our newsletters and the work we do, and would like to support our efforts, please click here>>>.

2012 is shaping up to be a busy year. Our work programme will include a focus on direct democracy and the Citizens Initiated Referendum to restore Crown ownership of the foreshore and seabed, the Constitutional Review, the MMP Review, Charter Schools, and welfare reform. We will continue to push for a low flat tax, the suspension of the Emissions Trading Scheme, and one law for all. The Treaty Settlement Analysis Project will be advanced and a local government reform project launched. In addition, through our Legislation Watch initiative we will maintain on-going scrutiny of the government's legislative programme - on your behalf!

Thanks so much for your interest in the work of the New Zealand Centre for Political Research and for your support - and please accept my very best wishes for a happy, healthy and successful 2012!

Kindest regards,
Muriel
Dr Muriel Newman
Founding Director
New Zealand Centre for Political Research
www.nzcpr.com

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THE NZCPR BLOG... 

• Frank Newman: Picking winners in 2012
• Lindsay Mitchell: Welfare - Is a new vision needed?
• Ron Smith: Iran in 2012
• Mike Butler: Taxing the family home

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2012: SETTING THE SCENE

The 2012 year has had a turbulent start – from the increasingly chaotic state of the European economies, to the proliferation of geopolitical unrest, to the on-going aftershocks in Christchurch, to the unpredictable weather! If this is a sign of things to come, we had better make sure our seatbelts are tightly fastened as we may be in for a bumpy ride.

The government could be in for a rough ride as well. In October, when the Pre-election Economic and Fiscal Update was published, the government’s books did not look that good – although to be fair, the longer term forecasts showed that things were on track to improve.[1] The PREFU showed that by the end of the June financial year, the deficit is expected to be $10.8 billion or 5.1 percent of GDP, gross Crown debt $79.8 billion or 37.7 percent of GDP, and government spending $74.5 billion or 35.2 percent of GDP. While that spending figure is significantly higher than the level of 29 percent that was identified by the 2025 Taskforce as being optimal for New Zealand, the longer term forecasts show that by 2016 spending will have fallen to 30.4 percent of GDP, the deficit will have turned into a $3 billion surplus, and gross debt will have reduced to 34.9 percent of GDP.

In the PREFU, Treasury warned that our economy faced a serious downside risk: “The risks to our main forecasts are skewed to the downside. In an illustrative downside scenario, in which we assume a sharper slowdown in trading partner growth and lower terms of trade, we estimate that New Zealand’s nominal GDP could be a cumulative $35 billion lower over the five-year forecast period to the year ending June 2016. We estimate that there is at least a one-in-five chance that the New Zealand economy performs worse than in this scenario.”

This more pessimistic view was reinforced in December in the National Bank’s Business Outlook survey which showed business confidence was slipping. As chief economist Cameron Bagrie explained, "Although New Zealand has many factors in its favour going into the global storm ahead, we will not be immune. We are a small, heavily indebted trading nation. The global scene will be coupled to European developments and there will be fallout for New Zealand via commodity prices, funding costs and a new urgency to fiscal austerity."

While Europe is not New Zealand’s main export market, the Asian economies, which are our key markets, depend heavily on European consumers to buy the goods that they manufacture. If there is a downturn in European sales, the fall-out impacts heavily on Asian businesses, wages and employment. As a result, Asian households are less likely to buy goods from New Zealand – especially if there are cheaper local alternatives. The domino effect of falling demand in our crucial export sector would be serious, not only on businesses that service the export sector, but retailers and other downstream ventures as well.

It would also impact heavily on the government through lower company tax, income tax and GST returns.  With less income but potentially greater welfare outgoings, the chance of the government moving back to surplus by their target of 2015 would be under threat.

But it is not only international developments that are threatening the government’s ability to balance the books. The fact that Christchurch is continuing to experience sizable aftershocks will have a significant impact as well. The rebuilding of Christchurch was expected to generate substantial growth in jobs and economic output for New Zealand. But that cannot be realised until the earth stops shaking. Not only that, but the on-going quakes and uncertainty are taking a heavy toll on families waiting to rebuild their lives.

With all of that in mind, I asked our Guest Commentator Prof Roger Bowden, former Professor of Economics and Finance at Victoria University and a visiting Research Fellow at Ulm University in Germany, if he could explain to NZCPR readers exactly what has caused the Eurozone crisis, so we can better understand what is happening – and how the same mistakes can be avoided! In the first of a two-part series, Roger examines the causes of the crisis. Next week he will look at the implications for New Zealand.

“The European crisis has double origins. Problem #1 stems from failure of many member nations to live up to the promises they made about good economic management.  The Maastricht Treaty convergence criteria, as reinforced by the Stability and Growth Pact 1997, specified max 60% for the Debt to GDP ratio, together with a side constraint of 3% of GDP for the annual government deficit.  Even France and Germany have been guilty of violations (now both at 90%), but the story really starts with Ireland, Greece, Portugal, and Spain. More recently Italy has taken up running backwards as well, a real worry as its economy is bigger than all the other four put together. A pity that, because unlike the others, Italy has quite a healthy government budget operating surplus. Their problem is a huge historical debt overhang, even now about 120% of GDP, which means that once investors start panicking, the burden of servicing the interest become crushing very quickly.

“The second origin (Problem #2) is that,  just to add to the woes they already had over the earlier subprime crisis and derivative exposures, European banks invested heavily in Eurozone sovereign debt and related derivatives. They did so because market yields had been dropping; and hey, this is our performance bonuses we’re protecting. As result, their balance sheets look like a disaster movie. In fact, some major players are only being kept alive by artificial suscitation (we haven’t got as far as resuscitation).  For several major banks there are serious doubts about whether the life support machine will have to be turned off anyway; or perhaps just nationalised, which means more bad luck for the taxpayers.” To read The Eurozone Meltdown and New Zealand Exposures - Part 1: The Why and Where of the Euromess, click here>>>

As I write this article, the situation is Europe is continuing to worsen with the credit rating agency Standard and Poor’s downgrading France, Austria, Italy, Slovakia and others. Portugal has been relegated to junk status. Germany retains its triple-A credit rating but is on negative watch.

