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Hi Guys
Received this in an email. They're in trouble !!
Regards
Harmy


New Zealanders must get serious about saving. It's the only way, writes Tony Sage, to stop the inevitable decline caused by living beyond our means

Office of Economic Cooperation and Development Statistics on comparative GDPs are irrefutable evidence of a steady long-term decline in our country's comparative economic perform-ance. Anecdotal evidence abounds.

Professionals in every field leave New Zealand after graduating for higher pay in other countries.

We can no longer afford even an adequate police force or the armed forces necessary to take part in regional defence.

We import mainly second-hand vehicles.

Nevertheless the level of government spending necessitates tax rates which perpetuate a low growth rate by inhibiting investment.

By pouring tax money into favoured areas and by indulging in rhetoric about the "knowledge economy," government ministers persuade credulous voters they can transform the economy and reverse the downward trend.

Continual unfavourable changes in our terms of trade are, however, permanent and structural. They are not amenable to ministerial fiat or PR spin.

Treasurer Michael Cullen will find a favourable "blip" in GDP statistics from the economic euphoria induced by the inflation he is determined to create.

But it will be a cruel deception: sound, investment-led growth is an entirely different animal.

The downward trend in our fortunes is one of those uncomfortable facts of life to which there is no viable alternative but adjustment.

As we no longer pay our way in the world with exports, having a chronic current account deficit and an impressive level of private sector debt in consequence, adjustment means attempting to live within our means.

The 2002 budget surplus is not all it seems. Despite increases in taxation, government borrowing is again on the rise.

In both the public and private sectors we are now borrowing to live.

Continued decline in comparative living standards is assured. But the lack of any government recognition that the present level of spending in real terms is unsustainable is disturbing.

Two phenomena characterising the New Zealand economy go hand in hand.

One is the degree of churning incomes through the tax system and the encouragement of reliance on transfer payments.

The other is the extent to which we deny anything resembling a savings culture the chance to take root.

Borrowing to invest in financial markets has nothing to do with saving and is a dangerous business.

Michael Cullen's New Zealand Superannuation Fund is no more than elaborate high-risk political flummery, impressing only the economically illiterate.

Norway has a smoothing fund but it is financed from state oil surpluses.

Ireland's is funded from windfall from the sale of Telecom Eireann. Canada's is being funded from levies on employers and employees.

Besides state health and education systems struggling for funding, our welfare benefit system is out of control. Thirty years ago there were 28 full-time workers for each working-age beneficiary. Today there are just four.

Yet 34 cents in every tax dollar goes on welfare benefits, including New Zealand Superannuation.

The levels of household debt and overseas private debt are evidence of our insouciance about saving. Much is made of a satisfactory incidence of home ownership but we are not unique in that.

We are, however, unique in several other ways.

New Zealand is the only developed country neither to have a compulsory individual savings scheme nor to encourage savings in (usually) workplace schemes through tax incentives.

The emphasis of such schemes elsewhere is mainly on lifetime saving for retirement. But in many cases savings may be applied to other purposes, such as health care, home ownership and general asset enhancement.

Almost without exception those countries with a higher per capita GDP than New Zealand have such schemes.

New Zealand is the only developed country to persist with a universal flat rate pay-as-you-go state pension. We even double up on pension payments to state sector employees.

Tens of thousands receive, as well as New Zealand Superannuation, taxpayer subsidised pensions in several other schemes.

More prosperous countries than ours, having found an adequate state pension is not sustainable from taxation, have chosen a variety of alternatives and supplements. Our political establishment continues however to pass the superannuation reform parcel to future governments.

New Zealand is the only country in the world to engage in the bizarre practice of actively discouraging workplace saving and superannuation saving schemes with tax penalties. Needless to say those penalties do not impact on our MPs' extravagantly generous superannuation scheme inaugurated in 1992.

The political establishment is in case-hardened denial of the disaster of unrestrained welfarism for New Zealand society. The more liberal the benefits, the greater the demand for them, the greater the dependence and the greater the demand for even more liberal benefits.

That continued escalation is morally indefensible and financially unsustainable is abundantly clear.

Two and three generations of families locked in dependence - with increasing child poverty a consequence - are now the norm in many parts of New Zealand.
The rest of the world knows the only way out of poverty is work. And yet our Social Services Minister announces that eliminating child poverty is to become a priority: benefits are to be ratcheted up even further. Few vote catchers could be more callously cynical than the government's Agenda For Children programme.

The burden of social spending programmes on government finances has become demonstrably unmanageable. External forces will eventually ensure the political establishment notices that social spending must be cut.

