Doctor Bollard's medicine hard to swallow
Prime Minister Helen Clark must be wondering how to get an even break at the moment.
Four polls have now confirmed that the Budget went down like a cup of cold miso with voters, despite Michael Cullen going to the well and spending the surplus on tax cuts. The latest was the Morgan poll out today, which has National up 1.5% to 50.5% and Labour down 3 points to 32%.
That poll follows three others - TVNZ's Colmar Brunton, TV3's TNS and the Herald's DigiPoll also finding voters unimpressed with the Budget - my previous concerns about the DigiPoll notwithstanding.
I guess, given the average gap is now more than 18 points, Clark will not being saying anything derogatory about the next Fairfax poll, given every poll since has pretty much confirmed the trend for Labour, which is down, down, down.
Into this polling malaise strode Reserve Bank governor Alan Bollard this week, with the sort of economic report card that makes your eyes water. I sat in on the select committee yesterday where he answered MPs' questions on the latest monetary policy statement and I haven't heard a central bank governor so blunt in many a year.
Basically Bollard said things were going to get a lot worse before they got any better, and that he thought most of Treasury's forecasts for economic growth, unemployment, and inflation were far too optimistic. So different from Treasury are the bank's forecasts that one of the two is going to end up seriously embarrassed.
Personally, my money's on the Reserve Bank being closer to the mark. Although Bollard's team is smaller, they seem more disciplined, not to mention more independent, than Treasury. The bank has a more of a weather eye on international events than Treasury, too, and I think more correctly assesses the impact of external events on our economy than Treasury does.
Granted, the bank has consistently got the oil price wrong, but then so has everyone else. And if the bank is wrong this time about the price falling, then the surprise will be on the downside, not the upside.
Of course the irony of our monetary policy framework is that consumers may get more relief from the bottom of the economic cycle through cuts in mortgage rates and lower taxes. It appears that both Labour and National now favour spending their way out of a possible technical recession.
It still seems unfortunate that the bank should virtually have to kill the domestic economy and the housing market in order to achieve its aim of lowering inflation, but that's the agreement that successive governments have signed up to.
The good news in all of this for Labour is that interest rates may start coming down before the election, which will put more money into voters' pockets at around the same time that the October 1 tax cuts kick in.
But rising unemployment, inflation, and stagnant economic growth isn't the record Cullen wanted to campaign on either, even if he can still argue things are better economically than when he assumed office.
The bank's verdict also has some good news for National, since it now appears that tax cuts aren't likely to be inflationary in the medium term after all. Finance spokesman Bill English has already said he feels more comfortable now about National's tax cuts programme and I think we can expect bolder moves from National than might have otherwise been the case.
It was also unfortunate for Labour that Bollard's statement fell on World Environment Day, which was what the Prime Minister wanted to talk about in Christchurch yesterday. Clark resurrected her "sustainability'' message for the occasion but it got buried beneath the avalanche of economic bad news.
"Sustainable societies are built on investment in knowledge and skills and technology ... that is why I have issued the challenged that we should dare think we could be a truly sustainable nation and to be carbon neutral,'' Clark said. "Heaven knows it isn't easy, but I am convinced that moving in the right direction is not only right for the planet but also is essential to our future prosperity.''
A cynic could say that if the economy slows much more the Prime Minister will have her carbon-neutral future sooner than she might think. But I'm not sure that's top of the public's mind right now.
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So tell me Jum. Does Bollard read the NZ Herald and NZ Womans weekly as well, - or is this all the fault of the Muldoon National Government?
Your destructive Labour Government can only hide for so long
Comment by Jum — 2 June 2008 @ 2:25 pm “Labour is still the best party to lead New Zealand and I will not change my mind as long as PM Helen Clark and Dr Cullen lead it.”
Lead New Zealand into what recession, economic ruin, third world status ??????????
What a big job for an incoming National Government - cleaning up after Labour yet again
"Granted, the bank has consistently got the oil price wrong, but then so has everyone else."
The people who predict it to keep going up have been on the money so far..
Ah, the R word.
Well, we're in good company, if <a href="http://business.timesonline.co.uk/tol/business/money/consumer_affairs/article4039969.ece" rel="nofollow">this leetle piece</a> in the Times is any guide.