Germany and France are, of course, the two countries that are spearheading a bid to introduce a financial transaction tax across the European Union as a way of collecting additional revenue to help fund their bailouts.

A financial transaction tax of one sort or another has also been promoted as being suitable for New Zealand by the Green Party, the Maori Party and the Mana Party - most recently during the 2011 General Election campaign. These parties clearly believe that there is good money to be made by clipping the tickets on financial transactions. The problem is that the advocates of this form of taxation have not bothered to explain the downside.

According to the 2001 Tax Review, a financial transactions tax, which is levied on withdrawals from financial institutions, impacts not on the withdrawal transactions but on goods or services purchased with those funds. Because the system does not allow credits to be allocated on inputs along the production chain, a cascade occurs, where tax is levied at each stage on the tax, which has already been levied at previous stages. As a result, the tax levied on products of equal value can end up varying greatly, depending on the number of stages in the production chain. Prices of some goods will be artificially inflated, distorting production and purchasing decisions. In addition, the amount of tax likely to be raised by any given rate is very hard to estimate.

In comparison, a Tobin tax – also called a “Robin Hood” tax and the type of tax being promoted by France and Germany - is a low-rate tax on all foreign exchange transactions. It is aimed at dampening currency speculation and stabilising exchange rates. The problem is that long-run exchange rate movements are a vital means by which countries adjust to economic changes. Furthermore, no mechanism exists that will identify transactions aimed primarily at speculation rather than hedging against risk. A Tobin tax would therefore limit the ability of exporters and importers to hedge their risk. That means that a tax intended to improve exchange rate stability would therefore end up exposing importers and exporters to increased exchange rate risk.

In response to the call by France for a Tobin tax to be levied on all European Union countries, the UK has stated they would block any such attempt – unless it is applied world wide! Meanwhile analysts have criticised the proposed tax on the basis that it is inefficient and by not differentiating between investment and speculation, it would seriously reduce economic activity, doing more harm than good.

Rather than even contemplating new ways of raising more taxes, the best thing our government could do to help New Zealand get ahead - with its small domestic market and huge distance from trading partners - is to get out of the way of innovators and wealth creators. Wealth creation is driven by small business, which is the backbone of the country. Small businesses provide the jobs that keep New Zealanders employed. Yet the government – and that’s not just central government but local government as well – spends much of its life creating new rules and regulations that act as barriers to progress!

According to Business NZ, the cost of complying with government regulations ranges from $3,000 per staff member for small businesses with up to 10 staff, to around $1,000 for bigger enterprises. Prime culprits are tax law, employment law, and health and safety requirements. This excessive compliance burden has led business groups to call for lower and flatter taxes, more employment freedom, and a restraint on local government – in particular removing the power of general competence and capping rates.  

When preparing fiscal forecasts the Public Finance Act requires governments to identify those risks that will have a material effect on the future. Key amongst those identified in October’s PREFU is the cost of climate change policy. It is indeed bizarre that costs imposed by the United Nations can have become a major financial risk for New Zealand. There is a $1 billion contingent liability identified for Kyoto Protocol units, $585 million in ETS operating expense changes, and unspecified liabilities for New Zealand’s contribution to the UN’s $US100 billion a year fund for developing countries, for the final Kyoto Protocol scheme obligation, and for a new scheme to replace Kyoto. Given the enormous cost to the country – and to householders who bear the brunt of the ETS – shouldn’t New Zealanders be given a chance to have a say on the wisdom of signing the country up to a new UN deal - especially when all of this has no impact at all on the climate?  

Other risks identified in the PREFU include $1.1 billion over 10 years to keep NZ Rail’s trains running, unspecified costs associated with the government’s response to the Wai 262 Treaty claim for intellectual property rights to New Zealand’s flora and fauna, and an unspecified new cost associated with Tainui’s and Ngai Tahu’s Treaty of Waitangi Settlements to satisfy their “relativity” mechanism which will give them 17 percent and 16 percent respectively of the total value of claims over $1 billion in 1994 present-value terms. With over 20 Treaty settlements ready to go in this term of Parliament, this is likely to become a material cost to taxpayers.

Next week we will be looking in more detail at what lies ahead for New Zealand – what the implications of the Eurozone crisis are for us, what the government’s stated priorities are for the next three years, and what some of the other major roadblocks to progress are. Until then, I hope that wherever you are, the summer weather is treating you kindly!

NZCPR POLL
This week’s poll asks:
In a year’s time do you think the NZ economy will be stronger, weaker, or about the same?
To vote click here>>>> 
(Readers comments will be posted here>>> daily)
View feedback on the last poll here>>>

NZCPR 
Commentary



THE EUROZONE MELTDOWN & NEW ZEALAND EXPOSURES

Part 1: The Why and Where of the Euromess 

Prof Roger Bowden

The European Commission is trying to chip in on its own, by levying new taxes on the EU as a whole. 

In particular, they proposed a financial transaction tax, to extend to wholesale transactions as well as retail. 

The British saw this as a thinly disguised grab for the economic surplus generated by the City of London, a financial centre that generates about 10% of the GDP of the UK. 

A bit rough, as they weren’t Eurozone members in the first place. 

Correctly perceiving that this would decimate London as a global financial centre, Mr Cameron said no, and M. Sarkozy had a hissy fit. 

