Friday, 7 March 2008

What happened to the surplus?

As always Bernard Hickey cuts through the chatter, and gets straight to the heart of the relevant figures.  The reason for the disappearing surplus is not so much failing investments or falling revenues.  The reason, he points out, is galloping government spending.

The really interesting stuff is on the other side, where spending is up 9.7% on the previous year at $32.126 billion. The biggest movers are health, up 9.8%, and core government services (bureaucrats in Wellington), which were up 33.8% at $1.7 billion.

Government spending is growing at a rate of 9.8%, which was more than twice as fast as revenue growth at 4.5% and twice as fast as estimated nominal GDP growth at around 5%. The government is eating the economy.

So can we afford tax cuts?  Hell yes -- we can't afford not to have tax cuts.  We can't afford not to have our own money back so we can invest it and use it productively instead of having it thrown down the government's various political black holes -- we can't afford not to reduce the theft the political classes exact upon us every year -- and given the combined inflationary effect of exploding government spending, of forthcoming emissions trading costs, and of an explosive year-on-rear rise in the quantity of money administered by the Reserve Bank, we can't afford not to get the government the hell out of the way just as soon as we possibly can. 

As all honest politicians realise (there's an oxymoron for you), you can't honestly cut taxes without cutting spending too.  This should be seen as an opportunity, not a problem.

Time for tax cutters to say where they're going to cut.  Here's a short list to start with.


  1. That percentage increase in core government services through a period Cullen was sneeringly dismissing tax cuts is an utter indictment of him.

    The more I think about Cullen the more ( view him as such an oddity (not a good one):he really is a throw back to straight out Soviet styled economic control. Yet I don't see him as a stupid man: how can he not have seen the end result of all his policies, which is, as being witnessed now, the destruction of NZ's productive sector, where some workers have to be given a raise of $4 gross, just to get them $1 extra in the hand after tax, loss of family support rebates, etc, etc?

    Come election time we're going to be in a very perilous state. Pity Key has no solutions whatsoever other than a continuation of the big State to clobber us all.

    Still, makes it easy: vote Libz :)

    Mark Hubbard

  2. I can't quite understand why you admire this economist. I don't.

    There is an assumption by the state that only propeller-head economists know what is good for us.

    This is a dangerous concept, and a favourite of authoritarian 'nanny-statists'.


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