NATIONAL S ECONOMIC ROAD TEST JANUARY 2013 DAVID PARKER, LABOUR FINANCE SPOKESPERSON 1
TABLE OF CONTENTS NATIONAL - MANAGING OUR DECLINE...3 AVERAGE ANNUAL ECONOMIC GROWTH: 1935-2012...3 UNEMPLOYMENT...5 THE DOUBLE DIPTON RECESSION...7 GDP PER CAPITA - NZ V AUSTRALIA...9 THE FISCAL HOLE... 11 SUPER FUND... 13 NZ SUPER COSTS... 15 MIGRATION TO AUSTRALIA... 17 INCOME INEQUALITY... 19 OVERSEAS BORROWING... 21 EXPORTS... 23 EXCHANGE RATE... 25 A BETTER WAY A LABOUR WAY... 27 2
NATIONAL MANAGING OUR DECLINE National promised a brighter future. It isn t delivering. After four years of National our economy is not delivering for far too many ordinary New Zealanders. Significant problems need to be addressed but the Government refuses to make the changes that need to be made. Unemployment has surged to a 13 year high. No extra jobs over the last year. Growth is the worst of any government in 50 years. The real economy of manufacturing and exports outside the primary sector is in decline. The current account is $10 billion in the red and getting worse. Revenue has dropped $13 billion below projections over 5 years, forcing the Government to raise petrol taxes to keep its surplus dream alive. The overvalued dollar is crippling our exporters and increasing NZ s overseas debt. National throws the blame wherever it can. At Europe, at Australia, at voodoo economists. But the blame lies squarely on their shoulders. As this road test shows they have failed to deliver on their own promises, let alone New Zealanders expectations. Promises like creating 170,000 new jobs, when the sad truth is the same number of people are looking for work and even more have left for Australia under their watch. National promised a brighter economic future and to close the wage gap with Australia. Neither has been achieved. The truth is National doesn t have the ideas or the willingness to make the changes needed. Behind every number is a person who failed to find a job, a family that can t keep ahead of their bills and a company owner who has had to close doors or lay off workers. Kiwis are sick of listening to four years of excuses. They deserve action. They want a government that will be hands on and make a difference. AVERAGE ANNUAL ECONOMIC GROWTH: 1935-2012 NATIONAL IN GOVERNMENT: LABOUR IN GOVERNMENT: 2.9% 3.7% SOURCE: STATISTICS NEW ZEALAND, BRIAN EASTON - HISTORICAL GDP ESTIMATES 3
170,000 NEW JOBS SOURCE: NATIONAL PARTY TELEVISION COMMERCIAL, NOVEMBER 2011 ZERO NEW JOBS CREATED IN THE YEAR TO MARCH 2013. 4 SOURCE: TREASURY HYEFU 2012
UNEMPLOYMENT 8 Unemployment Rate (Seasonally adjusted) 7 6 5 4 3 2 1 0 Number unemployed (000s) 2005Q1 2005Q2 180 170 160 150 140 130 120 2005Q3 2005Q4 2006Q1 2006Q2 2006Q3 2006Q4 2007Q1 2007Q2 2007Q3 2007Q4 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3 2010Q4 2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2 2012Q3 Number of unemployed people (Seasonally adjusted) 110 100 90 80 2008Q4 2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3 2010Q4 2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2 2012Q3 SOURCE: STATISTICS NEW ZEALAND, HOUSEHOLD LABOUR FORCE SURVEY 5
THE ECONOMIC RECOVERY IS A BIT FLATTER THAN WAS EXPECTED, BUT THAT IS A GOOD THING. SOURCE: BILL ENGLISH, NOVEMBER 2010 6 SINCE 2008, NEW ZEALAND IS THE ONLY DEVELOPED COUNTRY OUTSIDE OF EUROPE AND JAPAN TO ENDURE A DOUBLE DIP RECESSION