I think we're into a prolonged period during which the real meaning of 'sustainability' will be dished out the old-fashioned way - by deep, (searing, even?) personal experiences:
- the ATM-on-the-side-of-the-house is closed for business. No more accounting for more debt as if it were more income. - permanently high fuel and food prices. The good years are gone, and surprise, surprise, everything really Is connected to Everything Else. Fuel is an input to food. Who knew? - the disconnect of action from consequence will end. We taxpayers apparently fund beneficiaries' car-unimpounding fees. Can't last. Won't last. A sterner morality will take root and flourish.
harder times, it's said, test character. We'll see, soon enough. Those of us that stay...
Dr Bollard tells us that the next few years will be quite different from the previous ones. The National Party will inherit a situation where there have been 9 years of a buoyant economy and lots of money wasted .Labour will quote how unemployment numbers dropped and take the credit for other situations which were the result of worldwide positivity. I wonder , if behind closed doors Helen is breathing a sigh of relief that perhaps she may be joining the ranks of the opposition.
The irony is that Bollard is pushing his own agenda by saying that house prices are on thier way down by x per cent. Reality is that my property is worth whatever the buyer wants to pay. Currently, there are people selling property and people buying. The chaff is being pushed out and quality is still at a premium. What has changed from a year ago? Yes food and petol have gone up - but apart from that - I still go to work, look after the kids, do the things that I want to do, am still keen to buy a new boat - I mean - seriously - it's time for people to create their own reality. The message: Tune off the news and watch the food channel at 6pm. Trust me - your sanity will prevail!
Bollard's view coincides with that of bankers, if my sources are any guide. NZ is a cot case currently, they say. I don't think Waymad is that far off the mark. Great time to be in Opposition ........
The thing that worries me the most is that the USA is virtually printing money to overcome its own problems. This is known to be a prime cause of inflation. Anyone who doesn't believe me should read what their own pundits are saying via US web sites. The inflation tiger was supposed to have been killed in the 1980s, but there's every chance it will come roaring back, & via fuel & food it may already be here. Wages will have to respond sooner or later, then it feeds into prices & away we go again.
In which case, will Bollard or anyone else overcome it? Even by screwing down the local economy?
In addition, the USA can't keep overspending forever the way it has been doing to pay for the Iraq occupation. The new President will have to bring the troops home sooner or later: they can't afford to keep the current numbers in Iraq, & they can't govern Iraq properly with fewer troops. So they'll have to abandon Iraq, regardless of whether they want to or not.
The parallels with the mid-1970s after the USA abandoned Vietnam, ie a deep recession with stagflation, are quite frightening, & the USA is in hock to the rest of the world today in a way that it wasn't back then. Do we really expect to see huge good times in NZ when our 2nd main trading partner will be suffering so much?
I guess that the Fairfax polls is the most accurate as it probably still uses an AGB:McNair methodolgy which uses a stratifed random probablilty sample meaning that a person living in rural central Otago has the same chance of being interviewed as a person in living in South Auckland
Where is Jum? I hope he is OK. Perhaps he has done a Sutch and changed sides? Anyway we miss you Jum. Bollard is going to punish us for something that is not under our control. He needs his KPI's changed. We need an export sector, our dollar is far too high and encourages imports not exports, he is killing manufacturing along with Diddums Helen and Diddums Cullen. How will we survive when we are all reduced to working in the tourism sector or the public service? We will end up a cute little place that is nice to visit. Even Bollard admits that inflation with out food and oil prices is only at 1.6% as Colin has stated. So what is the situation, we really do have Stagflation and Bollard loves it. Hey did we tell mim that we are approaching a recession.
For me there are personal issues with Helen Clark, not just issues out of her hands when it comes to supporting her. I heard her saying on the radio yesterday that the SIS has changed the way it works (in relation to the Sutch case) and that she as "boss" of the SIS makes sure it abides by those rules. That for me is a problem. It's not that I think she lies all the time it's just that when I hear her talking there is a part of me that wonders if she is telling the truth, if she is being up front. I'm not sure I trust her and for me that is important. I know she is a politician and that trust is always an issue with them but with her I feel it is more of an issue than normal. And in saying this I'm not saying Key or anyone else is better. I'm just saying that for me the issues are Clark herself and how she comes across.
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Helen Clark said at the weekend that the TV1 poll was out of line with other polls.I wonder what she will say now . Colin. To expect her to say nothing derogatory about the polls is to expect Dr Cullen to invite John Key and his wife for a cosy dinner date. I don't believe I have ever heard Helen CLark admit to anything negative or even to say " I made a mistake".She will probably blame the National Party . Every one should read Absolute Power . Funny how the Labour red necks haven't had too much to say about it . They must have exhausted themselves with the rubbishing of Hollow Men.