That back-office bullshit

So the budget is out and the stupidity is now apparent for all to see. The entirely venal National Party approach to facts, projections and actual numbers is summed up nicely over at The Standard:

I have never, for instance, seen a budget in which cash raised from yet-to-be-sold assets was put on the books as if it already existed. They’ve basically bet our health system on being able to flog our assets for an imaginary price. Nor have I ever seen a New Zealand government make a billion dollars worth of cuts without being able to say what they are cutting. I don’t believe they actually know where these cuts will come from or how sustainable they will be.

One of the sources of these public sector savings cuts is in the mythical back office, the allegedly unproductive part of the sector that accounts for the money, runs the computers, keeps the lights on, runs the payroll and all the rest of those inessential services. National has long pursued the line that there is plenty of wasted cash sloshing around, being consumed by unproductive “pen-pushers”. Thankfully someone did some actual research on the numbers:

The 33 agencies measured in the report spend an annual $1.85 billion on back-office functions, or about 9.8% of their total operational costs, of which $1.05 billion is spent on ICT.

The report came from Treasury and the Department of Internal Affairs, so the expenditure numbers are likely to be reasonably robust. There are probably some savings possible through rationalising IT systems and the like, but it’s also likely that at least some of this low-hanging fruit has already been plucked in response to the belt-tightening of the last three years.

So the myth that there is lots of money that can be redirected from the public service’s back office to the front office looks like a piece of ideological cant, rather than anything attributable to rational analysis – what a surprise. English was pushing the party line this morning:

“We want government administration to be as efficient and well organised as it can be. At present the costs of running government are too high and there is too much duplication and waste.”

What’s missing from this statement is anything that resembles numbers, so it’s a matter of wild-assed conjecture whether a single dollar will be saved. The reality is that “too much duplication and waste” is really a coded phrase for more job cuts in the public sector.



Favourable market conditions for dummies

The problem with being the Economic Illiteracy Support Group is that New Zealand politics is a target-rich environment right now. There are so many stupid comments from so many stupid people that it’s hard to know where to begin.

Thankfully there are other high-quality commentators to do some of the heavy lifting, so we don’t need to intervene everywhere – for instance both No Right Turn and the inimitable Gordon Campbell pilloried the Minister of Dirty Dairying, David Carter, for his announcement of up to $400 million in subsidies for his farmer mates to dump effluent in New Zealand’s rivers. Their posts avoided us having to point out that it was yet another dumb-assed move from a Minister who makes Rob Muldoon look like an economic rationalist.

The other challenge is not turning this site into a continual Bill-and-John show. The dynamic duo in charge of the National Party have the sort of turns of phrase which stand-up comedians can only envy – like this pearler from John Key (thanks, Danyl):

“For the most part we are 100% pure.”

John Key defending New Zealand’s environmental record during a BBC interview.

The big challenge: how can we possibly maintain our hip post-modern ironic stance when the politicians are saying this kind of shit in real life? It’s a problem.

And then there was today’s contribution from the Prime Minister, part of the justification for slashing Kiwsaver:

The Government would borrow $20b this year. That is more than needed, but Key said the Government was taking advantage of favourable market conditions. “On a weekly basis, that averages out to new debt of $380m a week. That … increase in debt is absolutely unaffordable,” he said.

Umm … let’s analyse this one for a moment. The logic – such as it is – seems to go something like this:

1. We’re going to borrow more than we need this year because the market conditions are good.

2. We can’t afford to keep borrowing like this.

Every credit card user in the country can see the obvious error. The bank has lowered the interest rate we pay, so we go out and load up the credit card because the money is a bit cheaper, even though we don’t really have a use for the money, and now we’re moaning and complaining because paying the interest bill costs so much that we can no longer afford to go to the doctor. And the credit card is now full – how on earth did that happen?!

Irony is lost on these clowns. And the results can easily be seen in the government’s books – from surplus to the largest deficit in the country’s history in less than three years. Some commentators are suggesting that National is engaged in some form of class warfare, deliberately looting the country for the benefit of the rich. But that requires a level of intelligence that is nowhere on display with the Bill-and-John show. It could simply be that they are the sort of brainless idiots that borrow money they don’t need, and then bitch about how expensive it will be to pay it back.

The Dinosaurs are stirring …

Our beautiful Office Manager breathlessly rushed into our offices this morning (always a good sight) holding aloft a copy of the Dominion Post, the capital’s rag of record, where our recent intervention with some Wellington City Council councillors had become news. Apparently the dinosaurs down south are complaining that having their idiocy pointed out was some kind of attack on the very foundation of our democracy!

The council’s governance portfolio leader, Deputy Mayor Ian McKinnon, didn’t receive a letter but was outraged that his colleagues had. “The debate was in the open and, while there were differences of opinion, no-one tried to hide them. This is really an attack on the democratic process.”


He was probably jealous that he didn’t get the kiddie counting book and calculator with the big buttons we sent to some of his colleagues. We’ll see if we can do better next time, our tightly-constrained budget notwithstanding. However the actual recipients were all faux moral outrage and old-man harrumphing:

Councillor John Morrison was among at least three councillors to receive one of the packages last week. “It is totally derogatory, offensive and pathetic in so many ways,” he said.

