It costs $17 billion. The percentage of the Gross Domestic Product is almost a double digit figure. And it comes from one particular sector.
That is right ladies and gentlemen. We are talking here about the gaping hole left in the economy by the dairy price implosion. Perhaps more amazing (for not necessarily the right reasons)is the Government’s determination despite the huge hole in the economy left by this is the determination to press on with tax cuts.
Which is more staggering you ask me? It depends on which side of the fence you sit on.
On my side of the fence, the idea that the Government might will continue with tax cuts despite having a huge shortfall in revenue suggests that either a huge cut in services is going to be forced on New Zealanders in a desperate bid to keep borrowing in check or keeping the country’s debt in check is not a priority. Either way it is inane stupidity and proves to me something I already knew:
This Government is no better at economic administration of New Zealand than its Labour predecessors. And in fact, it might be worse, because the Fifth Labour Government of Prime Minister Helen Clark ran surpluses for nine straight years. Perhaps that is not surprising because for much of that time until the middle of 2006, the global economy was chugging along nicely – it was not until the first of 30+ banks to implode did so in 2006 that people realized there was a problem. Labour also did not have to worry about two devastating earthquakes and the insurance company wrangling that would follow.
But that does not excuse National for its conduct. It has had over 7 years now to demonstrate economic competence.
I have always said that this Government, like its predecessors, should have diversified the export industries instead of putting all of the eggs into one basket (which in the case of dairy was obviously not that well constructed). Our reliance on dairy and the farming sector on the whole has been excessive, and without lasting environmental damage and a potentially costly clean up bill, dairying has peaked.
The Government has suggested opening New Zealand’s seabed up for exploration, but at the same time has appeared reluctant to increase the percentage of royalties taken that must go back to the Crown. Coal for the time being is in decline as China’s economy hits the speed wobbles, and countries accelerate the exploration of renewable energy sources. Likewise oil, which New Zealand has some substantial deposits of, is in decline as a commodity – not so much from demand, but a minor collapse in the price.
I have a sinking feeling that unless National does something that appears to be blasphemous to the Prime Minister and Treasurer and raise income tax on the wealthy, or introduce a Capital Gains Tax on secondary homes, it might have trouble passing a Fiscal Budget. In which case the election nobody is ready for would have to be called.