No light at the end of the tunnel
It’s clearly going to be a troubled holiday break for New Zealand’s leaders – and all New Zealanders. The run up to Christmas and New Year is littered with worrisome indicators of continuing problems in the path of the country’s economic recovery.
The blowout of the deficit that will require the country to step up borrowing from the present $250 million a week to $350 million; the fact that the rejigging of the tax rate in October is not looking like it is going the way it was expected to go with bigger shortfalls in meeting collection targets; the continuing lag in the real estate market; the precipitous dip in new private sector investment and the lack of appetite for bank credit are just a few red flags that make the road ahead look harder than ever.
This is over and above problems such as the long languishing export sector so vital to New Zealand’s economy; continuing high prices of consumer essentials and a stagnant job market that makes the overall picture look even bleaker. Opinion is divided among economists whether New Zealand is headed for a double dip recession, with any faint glimmers of hope of recovery in the past quarter looking set to fade away into last year’s darkness at least in the first quarter of next year.
In the midst of it all, the government is not looking like it has the answers. Despite the much-touted financial wizardry of its leadership, it is unable to show New Zealanders any light at the end of the tunnel. The tunnel only seems to get longer and with many more twists and turns, some admittedly beyond the government’s control – such as the Canterbury quake and the leaky homes payout, besides other unforeseen circumstances that have strained its finances.
In the coming weeks, we are more than likely to see blame for the long delayed recovery being heaped on these “unforeseen” circumstances, because clearly, it is the easy way to explain away non achievement for any government in power.
The government’s lack of courage in seizing the opportunity to take bolder decisions on the economy and mopping up resources with tougher reform, despite the strong mandate and popularity that the government had in the first two years, is now beginning to show.
As a result the measures it has announced in the past few weeks – such as laying more emphasis on savings in the 2011 budget and other belt tightening measures like controlling government spending are already beginning to look ineffectual in front of the mounting problems that threaten the country’s already weak economic situation.
Besides, belt tightening is easier said than done particularly next year, given that it is an election year and with a big international event like the Rugby World Cup on the cards. No government in power can hope not to spend in an election year. Despite its continuing huge lead over Labour in the opinion polls, the National government cannot expect to put in practice the kind of belt tightening its needs to do to take corrective measures.
Some of the measures it will have to consider seriously to raise funds are sale of assets in government enterprises to the private sector. This is indeed a political hot potato but the government has few other options. National’s leadership will have to seriously consider going into what it has already dubbed “no go zones” in the realm of taxation – such as a capital gains tax.
It has always been suspected that these reforms would be expedited in National’s second term after next year’s elections, which it is expected to win – at least as things stand – given the complete disarray in the Labour camp and its lack of any credible game plan or even the projection of a decisive and credible leader so close to the election.
With a looming election year in which the government clearly looks as though it is more likely to duck rather than dare take tough decisions despite leading in the opinion polls, an opposition that continues to look rudderless with its leadership nearly in tatters and a global economy looking as bleak as ever, Kiwis look to be in even harder times at least in the first half of next year.
If nothing else, the rugby result may lift the country’s spirits in the second half. Or they may not, who knows. And no incumbent government would like to seek reelection in circumstances like that. So it is reasonable to expect a pre RWC election. Which means no tough decisions in the first half of next year – and bleak times will continue.
Time to stop sounding so Grinchy?
Have a great holiday.
It’s clearly going to be a troubled holiday break for New Zealand’s leaders – and all New Zealanders. The run up to Christmas and New Year is littered with worrisome indicators of continuing problems in the path of the country’s economic recovery.
The blowout of the deficit that will require the...
It’s clearly going to be a troubled holiday break for New Zealand’s leaders – and all New Zealanders. The run up to Christmas and New Year is littered with worrisome indicators of continuing problems in the path of the country’s economic recovery.
The blowout of the deficit that will require the country to step up borrowing from the present $250 million a week to $350 million; the fact that the rejigging of the tax rate in October is not looking like it is going the way it was expected to go with bigger shortfalls in meeting collection targets; the continuing lag in the real estate market; the precipitous dip in new private sector investment and the lack of appetite for bank credit are just a few red flags that make the road ahead look harder than ever.
This is over and above problems such as the long languishing export sector so vital to New Zealand’s economy; continuing high prices of consumer essentials and a stagnant job market that makes the overall picture look even bleaker. Opinion is divided among economists whether New Zealand is headed for a double dip recession, with any faint glimmers of hope of recovery in the past quarter looking set to fade away into last year’s darkness at least in the first quarter of next year.
In the midst of it all, the government is not looking like it has the answers. Despite the much-touted financial wizardry of its leadership, it is unable to show New Zealanders any light at the end of the tunnel. The tunnel only seems to get longer and with many more twists and turns, some admittedly beyond the government’s control – such as the Canterbury quake and the leaky homes payout, besides other unforeseen circumstances that have strained its finances.
In the coming weeks, we are more than likely to see blame for the long delayed recovery being heaped on these “unforeseen” circumstances, because clearly, it is the easy way to explain away non achievement for any government in power.
The government’s lack of courage in seizing the opportunity to take bolder decisions on the economy and mopping up resources with tougher reform, despite the strong mandate and popularity that the government had in the first two years, is now beginning to show.
As a result the measures it has announced in the past few weeks – such as laying more emphasis on savings in the 2011 budget and other belt tightening measures like controlling government spending are already beginning to look ineffectual in front of the mounting problems that threaten the country’s already weak economic situation.
Besides, belt tightening is easier said than done particularly next year, given that it is an election year and with a big international event like the Rugby World Cup on the cards. No government in power can hope not to spend in an election year. Despite its continuing huge lead over Labour in the opinion polls, the National government cannot expect to put in practice the kind of belt tightening its needs to do to take corrective measures.
Some of the measures it will have to consider seriously to raise funds are sale of assets in government enterprises to the private sector. This is indeed a political hot potato but the government has few other options. National’s leadership will have to seriously consider going into what it has already dubbed “no go zones” in the realm of taxation – such as a capital gains tax.
It has always been suspected that these reforms would be expedited in National’s second term after next year’s elections, which it is expected to win – at least as things stand – given the complete disarray in the Labour camp and its lack of any credible game plan or even the projection of a decisive and credible leader so close to the election.
With a looming election year in which the government clearly looks as though it is more likely to duck rather than dare take tough decisions despite leading in the opinion polls, an opposition that continues to look rudderless with its leadership nearly in tatters and a global economy looking as bleak as ever, Kiwis look to be in even harder times at least in the first half of next year.
If nothing else, the rugby result may lift the country’s spirits in the second half. Or they may not, who knows. And no incumbent government would like to seek reelection in circumstances like that. So it is reasonable to expect a pre RWC election. Which means no tough decisions in the first half of next year – and bleak times will continue.
Time to stop sounding so Grinchy?
Have a great holiday.
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