THE DOUBLE DIPTON RECESSION ADVANCED ECONOMIES WHICH EXPERIENCED A SECOND RECESSION BETWEEN 2008-2012 EUROPE OTHER Czech Republic (2012) Japan (2010) Finland (2012) New Zealand (2010) Greece (2010) 2.0% Hungary (2008) Iceland (2010) 1.5% Ireland (2008) Italy (2011) 1.0% Luxembourg (2009) Netherlands (2011) 0.5% Norway (2010) Portugal (2010) 0.0% Slovenia (2012) Spain (2011) -0.5% United Kingdom (2011) 2008Q4 2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3 2010Q4 2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2 2012Q3-1.0% -1.5% SOURCE: OECD 7
OUR VISION IS TO CLOSE THE GAP WITH AUSTRALIA BY 2025. SOURCE: JOHN KEY, 8 NOVEMBER 2009, SUNDAY STAR TIMES THE GAP IS WIDENING. 8
GDP PER CAPITA - NZ V AUSTRALIA SOURCE: STATISTICS NEW ZEALAND, AUSTRALIAN BUREAU OF STATISTICS THE WAGE GAP AVERAGE WEEKLY WAGE MAY-JUNE 2012 NEW ZEALAND AUSTRALIA $872.61 $1022.10 SOURCE: Stats NZ Quarterly Earnings Survey. Australian Bureau of Statistics Average Weekly Earnings. OECD PPP and Exchange Rates. Closing the wage gap with Australia was a cornerstone of National s 2008 election promise. The Government has stopped talking about this now. The Finance Minister recently said, it is no good crying at the airport or wringing your hands over New Zealanders heading to Australia. The weekly wage gap with Australia has grown by $27.73 a week since National has been in office, from $121.76 a week in December 2008, to $149.49 today The Government still won t even provide a milestone date by which the wage gap will be back to where it was when they took office. 9
SHOW ME THE MONEY SOURCE: JOHN KEY, PRE-ELECTION DEBATE, 2 NOVEMBER 2011 GROWTH IS SO POOR THAT CROWN REVENUE PROJECTIONS KEEP GETTING WORSE. 10
THE FISCAL HOLE 80000 MIND THAT GAP: THE $13.2B FISCAL HOLE REVEALED FORECAST CORE CROWN REVENUE 2012-16 Pre-election 2011 May 2012 Dec 2012 70000 Millions 60000 Since 2011 the Key Government has been quietly reducing revenue projections because the economy is flat. Now the shortfall totals 13.2 billion dollars DOUBLE the estimated value of National s sale of state assets. SOURCE: TREASURY - PREFU 2011, BUDGET 2012, HYEFU 2012 50000 2012 2013 2014 2015 2016 National s hands-off approach to the economy is not working. Repeated downgrades to job and growth forecasts have opened up a $13 billion hole in the five-year Government accounts. 11
40% OF THE SUPER FUND TO BE INVESTED IN NEW ZEALAND. SOURCE: NEW ZEALAND NATIONAL PARTY 2008 MANIFESTO PROPORTION INVESTED IN NZ UNCHANGED. 12
SUPER FUND SOURCE: The Guardians of the New Zealand Superannuation Fund NATIONAL S 2008 POLICY PROMISE: National s policy is for the Super Fund to invest a greater proportion in New Zealand, while also safeguarding the fund as a source of future New Zealand superannuation payments, and overseen by independent guardians. National will set the target of at least 40% of the Super Fund to be invested in New Zealand. National said that more of the Super Fund was not invested in NZ in 2008, because Labour has done nothing to generate new investment opportunities. Therefore, National has to accept responsibility for failing to create investment opportunities in New Zealand in 2013. 13
GOVERNMENT TO STRENGTHEN FISCAL RESPONSIBILITY SOURCE: BILL ENGLISH, BUDGET 2012 THE GOVERNMENT REFUSES TO MAKE PROVISION FOR FUTURE FISCAL PRESSURES. 14