So the Eurozone and a few hangers on will go ahead with their own ‘fiscal compact’...
 
To read click here>>>
 

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lPOLL RESULT
*What do you think will be the most important political issue in 2012?
*Results: The top three main issues of concern are economic management, race relations, and welfare reform.
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CIR UPDATE...

In February we warned that under the Marine and Coastal Area Act:  



We said, "A new right in the bill, mana tuku iho, divides up the entire coast and gives control of it to iwi. They can close off beaches through wahi tapu – and they can’t be challenged. They also must be 'consulted' on coastal, conservation and resource management matters. And this is before they even lodge a claim."

It is now happening. We know of at least one local authority that has introduced a new concept into their proposed district plan as a result of the foreshore and seabed legislation - an overlay running round the edge of the coast which declares all the land immediately adjoining the water's edge as "An Area of Significance to Maori". The overlay goes back as far as the depth of the average residential lot and means that no one on those lots can do anything without consulting with Maori. It appeared totally out of the blue and is scandalous for a host of reasons - not the least being that no one affected knew anything about it!

Our referendum petition form to restore Crown ownership of the foreshore and seabed is attached to this newsletter – just double click the attachment and print in landscape format. If you don’t have a printer, please contact our CIR Coordinator Geoff Parker on 09-426-7874 or cma3nz@inbox.com who can post forms to you. Please give out forms to everyone you know. We have heard of some supporters who are even sending them out with their Christmas cards! But whatever you do, please return as many completed forms as you possibly can to us over the summer. Full details about the Referendum and the petition are, of course, available on our website at www.CoastalCoalition.co.nz.

                  __________________________________________________

THE NZCPR BLOG... 

• Lindsay Mitchell: Child victims - no cut and dry answers
• Mike Butler: Whistle blown on government separatist corruption
• Marc Morano: UN Climate Summit Special Report - A-Z Climate Exposé
• Mike Butler: Billboard vandal's partner back at work in Greens' office

                      __________________________________________________

NATIONAL READY TO GOVERN AGAIN 

This is the final NZCPR Weekly column dealing with the 2011 General Election. We hope you have found value in our coverage. Before the election we wanted to inform you of the policy prescriptions being promoted by the various parties to assist you in making your voting decisions. Since the election, we hope our analysis has provided you with useful insight into issues and agendas that will influence the direction of the country over the next three years. In particular, this newsletter details the promises outlined by the four coalition partners in the new National-led government.

These NZCPR Weekly newsletters - and the wealth of information on our NZCPR.com website – are provided as a free service to better inform New Zealanders about the important public policy issues that shape our lives. I established the New Zealand Centre for Political Research think tank back in 2005 after serving nine years as a Member of Parliament as a way of contributing to public affairs from outside of Parliament. When asked how I intended to fund our think tank I explained that I believed that people who found value in our work would support us with voluntary donations. While that has certainly been the case in the past I now I find that I am struggling to find sufficient support for our crucial website upgrade.

As well as being necessary to overcome the technical problems arising from the ongoing growth in readership, the website upgrade is intended to focus on improving the NZCPR’s campaigning capability. MMP politics means that we will soon be facing some very big issues that could profoundly damage the future of this country - like the Maori Party’s plan to enshrine the Treaty of Waitangi and the Maori seats in a new constitution. We – the silent majority – need to have the ability to more effectively fight such moves in a way that strengthens our collective voice and enables us to convince the wider public to engage and support our stand.  If you value the service we provide to you each week but haven’t contributed to our website upgrade appeal, then please help us by clicking the button to donate now - as we go into discussions with website developers.  

The 263,469 special votes cast at the 2011 General Election have now been counted and a new government has been formed. The final election tallies gave National 1,058,638 party votes or 47.31 percent of the total list votes (down from their election night tally of 47.99 percent) to win 59 MPs – one less than their election night result. Labour gained 27.48 percent of the list votes (up from 27.13) to win 34 MPs, the Greens gained an extra MP to give them 14 with 11.06 percent of the party vote (up from 10.62), New Zealand First won 6.59 percent (down from 6.81) and 8 MPs, the Maori Party 1.43 percent (up from 1.35) and 3 MPs, the Mana Party 1.08 percent (up from 1.0) and 1 MP, ACT 1.07 percent and 1 MP, and United Future 0.6 percent and 1 MP. The biggest party outside of Parliament was the new Conservative Party, which won 59,236 votes, or 2.65 percent of the party vote, down from 2.76 percent on election night.

As a result of the confidence and supply agreements that National signed with ACT and United Future, John Key has the numbers to govern. With a total of 61 votes secured (out of a total of 121) for crucial Parliamentary votes such as the budget, John Key was able to go to the Governor General to inform him that he has formed a new government. While National needs the support of both ACT and United Future to be able to govern, it is not reliant on the support of the Maori Party. That means that although the Maori Party has now also done a deal with National it is not the “kingmaker”.

In practice this distinction might not mean very much since during their last term of government, National took the radical step of sacrificing New Zealand’s publicly owned coastline in favour of Maori ownership and control - even though they didn’t technically need the support of the Maori Party to govern. This means that National may once again be prepared to ignore the rights of the majority of New Zealanders in order to satisfy the Maori Party’s separatist’s demands – just so they can look more “inclusive”.

All three coalition partners have negotiated agreements that give their leaders ministerial positions outside of Cabinet. John Banks will be the Minister for Regulatory Reform, Minister for Small Business, Associate Minister of Education, and Associate Minister of Commerce. Peter Dunne will be the Minister of Revenue, Associate Minister of Health and Associate Minister of Conservation. Pita Sharples will be Minister of Maori Affairs, Associate Minister of Education and Associate Minister of Corrections. Tariana Turia will be the Minister responsible for Whanau Ora, Minister for Disability Issues, Associate Minister of Health, Associate Minister of Housing, and Associate Minister of Social Development and Employment.