The beneficiary constituency is a large part of the electorate. The only possible exit from the impasse requires cross-party support for individual saving rather than tax payments, transferring responsibility for retirement income and healthcare costs in age, for example, from the state to the individual.
The burden of social spending programmes on government finances has become demonstrably unmanageable. External forces will eventually ensure the political establishment notices that social spending must be cut.

The beneficiary constituency is a large part of the electorate. The only possible exit from the impasse requires cross-party support for individual saving rather than tax payments, transferring responsibility for retirement income and healthcare costs in age, for example, from the state to the individual.
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The 2002 budget surplus is not all it seems. Despite increases in taxation, government borrowing is again on the rise.

Yep I reckon one or two goverments around the world are just as rotten in their accounting standards as so many company's have been.

Besides state health and education systems struggling for funding, our welfare benefit system is out of control. Thirty years ago there were 28 full-time workers for each working-age beneficiary. Today there are just four.

Yet 34 cents in every tax dollar goes on welfare benefits, including New Zealand Superannuation


Those are telling figures & ones that aint sustainable.But,

The beneficiary constituency is a large part of the electorate. The only possible exit from the impasse requires cross-party support for individual saving rather than tax payments, transferring responsibility for retirement income and healthcare costs in age, for example, from the state to the individual.

..is gonna prove a hard thing to change until it has fallen in a heap, cause most those voters aint gonna be sold on the idea otherwise.

JR


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Not really familiar with the situation in NZ but that doesn't sound too good.
Sounds to me like -add 20 years and you get a civil war - possibly.

I did pick up on a couple of things - Michael Cullen's New Zealand Superannuation Fund is no more than elaborate high-risk political flummery, impressing only the economically lliterate. ............... ..................Canada's is being funded from levies on employers and employees. . I don't know about you, but to me a levy is still tax, irrespective of what the government or other commentators call it.

The other thing I was wondering was along the lines of elections.
eg
Is there an election coming up?
Does the writer have political ambitions?
Is the writer a political journalist?

Sometimes it helps if you know where people are really coming from.

regards
Barcoo
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..is gonna prove a hard thing to change until it has fallen in a heap, cause most those voters aint gonna be sold on the idea otherwise.


JR
You're right !! I fee sorry for those who haven't saved enough for their retirement. I can't draw the NZ Age Benefit here in Oz and can't draw the Oz one either because I have too much in the way of assets.
I think it's going to be a bleak future for many.
Regards
Harmy
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Barcoo

Sounds to me like -add 20 years and you get a civil war - possibly.

That's not so far fetched as you might think. The Maori's are in full cry for their cut of the national cake and in my view with the added pressure of a falling standard of living I would predict, at the very least, considerable social unrest.

Michael Cullen's New Zealand Superannuation Fund is no more than elaborate high-risk political flummery, impressing only the economically lliterate

Of course it's flummery !! Cullen is borrowing overseas funds to support his new superannuation fund. It's crazy !!

Is there an election coming up?

Yes - due in a few weeks. Labour will get in this time but will fail to get in next time because it's economic policies will be insupportable and will cause severe economic strains. National will get, in not because they have a better economic policy, but because Labour will be voted out. The usual pattern !!

Regards
Harmy



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Hi Harmy

Are things really that bad in New Zealand?

Civil war? Does sound a little drastic to me. I freely admit that I have only been to NZ once for a month two years ago but have friends and distant family there with whom the subject has never really come up so I just wonder.

I must say that my impression was that the country seemed in pretty good shape. Yes I see that wages and salaries are lower than a lot of countries eleswhere....but then....so are the living expenses, or at least appear to be.

I know that you and some of your family have left and so you must have had a very good reason, but I would welcome your views on NZ in general. My partner and I liked the country and its people so much that we have even considered it as a place to retire to in say eight years or so. Presently in the UK and so at current exchange levels and cost of living differences the move would be financially very beneficial comparing like with like.

No capital gains is a big plus if you have shares that are doing well. Any plans for them to change that in the foreseeable future do you think? Interested in your opinion.

Jon
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No capital gains is a big plus if you have shares that are doing well. Any plans for them to change that in the foreseeable future do you think? Interested in your opinion.

Jon
Yes - no CGT is an attraction but I cannot see it lasting for much longer. I have emailed you privately on a number of other matters which you may be interested in.
Regards
Harmy

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Civil war? Does sound a little drastic to me. I freely admit that I have only been to NZ once for a month two years ago but have friends and distant family there with whom the subject has never really come up so I just wonder.

Good to hear from you applefoot. Hang around more often.
Yes it does sound drastic but 20 years is a long time. They do say "a week is a long time in politics". Besides I said it was a possibility not a certainty.
The situation described in the email was a welfare state that will run out of money in the future and be exposed to all sorts of anachistic elements. How do you think the people will react when their living standard drops 80%? Hopefully some of the governments in the meantime will make a few hard decisions while still managing to keep things on the rails.
The email was obviously sensationalistic electioneering so I take all points in it with a grain of salt.

regards
Barcoo
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Hi Harmy and Barcoo,

Thanks Harmy for the insight and the email. You have given me a valuable new perspective with which to work.