NZ SUPER COSTS 14000 Cost of NZ Super vs Education, Dole and Welfare expenses 12000 10000 Millions ($NZ) 8000 6000 NZ Superannuation Education expenses All Welfare (excluding NZS) Unemployment Benefit 4000 2000 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 SOURCE: TREASURY, HYEFU 2012 FISCAL RESPONSIBILITY REQUIRES RESPONSIBILITY AROUND NZ SUPER Ironically, the Finance Minister claimed in the 2012 Budget that, The Government is proposing introducing some additional principles into Part 2 of the Public Finance Act that ministers would have to take into account when setting fiscal policy. The proposed changes are designed to ensure greater transparency around how government decisions affect the wider economy and future generations. The single largest fiscal pressure in the government is the looming cost of NZ Superannuation. In three years, the annual cost of NZ Super will exceed annual spending on all of the welfare system, or all of the education system from pre-school to tertiary. It will be large multiples of spending on unemployment. And with the retirement of baby boomers, along with rising life expectancy, the cost pressures will only rise. National s refusal to deal with the issue makes it more likely it will impose unfair and sudden change later when it s too late for individuals to change their plans. 15
WAVE GOODBYE TO HIGHER TAXES, NOT YOUR LOVED ONES SOURCE: NATIONAL PARTY CAMPAIGN BILLBOARD, 2008 16 177,031 PEOPLE HAVE LEFT PERMANENTLY FOR AUSTRALIA SINCE JOHN KEY TOOK OFFICE. AS OF NOVEMBER 2012
MIGRATION TO AUSTRALIA 60000 Annual Migration to Australia (Year to September) 55000 50000 Departures to Australia 45000 40000 35000 30000 25000 20000 2005 2006 2007 2008 2009 2010 2011 2012 Sept Year 34304 33866 39773 47166 37362 33814 48829 53729 24,000 22,000 Annual Migration to Australia Ages 18 to 30 Years Inclusive (Year to September) 20,000 18,000 16,000 14,000 12,000 10,000 2005 2006 2007 2008 2009 2010 2011 2012 Sept Year 12,557 12,338 13,985 17,007 13,881 13,219 19,166 21,589 SOURCE: STATISTICS NEW ZEALAND 53,729 people departed for Australia in the year to September 2012. 177,031 people have left New Zealand for Australia since John Key took office in November 2008. 40 per cent are between 18 and 30 years old. 2012 is set to be the calendar year during which the highest number of people leave for Australia in New Zealand history. 17
WE ARE ALL IN THIS TOGETHER. WE ALL STAND TO LOSE FROM THE EMERGENCE OF A GROWING UNDERCLASS, AND WE ALL STAND TO GAIN BY DOING SOMETHING ABOUT IT. SOURCE: JOHN KEY, 31 JANUARY 2007 18 INCOME INEQUALITY IN NEW ZEALAND: THE HIGHEST SINCE RECORDS BEGAN SOURCE: MSD - HOUSEHOLD INCOMES IN NEW ZEALAND: TRENDS IN INDICATORS OF INEQUALITY AND HARDSHIP 1982 TO 2011
INCOME INEQUALITY 45 43 Income inequality in New Zealand: after housing costs 41 39 Gini coefficient (x100) 37 35 33 31 29 27 25 Source: MSD - Household incomes in New Zealand: Trends in indicators of inequality and hardship 1982 to 2011 1990 1992 1994 1996 1998 2001 2004 2007 2009 2010 2011 In response to this chart, John Key said: THAT LOOKS LIKE THE NATIONAL PARTY S POLL RATINGS WHILE IN GOVERNMENT. - JOHN KEY, PARLIAMENT, AUG 28 2012. 20% OF NEW ZEALAND CHILDREN LIVE IN POVERTY. SOURCE: GOVERNMENT GREEN PAPER FOR VULNERABLE CHILDREN, 2011 19
OUR EXTERNAL DEBT LEVELS REMAIN HIGH AND THE CURRENT ACCOUNT DEFICIT IS MOVING BACK TOWARDS THE 5 PERCENT PLUS DANGER ZONE SOURCE: CAMERON BAGRIE, ANZ CHIEF ECONOMIST, 2011 IN 2012 NEW ZEALAND HAD THE SECOND WORST CURRENT ACCOUNT DEFICIT IN THE DEVELOPED WORLD AFTER GREECE. 20 IN 2013 IT WILL BE THE WORST.