ACT’s Confidence and Supply agreement is focussed on improving business competitiveness and raising productivity growth by reducing intrusive government regulation and excessive government spending. To this end Treasury will provide an annual report on progress including reducing the income gap with Australia, the Regulatory Standards Bill to lower the regulatory burden on businesses and individuals will be passed into law, the Public Finance Act will be amended to include a spending cap limiting government spending to the rate of population growth multiplied by the rate of inflation, and the ACC's Work Account will be opened up to competition. In addition, the Resource Management Act, which is seen as a major barrier to investment, jobs, and prosperity, will undergo further reform, particularly in the area of planning to ensure there is only one “unitary” plan for each district.

In the social policy area, charter schools will be introduced as a trial in South Auckland and Christchurch. These charter schools, which will operate independently from the state but still qualify for government funding, have the potential to significantly lift the outcomes of disadvantaged students through performance contracts that focus on such things as improving student achievement and rewarding teacher excellence (usually through performance pay). These schools will remain externally accountable. In terms of welfare reform, the recommendations of the Welfare Working Group to provide budgeting support, income management, and intensive parenting services disadvantaged families will be enacted, and employment services will be contracted out to private sector and community organisations.[1]

As far as United Future is concerned, their confidence and supply agreement continues many of the initiatives developed in the previous parliament. Their concessions include the reinstatement of the Income Sharing Bill to allow married couples to split their income for tax purposes; an enhanced role for Pharmacists in patient medicines management; a reduction in elective surgery waiting lists by greater use of private hospitals; a free of charge annual health-check up for over 65 year olds (when fiscal circumstances allow); a downsizing of the Families Commission to a single Commissioner; the provision of parenting and relationship education in secondary schools; ‘Youth One Stop Shop’ support services; the introduction of alcohol and drug dependency assessments for prisoners appearing before the Parole Board; the establishment of the Game Animal Council as a Statutory Body; and the banning of guided helicopter hunting on the conservation estate and in wilderness areas. In addition, United Future will push for the maintenance of free public access to rivers, lakes, forests and the coastline, and it will support Public-Private partnerships for major roading infrastructure. The government will also investigate United Future’s “Flexi-Superannuation” proposal whereby people can opt into retirement early at a reduced rate of super, or later at a higher rate depending on their individual circumstances and preferences.[2]

The Maori Party’s confidence and supply agreement has been called a “Relationship Accord” to allow the party to vote against key National policies such as partial asset sales. Essentially the party’s concessions include boosting Whanau Ora to incorporate a stand-alone commissioning agency; establishing a Ministerial Committee on Poverty - chaired by the Deputy Prime Minister Bill English with Hon Tariana Turia as Deputy – which will release six-monthly update reports; doubling the funding for the treatment of rheumatic fever; providing home insulation to 20,000 low-income homes and older state houses; increasing Maori participation in early childhood education and achievement in primary, secondary and tertiary education; drafting statutory legislation for Maori education initiatives like kohanga reo; allocating job, skills and trade training on the basis of race to Maori and Pacific Island youth; establishing skills and trades-based academies; supporting iwi housing providers through grants, loans, land, and surplus State house purchases and transfers; improving the quality of water in rivers, lakes, seas, and rural water supplies; engaging with iwi, hapu and whanau in the government review of the Crown Minerals Act; introducing offsetting of pre-1990 forests; refocusing Te Puni Kokiri on improving Maori employment, training, housing, and education as well as creating a high-level policy unit within TPK; progressing the Maori language revitalisation strategy; continuing anti-smoking initiatives; deciding on whether to allocate 4G spectrum (700MHzBand) to Maori;  and supporting the following Maori Party Private Members Bills to a select committee: the Gambling (Gambling Harm Reduction) Amendment Bill, and a cultural heritage bill to recognise Matariki/Puanga and honour the peacemaking heritage established at Parihaka.

The Maori Party’s review of New Zealand’s constitutional arrangements established in the last Parliament will continue with the Advisory Panel’s recommendations to be delivered to the Government by September 2013. Regarding the fraught issue of Maori seats, the National Party agrees not to seek to remove them without the consent of the Maori people and the Maori Party and the National Party will not pursue their entrenchment in the current Parliamentary term.[3]

During the next three years National will embark on a reform agenda as outlined in their “Post-election Action Plan”.[4] The changes include halving the budget deficit next year to be back in surplus by 2014/15; introducing lower public service staffing caps; ensuring departmental spending targets are met; connecting 58,000 premises to ultra-fast broadband; increasing productivity through establishing the Crown Water Investment Company; allowing choice in the ACC work account; extending the youth training wage (of 80 percent of the adult wage) to six months; constructing the Waterview Connection and Auckland’s Western Ring Route; introducing six-month time limits on RMA consents for medium-sized projects; introducing the partial sale of four SOEs and reducing the Government’s stake in Air New Zealand to create the Future Investment Fund; introducing tougher consumer credit laws to target loan sharks; slowing the phasing-in of the ETS and allowing off-setting for pre-1990 forest owners; updating the Maritime Transport Act including for the International Convention on Civil Liability; introducing a competitive new system for processing oil and gas exploration permits; reforming social welfare to ensure the able-bodied go back to work; sanctioning beneficiaries whose use of drugs prevents them from getting a job; increasing prosecutions for welfare fraud; stopping benefits for people on the run from Police; making it harder for serious offenders to get bail; introducing Civil Detention Orders to protect the community from extremely high-risk offenders; reducing unnecessary parole hearings; passing the Search and Surveillance Bill; increasing penalties for child pornography and breaches of domestic violence protection orders; better protecting vulnerable court participants – especially children; ensuring state houses built before 1978 are insulated; increasing elective surgery operations by 4,000 a year and ensuring that all patients booked receive their operations within four months; ensuring patients needing specialist appointments are seen within four months; expanding the Voluntary Bonding Scheme to health professions and hard-to-staff regions; providing free after-hours GP visits to children under six; rolling out a comprehensive after-hours telephone advice service with access to nurses, GPs, and pharmacists; making secondary school performance information available to parents; developing more effective systems of teacher and principal appraisal; reforming and strengthening the Teachers Council; ensuring 98 percent of new school entrants have participated in early childhood education; and continuing to prioritise the rebuilding of Christchurch.