Barcoo, thanks too for your thoughts. The problem of falling living standards is of courrse, not restricted to New Zealand. In continental Europe and the UK also the debate is ongoing about how to fund the retirement plans of these countries. Ageing populations and a distinct trend towards underfunding by the individual for his/her retirement is being discussed as to its impact on the diminishing work force.

The occasional bout of civil unrest is also reported from time to time. France particularly at the moment seems to be taking the limelight, although the situation is similar in Italy also. It would be a great shame, nay a disaster, if such a beautiful country as New Zealand was to succumb to politicians who stick their heads in the sand.

I do read about 80% of the posts on this board and so am never far away. I am a one-trick-pony though when it comes to Oz investments. Just got the one stock, NRT, and am happy to post on that subject when the occasion demands.

Will chime in from time to time.

Jon
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The email was obviously sensationalistic electioneering so I take all points in it with a grain of salt

Barcoo
It may have sensationalistic electioneering but there was also much truth in the article. There is no doubt that there has been a very significant decline in the standard of living for the average kiwi. This decline has been going on for the last thirty years and it has not bottomed (there's that word again !!).
NZ cannot now afford an adequate defence force and, as you know, has cut the air force and the navy to the bone - almost to the point of complete emasculation. The police numbers are fudged and re-fudged to keep the populace happy but the because of the rising crime rate (in itself an indication of social unrest) far more police are needed. Hospital waiting lists are an absolute disgrace - and again the politicians re-hash the numbers by eliminating people from the lists which then makes the list acceptable and appears as though the government is improving matters. Let me tell you that for non-urgent surgery (read - not in danger of imminently dying) the waiting list is years.
There is no easy answer to NZ's problems - there is nothing on the horizon that can possibly improve the size of the national cake. It has no national resources capable of development which would bring in overseas funds. This is a country going deeper into debt with no end in site.
The brain drain exacerbates the situation with 10% of the population ie over 400,000 now choosing to live in Australia and possibly as many again in other countries. The very best are leaving NZ permanently.
I am pessimistic about the future and am thankful that my family have moved here. Australia does not provide an easy answer but there is a good future for those prepared to work.
Regards
Harmy
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with 10% of the population ie over 400,000 now choosing to live in Australia and possibly as many again in other countries

Yep & most I reckon are in Perth, the Maori v Australia Rugby match has convinced me of that , left like a foriegner in my own town.

Look it's good that we have such an open relationship between our two countries , but you go down south of Perth & you start getting Kiwis taking over towns not right IMO. I hope that the Kiwis do sort out the mess back home so some of those folks can return....soon.

JR
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Some more on the subject,
It is difficult to estimate the number of NZ citizens who currently live overseas on a permanent and/or long-term basis. However, based on figures obtained from overseas countries on NZ-born populations, a rough estimate is between 500,000 - 600,000. That's about 14%, or one-eighth, of the current population of New Zealand that was 3.83 million at the end of March this year.

Not enough to stop em leaving,
You'd think all these positives would inspire a bit of national pride and a loyalty to contribute to our sometimes dwindling economy. But still it seems, working Kiwis get restless and leave.

I like the bit about if they did all return home the country would sink. LOL

http://www.nzedge.com/hot/braindrain_adams.html

JR


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JR
It is a frankly depressing scenario and backs up what I posted earlier.
I hope Applefoot reads this !!!
Regards
Harmy
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It is a frankly depressing scenario and backs up what I posted earlier.

ESP, since most those, in that link anyways, do not intend returning in the long run, so no wealth coming back in to strenghen NZ for future generations thats sad.

JR
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so no wealth coming back in to strenghen NZ for future generations thats sad.

JR
That's about the size of it !!
Regards
Harmy
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It is a frankly depressing scenario and backs up what I posted earlier.
I hope Applefoot reads this !!!


Hi Harmy, JR.

Depressing I guess if you have spent most of your life in NZ. It is never a good feeling to see a country which you admire greatly or have called "home", seem to be losing its able population. But NZ is not alone.

The irony is that just as the world is getting more and better connected via internet it is also getting more connected physically and that makes it inevitable that people will want to live and work more elsewhere. One aspect of this for English-speaking nations at least is that as English has become the lingua franca of the world it is so much easier for its young people to function almost anywhere without the drawback of learning a second language....at least to start with.

My feeling after reading the article, is that NZs time will come again. Maybe not for a while yet and maybe not until the economy is made to pick up a bit, but I detect in those interviews a definite desire to keep links with and maybe even retire back to the mother country.