A kiddie book is “derogatory, offensive and pathetic”? Really?

Of course the one thing he didn’t say was that we were wrong. Presumably he didn’t want to mess up a good media opportunity with any actual facts – or at least none that the Dominion Post printed – and so nowhere in the story is it mentioned that he supports roading projects with a cost/benefit of only 0.4. Thats right – Mr Outrage seems to stand ready to hose away 60 cents for every taxpayer dollar that’s spent on his pet projects, but it’s somehow offensive when we point it out to him.

In the letter we included with the kiddie book and the calculator we advised that “… it’s never good to look like a dick in public. So avoid making stupid statements about how roads are an investment in the future or how they create jobs, because all the people who’ve already read the book and mastered the calculator will think you’re a moron.”

I know it’s going to feel like tough love, councillor, but we stand by that advice.


A love-letter to Brian Gaynor

Here at the secret Economic Illiteracy underground headquarters near Matamata, we don’t have much time for most economic commentators in the media. Despite being avid fans of Morning Report (our best daily source of unintentional economic hilarity from the politicians being interviewed) we’ve never quite figured out why they keep trying to pass off bank economists as actual economists, when it’s obvious they’re paid to air the views of their employers. And the quality of material in the printed media is little better.

Only …. sometimes there’s a column that just absolutely and totally nails it. Step up, Brian Gaynor, who uses actual facts and figures to make a point in the NZ Herald that has been crying out for quality analysis for decades. The headline says it all – “Brian Gaynor: Overseas ownership is holding NZ back” – and if you thought the headline was good, the body of the article is a tour-de-force of condemnation for the dumb-ass right-wing idea that all foreign investment is good. In Brian’s words:

Our politicians, beginning with Roger Douglas and Richard Prebble, sold a large number of the country’s strategic assets to overseas investors. These politicians failed to realise they were establishing a domestic wealth destruction culture as wealth is mainly created through ownership rather than disposal …

Telecom was sold to overseas interests for $4.25 billion in 1990 and since then has made distributions to shareholders, in the form of dividends and capital repayments, of $14.6 billion …

The Bank of New Zealand was sold to National Australia Bank (NAB) for $1.5 billion in 1992. Since then BNZ has distributed $5.2 billion in dividends to its Australian parent and is now worth an estimated $7.2 billion based on its 2010 net earnings of $602 million and a price/earnings ratio of 12. Thus NAB paid $1.5 billion for BNZ and the latter has delivered total shareholder value of $12.4 billion to its Australian owners since late 1992.

The article keeps on getting better and better, as Gaynor points out that it’s not solely about a loss of profits, but the depletion of available investment capital, the cutting off of international expansion opportunities, and the deprivation of the rest of the economy of high-quality investment opportunities.

This is an article that deserves a wide audience, particularly amongst the benighted fools in the National Party who seem determined to asset-strip the country in a second term of government. Go read it now. And take a bow, Mr Gaynor.

Ken screws up – again

Fresh from his star turn of failing to understand cost/benefit ratios, Wellington Chamber of Commerce head Ken Harris has now demonstrated his failure to understand basic inflation calculations.

Our attention was drawn to this particular pearl of wisdom falling from Ken’s mouth when he took issue with the Wellington council raising the parking charges from $4 to $5. Outrage! Here’s Ken doing battle for the hard-pressed retailers in the capital!

Not only are car park vacancy rates too high to warrant such a fee hike but this 25% jump, coming on top of previous increases over the years, more than outstrips the inflation rate. It is difficult to see this proposed increase as anything more than a revenue raising exercise.

Yeah! That’s the champion of free enterprise laying the smack-down on those lilly-livered public servants that want to deny him $4/hour parking for his SUV! The increase “more than outstrips the inflation rate”!

Only it doesn’t – probably because the hard-working Ken didn’t bother checking what inflation amounted to since 2004, when the council last raised the parking charges. Or maybe he’s just a dickhead, it’s sometimes hard to tell with lobbyists. A quick tour around the Reserve Bank’s inflation calculator revealed that there’s been a 23.5% increase in the CPI from the beginning of 2004 to the beginning of 2011, so that $4 fee in 2004 is now the equivalent of $4.94 in 2011 – completely in line with the council’s new parking charges.

In other words, Ken’s utterly wrong, economically illiterate, and incapable of using Google to obtain the answers to basic questions. In other words, he’s perfectly qualified to be the CEO of a business lobby organisation, which aren’t exactly the pinnacles of intellectual achievement.

Luckily there was one person who was making economic sense in this debate – the bloke who works for the Wellington council. The unlikely-named Stavros Michael (presumably related to George) said that “”Businesses that are open during the day in the CBD benefit from paid parking through higher turnover, while those businesses that operate in the evening do not benefit because people hog the limited number of spaces all night.”

It’s a worry when the public servants make more economic sense than the private sector lobbyists.