There is no doubt that major changes are needed to the way New Zealand Inc operates if we are ever going to lift our game and achieve true first world status. In particular, the welfare system must be returned to its proper purpose of providing temporary support for the able bodied in their time of need – instead of trapping them into long term dependency on the state. The mindless regulation and red tape that continually holds back small business must be drastically pruned. The Resource Management Act and overbearing local government planning rules need major surgery so people can get on with their projects instead of being endlessly tied up in costly box-ticking bureaucracy.  Government spending must be significantly reduced to levels affordable for a small country of 4 million people so our economy can grow and living standards can rise. But mostly we need to recapture the aspiration to succeed and the traditional “can do” attitude that have been knocked out of us over recent years… but to do that we need to know that all Kiwis are pulling together in the same direction – as society committed to a better future for all New Zealanders, not a society divided by race.

This week’s Guest Commentator, NZCPR Research Associate Mike Butler, picks up on this theme: “With just 48 percent of enrolled Maori voters turning out last week, Maori Party co-leader Tariana Turia is greatly concerned, although she should be more concerned that her party only captured 1.4 percent of the party vote. If you add in Hone Harawira’s Mana Party’s 1 percent, the total 2.4 percent share shows their influence far outweighs their actual support. They owe their existence to the anachronistic Maori seats.

“If Turia applied some accurate thought and linked voter turnout with policies she has promoted, such as whanau ora separate welfare, signing up to the Declaration of Indigenous Peoples’ Rights, pushing for a treaty-based constitution, and facilitating sweetheart deals with tribal corporations, the message is staring at her in the face - that her party has failed to capture the imagination of Maori voters. If she would step back a bit further, she would realise that the concerns of Maori voters are not separate and distinct. They are the concerns of everyone – jobs, health, education – and the government she was in coalition with has had minimal success on all three.” To read Mike’s article, click here>>> 

John Key will announce his Cabinet line-up on Monday and they will be sworn in on Wednesday. Parliament is likely to have its first sitting on Tuesday December 20^th to enable the Governor General to deliver “The Speech from the Throne” outlining the new government’s priorities over the next three years and enabling new MPs to be sworn in. All business on the government’s Order Paper lapses once the House rises for an election, but most of it will be reinstated and resumed by a majority vote under the Constitution Act. The new Parliament is expected to rise for Christmas on December 22^nd ready for the real work to begin in February.

NZCPR POLL
This week’s poll asks:
Given that National already had the numbers to govern with ACT and United Future, do you support National entering into a Confidence and Supply agreement with the Maori Party?
To vote click here>>>> 
(Readers comments will be posted here>>> daily)
View feedback on the last poll here>>>

NZCPR 
Commentary



THE NO-VOTE PROTEST VOTE 

Mike Butler

Why was the voter turnout 
so low? Just 73 percent of enrolled voters cast a vote in Saturday's general election compared with 79 percent
 in 2008. 

Around one million eligible people didn’t vote. 

The view that voters stayed away because polls predicted the National Party could govern alone overlooks a wider reality that many feel the electoral process has nothing to do with them. 

There is also the view that people who don’t vote are lodging a protest vote. 

There is much to protest about, but the most obnoxious aspect of our political system is that the politicians act as if they know best. MMP brought lists of MPs who owe their loyalty to the party hierarchy rather than to an electorate. 

Voters are not silly, and don’t like being dictated to, and many of us believe we live in a representative democracy, founded on the principle of elected individuals representing the people, and not the other way around.
 
To read click here>>>
 

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lPOLL RESULT
*Are you more or less likely to vote for a government that cuts costs to balance its budget?
*Results: More likely 99%, Less likely 1%
*Read comments here>>>
*Browse all previous poll comments here>>

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Visit our HELPDESK to
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CIR UPDATE...

There is a chance that when the special votes are counted next Saturday and final adjustments made, the National Party may lose up to two seats. If that is the case, the support of ACT and United Future is not enough to enable National to govern - the support of the Maori Party would be critical. If the Maori Party becomes ‘king maker’, the price could be high.

During the election campaign, the Maori Party claimed the thresholds for foreshore and seabed claims were too high - a lowering of thresholds may be amongst the concessions they negotiate for. We said that the Marine and Coastal Area Bill would open the floodgates for claims - that is looking increasingly likely.

But you can help to fight back. By giving the CIR petition forms to all of your family and friends over Christmas - asking them to circulate the forms around their own networks – they can help us gather the 320,000 signatures we need to force a nationwide referendum to restore Crown ownership of the foreshore and seabed.

We must stand up for our rights otherwise a small group of disgruntled sovereignty activists will gradually seize private control of our coastline - including the right to exploit its non-nationalised mineral wealth.

Because of the distractions of the Rugby World Cup and the election, we really need your help to crank up our efforts over the summer period. I have attached the petition form to this newsletter – just double click the attachment and print it in landscape format. If you don’t have a printer, please contact our CIR Coordinator Geoff Parker on 09-426-7874 or cma3nz@inbox.com who can post forms to you. But whatever you do, please send in as many completed forms as you possibly can over the summer. Full details about the Referendum and the petition can, of course, be found on our website at www.CoastalCoalition.co.nz.