In the meantime JR, I would not complain too loudly about the Kiwis taking over parts of your patch.......I could mention a few places in London where I could say the same of the Aussies........bless'em.

Just glad to be a free man and to be able to live and travel just about anywhere I choose. We have come a long way in the last 50 years in that respect.

applefoot
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My feeling after reading the article, is that NZs time will come again

Yep dunno why but after I read it the same feeling hit me.

In the meantime JR, I would not complain too loudly about the Kiwis taking over parts of your patch.......I could mention a few places in London where I could say the same of the Aussies........bless'em.

Mostly backpackers no doubt, they come home & I promise you we get more from your country then we send. The Kiwi situation is much dif they often stay forever not comparable to the backpackers who anly have visas.

Backpackers are good cause they do jobs Aussies don't & England is the same from what I know.

One aspect of this for English-speaking nations at least is that as English has become the lingua franca of the world it is so much easier for its young people to function almost anywhere without the drawback of learning a second language....at least to start with.

Yep we are lucky.

Just glad to be a free man and to be able to live and travel just about anywhere I choose. We have come a long way in the last 50 years in that respect.

Yes if you have the money then your welcome nearly anyplace to stay, money talks louder than anything else thats for sure.


JR





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Harmy a bit of topic & if you don't wanna answer no probs.

You mentioned that you don't get the pensions cause of your capital worth(I'd see a good accountant) do you not get an army pension of some sort?

I asked cause me old man spent 22 years in the Coldstream gaurds & while I don't know his exact worth his house & boat would be worth over $600 grand & I know he didn't get any Aust pension, so I presume that is for service done & not a pension as such?

They gave him a flat in London to but not forever just for life(he don't own it) , very handy.

I'm just interested nothing else in your situation as he always complained that the Aust forces would have paid more pension.

I reckon over the last 5 years he's done alright with the exchange rate & the flat so I like stirring him when he starts complaining bout it.

JR
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I heard a timely and amusing snippet on the radio last night.
Apparently ABC radio has just gone to NZ and set up for the first time ever.
They were talking about how the NZ dollar has become so much stronger in comparison to the Oz dollar of recent times.
They basically attributed this to the PM.
They pointed out how well respected she is, where ever she goes the people like her and don't heckle her.
How she is getting the economy back on track.
But the farmers don't like the strengthening dollar but it's great for everyone else and people might even start shifting back.

I don't really have an informed opinion one way or the other but I thought the 2 extremes were amusing.

Barcoo
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Just glad to be a free man and to be able to live and travel just about anywhere I choose. We have come a long way in the last 50 years in that respect.

Jon
Hellejua to that !! One thing that could produce a complete turnround for NZ is the discovery of a big oil patch. For years oil and gas has been discovered in small to medium amounts (by NZ standards) including a massive gas field which was world class in size.
A recent discovery in very, very deep water off the east coast of the North Island has raised hopes that it may be the big one everybody has been hoping for has finally been discovered. This discovery is in depths of around 2000 metres and until now drilling in those depths has been out of the question. However, new drilling technology now has rigs drilling in 3000 metres of water off the Mexican coast. The NZ discovery is a massive sedimentary basin several thousand feet thick and very extensive in area which is very similar to those around the middle east. It contains typical oil formations and has aroused the interest of several big overseas consortiums - Shell, BP etc.
It's very early days yet with only licences being issued.
Very interesting developments though.
Regards
Harmy
PS Who knows I may yet be able to draw my old age pension from NZ - not holding my breath though - LOL !!
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They were talking about how the NZ dollar has become so much stronger in comparison to the Oz dollar of recent times.

Barcoo
I think that it is the result of better farm prices over the last couple of years. There is nothing else in the NZ economy that warrants the rise in value of the NZ dollar to my knowledge. If Helen Clarke has talked up the dollar then it can just as easily be talked down.
Regards
Harmy

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Harmy

Had not heard about the oil and gas prospecting that you mentioned, so I'll keep tabs on that.

BTW, do you have a preference for a newspaper web site or other, where I could keep up with the general daily and weekly news from NZ? I guess that following such a site a couple of times a week would be a good way of getting up to speed.

Thanks again

Jon
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BTW, do you have a preference for a newspaper web site or other, where I could keep up with the general daily and weekly news from NZ? I guess that following such a site a couple of times a week would be a good way of getting up to speed.

Jon
Here you go !!
Probably about the best one.

http://www.nzherald.co.nz/

Regards
Harmy
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Here you go !!
Probably about the best one.
http://www.nzherald.co.nz/


Thanks Harmy

just been over there and it is just what I was looking for. See its still raining in the Coramandel. <grin>

Jon
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