OVERSEAS BORROWING 25 20 Balance on Current Account, % of GDP: Advanced Economies 2013 IMF Projections 15 10 5 0 Estonia Spain Israel Italy Malta Finland France Portugal Cyprus Iceland Czech Republic United Kingdom Greece United States Canada Australia New Zealand -5-10 Singapore Norway Switzerland Netherlands Sweden Taiwan Luxemburg Germany Denmark Hong Kong Ireland Japan Korea Austria Slovenia Belgium Slovak Republic Source: IMF World Economic Outlook, September 2012 Current Account Balance (% of GDP): Forecasts 0.0% 2013 2014 2015 2016 2017-2.0% -4.0% -6.0% NZIER IMF Treasury RBNZ Infometrics -8.0% -10.0% -12.0% 21
EXPORTS TO BE 40% OF GDP BY 2025. SOURCE: TIM GROSER, 20 JUNE 2012 ANOTHER TARGET NOT BEING MET. EXPORTS ARE STATIC AND OUR CURRENT ACCOUNT DEFICIT IS UNSOLVED. 22
EXPORTS 50.0% Exports as proportion of GDP 40.0% 30.0% 20.0% 10.0% 0.0% 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 SOURCE: STATISTICS NEW ZEALAND EXPORTS AS PROPORTION OF GDP 2008: 28.3% 2009: 31.2% 2010: 28.3% 2011: 29.7% 2012: 30.2% Exports are not growing as a proportion of GDP even when GDP growth has been flat. 23
THE ECONOMY CANNOT OPERATE FOR LONG ABOVE A US70c EXCHANGE RATE SOURCE: JOHN KEY, 5 APRIL 2007 24 THE DOLLAR HAS BEEN ABOVE US70c FOR YEARS AND SHOWS NO SIGNS OF FALLING.
EXCHANGE RATE 0.90 NZD-USD Exchange Rate 0.80 0.70 US Dollar 0.60 0.50 0.40 0.30 Dec 2008 Apr 2009 Aug 2009 Dec 2009 Apr 2010 Aug 2010 Dec 2010 Apr 2011 Aug 2011 Dec 2011 Apr 2012 Aug 2012 Dec 2012 SOURCE: RESERVE BANK OF NEW ZEALAND 240000 Filled Jobs in Manufacturing (QES) 220000 200000 180000 160000 140000 120000 2008Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q3 2011Q1 2011Q3 2012Q1 2012Q3 SOURCE: STATISTICS NEW ZEALAND QUARTERLY EMPLOYMENT SURVEY 25
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A BETTER WAY A LABOUR WAY Many of National s policies have passed their use-by date. Economists, many governments and major institutions such as the IMF realise that the world has changed. They know new answers are needed. New Zealanders understand this too and know that we must change as well. Kiwis want real and innovative solutions to take this country forward. They want a Government that sees problems and gets stuck in to fix them rather than try to explain them away. That s why there is significant support for major Labour policies, including KiwiBuild, raising the retirement age, universal KiwiSaver, updating our monetary policy and a capital gains tax. It s time for a hands-on government, one that is committed to making a real difference in people s lives. LABOUR S SOLUTIONS Build 100,000 new homes in 10 years, a policy that will create 4,000 jobs. Help exporters and manufacturers by changing the Reserve Bank Act so we achieve a fair and competitive exchange rate. Help the manufacturing industry achieve its vision of being a modern, high-tech driver of our economy, employing New Zealanders in well-paid jobs and supporting other parts of the economy. Change tax to encourage investment in productive, exporting industries. A capital gains tax and research and development tax credits are a key part of this. A new vision for skills, education and training so that New Zealanders can take advantage of the job opportunities of a 21st century economy. Investing more in innovation and science by reinstating Research and Development tax credits. Tighter controls on foreign purchases of productive farm land and infrastructure. Prudent decisions about looming fiscal pressures, including the age of eligibility for superannunation. Introducing Universal KiwiSaver to build our savings so that we can own our own country. 27
Authorised by David Parker MP, Parliament Buildings, Wellington