                  __________________________________________________

THE NZCPR BLOG... 

• Richard Epstein: Curing the Unemployment Blues
• Marc Morano: Scientific case for man-made global warming is dead
• Oliver Marc Hartwich: Incentives are life and death
• Gerry Eckhoff: The Haves and the Have Yachts

                      __________________________________________________

EUROGEDDON AND AUSTERITY 

While the coalition negotiations between National, ACT, United and the Maori Party continue on in their indeterminable way, the sovereign debt crisis in Europe deepens. Amid fears of  loan defaults by Italy and Greece, the credit rating agency Standard and Poor’s has downgraded 37 banks around the world including the four main Australian banks – and with them other New Zealand banking subsidiaries, the ASB, ANZ, BNZ, and Westpac. Although the banks say there will be little effect, over time it is likely there will be upwards pressure on interest rates.    

In light of the worsening global economic situation, there is an argument that the parties contesting the 2011 General Election should have put more focus on austerity measures. To see whether austerity programmes are as unpopular with voters as politicians may think, let’s examine what the research tells us about the track record of governments that have introduced tough austerity programmes. A report from Harvard University in 2010 examined the results of elections in 19 OECD countries over a 33 year period from 1975 to 2008 to see whether governments that imposed austerity measures got thrown out more often than governments that didn’t. Surprisingly, they found there was no difference - governments that focussed on cutting their budget deficits had a survival rate no worse than average.

When researchers burrowed down into the approaches used to balance the books, they found that those that relied primarily on tax increases were more unpopular than those that relied heavily on spending cuts: “In only 20% of elections in the countries that slashed spending did the government lose power, compared with a 56% rate of being booted out of office for governments which chose to raise taxes. Voters evidently dislike tax increases much more than they abhor spending cuts.”[1]

The paper concludes by saying that cash-strapped governments should not worry too much about losing office if they introduce strict austerity measures. While there might be riots in the streets from interest groups that stand to lose some of their benefits, the electorate at large tends to take a more balanced view of fiscal consolidation - especially if it is done through spending cuts rather than tax increases.

This was certainly the case in Canada in the mid-nineties, where, according to a new report from Reuters, the government transformed their “basket case” economy primarily on the basis of severe spending cuts.[2] Canadian ministers were told how much they had to cut and then told to come back with a plan on how they intended to do it. Cuts ranged from 5 to 65 percent of departmental budgets, with almost no area of government spending exempt. The point was made that unless whole programmes were axed, departments were likely to simply postpone spending with the result that the problem would be just as big as it originally was within just a few years.

As a result of their reforms, the Canadian government reduced spending by around 12 percent, interest rates fell, and the deficit - which had risen to 6 percent of GDP in 1994 - disappeared. The debt to GDP ratio declined rapidly from 67 percent in 1993, as the economy outperformed the rest of the G7 countries on growth, jobs and investment. Debt is now around 34 percent of GDP.

The Canadian public were right behind the budget cuts - families that had cancelled holidays and taken on second jobs to make ends meet in the recession couldn’t understand why the government thought it could get away with living beyond its means. As a result of their severe fiscal restraints, the reforming government won two more elections to return majority governments – a rare feat in those days.

The lesson for the John Key and his National government from all of this is that if the global economic situation worsens, they should not be afraid of introducing an austerity budget to severely rein in government spending. In fact, in the cold hard light of day, the state of the government’s books - with a forecast budget deficit of $10.8 billion or 5.1 percent of GDP, and forecast gross Crown debt of $79.8 billion or 37.7 percent of GDP - almost demands an austerity programme. And while New Zealand's government debt at 37.7 percent of GDP remains well below that of Greece at 132 per cent of GDP, Italy at 129 percent, Portugal at 107 percent, France at 97 percent, and Spain at 72 percent of GDP, given our narrow trading base and the fact that our main markets are now feeling the impact of the European sovereign debt crisis, there is no room for complacency.

So what should be the direction of an austerity budget?

At the top of the list would have to be National’s welfare reform programme, which they claim will produce great benefits including savings of $1 billion over four years.

At the present time the social welfare system support 550,000 New Zealanders - 328,000 working-age adults and 222,000 children. It is an indictment of the system that of the 12 percent of working age adults who are presently living on benefits, over half have been on welfare for at least five years. For the able-bodied, welfare was designed to provide temporary support, not lock them into permanent dependency on the state.

Over the years the benefit system has expanded to entrap many people who could and should be working in state dependency. This problem is now intergenerational and is harming children. When children grow up in benefit dependent households that do not value marriage or commitment, where no-one works for a living, where education is not treasured, and where substance abuse is commonplace, they are extremely vulnerable - their potential severely limited by a hand-out system that destroys lives.

National’s welfare plan is based on many of the recommendations of the Welfare Working Group. Their goal is to provide long-term support for those who are genuinely unable to fend for themselves, while refocussing all other beneficiaries on work. There will be a big increase in work testing, benefits will be restructured and simplified, the incentives to have more children on welfare will be curtailed, and drug addicts and alcoholics will be forced to either get treatment or lose their benefits. In conjunction with these changes will be a serious crackdown on the benefit fraud and abuse that has long riddled the system.   

In looking at the sort of fundamental economic changes that are needed in an austerity programme, the government should have a  goal of reducing government spending back to what it was in 2005 - when it was an affordable 29 percent of GDP. In conjunction with spending cuts, a comprehensive boost to the economy would be generated through reducing the red tape and compliance costs that severely inhibit business growth. Following the lead of Canada - which has reduced company tax to 15 percent - a further reduction in company tax from 28 percent to below 20 percent would give New Zealand export businesses in particular the competitive advantage they need to help them overcome the handicap of distance from our international markets. In addition the government’s spending cuts would enable personal tax rates to be lowered closer to 20 percent thus easing the financial burden on many households and raising living standards.

