If Steven Joyce is right that David Parker told ‘nine lies’ about the economy on The Nation last weekend, then he must believe the economy is already in full boom; growth has peaked and needs to be slowed; exporters are whingers; the hot New Zealand dollar is nothing to worry about; that not selling enough products to the world to pay for all the things we buy from other countries isn’t a problem - hell, we’ve been doing it for forty years - let’s do it for another forty!
And there is no housing bubble in Auckland - David Parker made it up.
Let’s go through Steven Joyce’s nine responses to David Parker:
David Parker interview on The Nation – April 26 2014
1. “Export prices are going down” (David Parker)
"Export prices in fact rose 13.8 per cent in the year to December 2013 (Statistics New Zealand).
The ANZ NZD Commodity Price Index rose 11.6 per cent in the year to March 2014 and is just 6 per cent below its all-time March 2011 peak." (Steven Joyce)
It’s true, export prices rose 8.9% in the last quarter. But as Bernard Hickey has pointed out, this was due mostly to a 24% rise in dairy prices and a 29% increase in milk powder prices. Without dairy prices, export prices would only have increased 3.8%.
And now dairy prices have fallen 20% since February.
In March 2014, the ANZ NZD Commodity Price Index fell 2.6% for the month, and prices are expected to keep falling.
2. “We are not covering the cost of our imports (and interest)” (David Parker)
"Statistics New Zealand reported a merchandise trade surplus for New Zealand in the year to February 2014 of $649 million (1.3 per cent of exports).
January and February’s merchandise trade surpluses were the highest ever for their respective months." (Steven Joyce)
The Balance of Payments dataset is the proper measure of the current account deficit. Steven Joyce uses Merchandise Trade figures which are not a measure of the current account, and also does not include trade in services or interest costs.
New Zealand has had a negative current account deficit for 40 years. That’s not good, and the National government should be worried, rather than pretending it’s not a problem. Their only defence is to say ‘Australia has one too’. Except Australia - unlike us - hasn’t had one for forty years.
3. “We are losing jobs in the export sector” (David Parker)
"The number of people employed in the agriculture, forestry, fisheries, mining and manufacturing sectors has increased by 16,100 in the last twelve months.
Total New Zealand employment increased by 66,000 in the last year or 3.0 per cent in one year. This is the fastest employment growth since December 2006. (Statistics New Zealand Household Labour Force Survey December 2013)." (Steven Joyce)
The number of people employed in the agriculture, forestry, fisheries, mining and manufacturing sectors has fallen by 7200 in the past two years. Infact there are 13,000 fewer people employed in these industries since National took office in November 2008. Over the same time period, the working-age population has increased by 197,000.
4. “This challenge of getting New Zealand’s current account deficit under control” (David Parker)
"New Zealand’s balance of payments deficit is currently 3.4 per cent and has averaged only 3.1 per cent over the last four years.
Under Labour the Balance of Payments peaked at 7.9 per cent in December quarter 2008 and averaged 7 per cent over their last four years.
New Zealand’s Net International Investment Position is currently down to 67 per cent of GDP after peaking at 85.9 per cent in March 2009." (Steven Joyce)
So everything is fine then? Even with dairy and commodity prices peaking recently, we still carried a huge deficit. If we can’t run a surplus with prices and demand for exports this favourable, when will we ever pay our way in the world under the current economic settings?
5. “Ridiculously high interest rates” (David Parker)
"Interest rates have just edged up above 50-year lows.
Floating mortgage interest rates are currently between 6 and 6.25 per cent. They peaked at 10.9 per cent between May and August 2008." (Steven Joyce)
Interest rates are higher in New Zealand relative to the rest of the world. Other countries had 0% interest rates when we had them around 2%. That’s why speculators pushed currency into our banks and played monopoly with the Kiwi dollar.
The comparative international context is far more relevant to investors and the economy than the historical context.
6. “Exporters…. Aren’t willing to invest in plant” (David Parker)
"Investment in plant, machinery and equipment by New Zealand companies was up 7.5 per cent in the December quarter and 3 per cent for the year. Investment in plant, machinery and equipment is now at its highest level ever (Statistics New Zealand – December quarter 2013 GDP release).
Just yesterday, long term New Zealand forestry processor Oji Limited announced a $1 billion investment to purchase Carter Holt Harvey Processing assets." (Steven Joyce)
Oji Limited is Japanese-owned, it is not a New Zealand processor. Steven Joyce ‘forgot’ to mention that the purchaser of the Carter Holt Harvey assets is a joint venture between Oji and Innovation Network Corporation of Japan (INCJ) - a corporation sponsored by the Japanese government and Japanese private enterprises aimed at promoting innovation and enhancing the value of businesses in - thats right - Japan!
If only our government took a more hands-on approach we could be retaining the profits of wood processing in NZ.
Our prolonged current account deficit and net international liabilities means that to cover the cost of our imports and interest every year we need to borrow more from offshore or sell our locally owned assets overseas.
Steven Joyce seems to think that's a success story.
7. “House prices are up 40 per cent under them” (David Parker)
"House prices under this government have increased at around 5.7 per cent per annum, compared to 10.7 per cent per annum under Labour, according to REINZ figures. Total house price increases over the period is 30 per cent, not the 40 per cent Mr Parker claims. That compares with a 96 per cent increase in house prices under Labour." (Steven Joyce)
In the year to March 2014 75% of the increase in National median prices is attributable to Auckland, 14% in Canterbury/Westland, and 9% in Waikato/Bay of Plenty. So house price inflation is concentrated regionally.
It was recently reported that house prices in some areas of Auckland have risen by up to 51.9% in the past three years.
After adjusting for inflation annual house prices in Auckland increased by 6.5% a year since 2009. This compares with a 4.4% (inflation adjusted) annual increase in Auckland house prices from 1999 to 2008.
Mr Joyce uses a 96% figure from across Labour's nine years in government, as if that were comparable to his five years.
8. “You need to tax the speculators. They are not taxing speculators” (David Parker)
"Taxpayers who buy and sell houses for income are currently taxed at their personal income tax rate on their capital income." (Steven Joyce)
He doesn't know this because for compliance cost reasons, taxpayers are not asked to isolate the source of their taxable profits on their income tax returns. Sales of property are indistinguishable from sales of other goods or services. So the government has no way of identifying how much has been raised from this “already existent” CGT, yet it claims that property speculators are already paying tax on capital gains.
At the same time as they claim a ‘CGT’ already exists (through income tax) they claim that Labour’s CGT would destroy the economy”. They can’t have it both ways.
I doubt Bill English has received advice from Treasury regarding income tax paid on capital gains made on property investment for the purpose of trading because IRD or Treasury don’t know.
9. “They are not building any more houses” (David Parker)
"The actual trend for the number of new dwellings, including apartments, is up 95 per cent from the series minimum in March 2011.
The trend is at its highest level since October 2007 (Statistics New Zealand February 2014 Building Consents Release)." (Steven Joyce)
If only that were true. Residential Building Consents are down by 34% a month (on average) under National, compared to the previous government. This is despite the massive $40 billion Canterbury rebuild, the third most expensive insurance event in world history.
Building consents are increasing but not as fast as they should be to keep up with demand and the needs of the rebuild after reaching 30-year lows through 2011-2012.
Steven Joyce has made up a lot of numbers or distorted them to try to claim that David Parker's figures weren't true. This is dishonest politics. He can only get away with this because his own numbers don't get fact checked; he just asserts nonsense and no one checks it out. But if he has to make up stuff or distort numbers to make his point then he can't actually have a substantive point.
Mr Joyce claimed nine mistakes in David Parker's interview. None stacked up.