Any austerity package serious about offsetting the global downturn and boosting growth would have to include suspending the Emissions Trading Scheme. Scrapping the ETS was promoted by ACT, New Zealand First, and the Conservatives in their election manifestos. Instead of an ETS that was designed as a mechanism to reduce emissions in industrial nations - not a sparsely populated rural economy like New Zealand - the NZCPR has long advocated a national project like planting Kauri forests on Department of Conservation or Council land (utilising the help of local long-term unemployed) as New Zealand’s commitment to reducing greenhouse gases - if one is deemed to be necessary for competitive trade-related purposes. The present ETS has added unsustainable costs onto every New Zealand household through rises in the price of fuel and power that have also increased the cost of most other goods and services in our economy.

With carbon prices collapsing both here and in the European Union, it would be far better for the government to suspend the ETS now in the name of austerity, rather than wait for the total collapse that will occur once the Kyoto Protocol expires next year. Scrapping the ETS, would not only relieve the cost burden on kiwi families, but the forecast cost of $1.5 billion for the provision of ETS credits in the budget could be cut as well.

During the campaign John Key talked of the need to “make the boat go faster”. In light of that, surely the government should reverse its decision to privatise the massive wealth found within New Zealand’s coastline to corporate iwi. Instead it should be retained for the benefit of all citizens. Retaining Crown ownership of the foreshore and seabed would also save $1.6 million from the budget – that is the cost that taxpayers will be expected to pay corporate iwi to prepare their claims for our coast!

In looking to the future, I asked this week’s NZCPR Guest Commentator, journalist and former editor of The Dominion, Karl du Fresne if he would provide a roundup of the election. In his final paragraph he picks up on this same theme of wanting National to do more:

“Will the Key government show more daring in its second term than it did in the first? It has the excuse that the global economic crisis calls for bold action, but it could just as easily argue – and probably will – that a period of international uncertainty is no time for making radical changes that might create anxiety. So while we can expect modest reforms in such areas as welfare, youth wages, accident compensation, partial privatisation of state assets and the Resource Management Act, no one’s bracing themselves for tough action to curb the state spending binge that began under the Helen Clark government and has continued largely unabated under National. Stability is likely to remain National’s soothing mantra.” To read Karl’s commentary, click here>>>

In light of the worsening global situation and the fact that history respects governments that cut costs in difficult times, one can only hope that National finds the intestinal fortitude to take the bold steps necessary to put HMS New Zealand back on a course to growth and prosperity. The economic threat is very real, and New Zealand is far too heavily dependent on just a few commodity markets to ignore the warnings. We urgently need to increase export growth but we can’t do that until the government introduces an austerity programme that focuses on the removal of barriers to entrepreneurialism and wealth creation as a priority.

NZCPR POLL
This week’s poll asks:
Are you more likely or less likely to vote for a government that cuts costs to balance its budget?
To vote click here>>>> 
(Readers comments will be posted here>>> daily)
View feedback on the last poll here>>>

NZCPR 
Commentary



THREE MORE YEARS 

Karl du Fresne

The vital statistics – 60 
seats for National (up two) and 34 for Labour (down 
nine) – tell only part of the story. 

Even more striking was the fact that in Labour strongholds such as Christchurch East, Te Atatu and New Lynn, National won the party vote. 

That humiliation was compounded by Labour’s 
loss of well-regarded up-and-coming MPs such as Stuart Nash and Kelvin 
Davis, and by the thrashing handed out to glamour candidate Andrew Little in the 
previously ultra-marginal seat of New Plymouth, Little’s home town. 

The ambitious former union boss still gets into 
Parliament at No 15 on the Labour list, but his star has lost a lot of its lustre.
 
To read click here>>>
 

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lPOLL RESULT
*Do you see the election result as being positive or negative for New Zealand?
*Results: Positive 72%, Negative 28%
*Read comments here>>>
*Browse all previous poll comments here>>

lTECHNICAL HELP
Visit our HELPDESK to
solve problems with the newsletter here>>>

CIR UPDATE...

*Working hard to restore Crown ownership of the foreshore & seabed

Members of the Pakuranga Grey Power intend to gather CIR petition signatures at their local shopping centres. Here is a group collecting signatures at an event at Gulf Harbour. If you would like to use the signs, please contact CIR Coordinator Geoff Parker on 
09-426-7874 or cma3nz@inbox.com.

*CIR petition forms can be downloaded from www.CoastalCoalition.co.nz
                  __________________________________________________

THE NZCPR BLOG... 

• Ron Smith: Pornography and the public interest
• Karl du Fresne: What's going on at TV3?
• Lindsay Mitchell: 1200 children born today might be dead if born in 60s
• Steve Baron: Direct Democracy - Major Objections and Responses

                      __________________________________________________

ELECTION 2011 - THE FINAL COUNTDOWN! 

Last month, with the Rugby World Cup in full swing, the country was painted black in support of the All Blacks. Now, the country is painted blue in support of a National-led government.

Almost half of the population voted for National, but due to the vagaries of MMP, John Key still needs coalition partners to enable him to govern.

United Future’s lone MP Peter Dunne, and ACT’s now lone MP John Banks, have both stepped up and pledged their support so that National can form a government.

The numbers of crucial party votes tell the story of this 2011 General Election: 

* 958,000 votes for National gave 47.99 percent and 60 seats in Parliament
* 541,000 votes for Labour gave 27.13 percent and 34 seats        
* 212,000 votes for the Greens gave 10.62 percent and 13 seats        
* 136,000 votes for NZ First gave 6.81 percent and 8 seats        
* 27,000 votes for the Maori Party gave 1.35 percent and 3 seats
* 21,000 votes for ACT gave 1.07 percent and 1 seat
* 20,000 votes for Mana gave 1 percent and 1 seat
* 12,000 votes for United Future gave 0.6 percent and 1 seat in Parliament

The new Conservative Party picked up 55,000 votes or 2.76 percent of the Party vote, but because it failed to win an electorate seat, those votes were wasted and re-allocated to the other parties.

The 2011 General Election was run against the backdrop of a deteriorating global economy. Throughout the campaign the crisis in the Euro zone has continued to escalate as Greece, Italy and Spain all face calamitous debt defaults that have threatened the European Union and the stability of world economies. Each of these countries are faced with the similar problems of incompetent governments that have failed to impose effective austerity measures to reduce government spending and reign in government debt. As a result their economies have stalled and rising unemployment is making their problems worse.

With all of this in mind, the Labour Party’s main campaign message of more borrowing and spending did not resonate well with voters. It appeared to be more of a threat to our future, than the promise of a better way. In addition, their negative campaigning based on envy and greed did not appeal to many New Zealanders, who at heart are aspirational in nature. From their darkly oppressive advertising images, to the nasty and bitter rhetoric - Damian O’Connor in Labour’s opening televised address described National’s tax cuts and the ‘trickle down’ theory as “the rich pissing on the poor”, David Cunliffe on the campaign trail and on youtube described the Prime Minister as “the greasy little fellow in the blue suit”, David Parker in the closing televised address described people on welfare as “sitting on their arses” - Labour’s negative campaigning drove voters in search of alternatives, bringing the worst rout since MMP began, as voters abandoned them largely for the Greens.

With the biggest question on people’s minds being who would provide the safest pair of hands to guide the economy through the difficult times ahead, National’s more aspirational campaign promising a brighter future struck a chord. Their focus on strong economic management, reducing government spending, and more effective welfare reform, resonated with voters. They ran a tight presidential campaign and achieved their goal of 48 percent of the party vote.

The star performer of the 2011 Election Campaign has been the Greens. They have successfully shifted their brand from the radical left positioning epitomised by likes of former MPs Sue Bradford and Nandor Tanczos, to the centre ground of politics occupied by Labour. Their masterful campaign content was an effective balance between policy and the emotional imagery of playful children, clean freshwater streams, and towering windmills on outstanding landscapes. They managed to enter the economic debate with credibility and didn’t miss a beat with their trademark stream of relevant news stories designed to keep them in front of the cameras and the public.

All parties could learn a lot from the Greens' propaganda machine, which is so slick that it effectively deflects close scrutiny - but one would have thought the lessons should have already been learnt, since the Greens have always been extremely effective at campaigning.

ACT on the other hand was unable to throw off the infighting and innuendo that had continually dogged the party over recent years, and the resulting lack of traction for its campaign messages left the ACT of today in a very different position from that of 1996, when it promised to breathe fresh air into New Zealand politics.

That fresh air instead came from the new Conservative Party. With a largely leaflet based campaign, the Conservatives - like many new parties - struggled to gain media traction. However, in spite of that it managed to achieve a party vote better than the combined vote of ACT, United Future, and the Mana Party! It remains to be seen whether the founder Colin Craig will grow the party into a fully functioning democratic party ready to contest the 2014 General Election.

The major surprise of the election campaign, has of course, been the return of New Zealand First. Written off by the media and demonised by many politicians, Winston Peters has been working under the radar to spread his message around the country over the last three years. The straight talking style of Mr Peters on issues of concern to many New Zealanders  - in particular the rise of the Maori sovereignty movement – is undoubtedly a key factor in his return. In this politically correct world in which we now live, where anyone who criticises Maori sovereignty activists are accused of being racist, many New Zealanders would have supported the return to Parliament of a politician prepared to speak out strongly against the growing racial divide that deepened and widened during the three years that the Maori Party has had its hands on the levers of power.  

In looking at the Maori vote, as with ACT, it appears that their infighting has turned supporters away. The Maori and Mana parties between them gained only 47,000 votes from the 230,000 enrolled on the Maori electoral roll. In fact, these two parties split the radical Maori sovereignty vote in two. On the one hand are those who support the Maori Party, which is the voice of the iwi leaders - an elite group that according to a recent government report, control some $37 billion worth of assets in New Zealand. And on the other hand are those activists represented by Hone Harawera and his Mana Party. So when John Key strikes his coalition agreement with the Maori Party, it will be to give the Maori aristocracy a “voice at the top table”, not struggling Maori.

In the lead up to an election, the polls play a major roll in indicating where voter support is moving. To some extent government funding for campaign purposes is tied to how the parties are ranking in the polls, and some media networks use the polls restrict the appearance of low ranking minor party leaders in their televised debates. As a result, political polls can have a dramatic influence on the outcome of an election.

This week’s NZCPR Guest is Frank Newman, an economic commentator and NZCPR Director, who has examined the winners and losers in this year’s election – including the pollsters: “The politicians were not the only ones being judged on election night. So too were numerous polling companies. In this election there was a marked difference between the polls. Horizon, for example, predicted National would poll around 33% and the Conservative Party over 5%, while Fairfax had National support at 54%. 

NZCPR 
Commentary



ELECTION 2011:
 WINNERS AND LOSERS 

Frank Newman

The winners and losers on election night, when measured by the change in party vote from their 
2008 result are:

Winners
1.Greens:  + 3.9%
2.National:  + 3.06%
3.Conservative:  + 2.76%
4.NZ First:  + 2.74%
5.Mana:  + 1%

Losers
1.Labour:  - 6.86%
2.ACT NZ:  - 2.58% 
3.Maori Party:  - 1.04% 
4.United Future: