Joyce: saboteur

With a few wobbly poll results over the weekend a defensive Steven Joyce is running scared over the solid and unifying Labour-Green 'NZ Power' policy launch. It's timing was entirely provoked by the pig-headed Mighty River Power privatisation, so Joyce has only his hand-crafted asset sale programme to thank for that. His hysteria at the thought of lowering costs to consumers and the cries of anguish at the post-announcement slumo of the share price on behalf of the over-valued cartel has not relented. The Nats are sensing danger if the first pou of a coalition house goes in the ground unchallenged. The Tory counter-attack however has been more Dad's Army than anything 21st century. After Bridges called it North Korean, Joyce said it was South Korean. If they can't get their Koreas right, perhaps they should be searching for a new Korea?

From the paraniod Joyce today - fresh from flushing out reds from under his limo after another viewing of 'Good luck and Goodbye' spent sympathising with that awesome Sen. McArthy - he tells us the prompt disclosure by the potential incoming government of their policy to reduce electricity bills... Is to accuse them of 'sabotage' no less.

Joyce:
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It's simply economic sabotage .
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[A...] cynical and selfish attempt by left wing parties to play politics with the value of NZ's economic assets.
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Crying a mighty river on behalf of the foreign interests too. The only thing cynical and selfish is the privatisation of public assets into the hands of the few on a flimsy pretext. The sabotage is a government that would sell off state assets to fund the irrigation schemes to make famers rich instead of paying off the debt like they promised. Everyone knows these things at some level. Those in favour of a Rogernomics-era style fire sale and unrestricted foreign ownership is low. Joyce's bogeyman tactics don't ring true and smack of desperation. By pinning so much on a share float - a show of confidence - it ran the risk of back-firing.

If Joyce is the best the Nats can do they should just bite their lips and take the judgment the market will render rather than flap about condemning the opposition for essentially being responsible and up front.

NZ Herald infographic:

The only main thing missing is the debt. The orthodox move after a float will be for the private shareholders to demand higher dividends - windfall/super dividends of over 100% of profits - and they will raise debt to do it. Borrowing to pay themselves. Looting upon looting.  After they have racked up billions in debt onto the books (which the government as 51% owner is also responsible) and taken all the cream they will then attempt to use that as a reason the commerce commission and the regulators should let them charge above average increases. It is all so predictable.

Flatlining

The Stats NZ CPI quarterly statement:
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The consumers price index (CPI) rose 0.4 percent in the March 2013 quarter, Statistics New Zealand said today. There were increases for cigarettes and tobacco, food, rents and newly built houses, petrol, and prescription medicines. These were countered by seasonally lower international travel prices, better value telecommunication services, and widespread discounting for furniture, appliances, and audio-visual equipment. [...] The falls for furniture and audio-visual equipment were influenced by widespread discounting.
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Annually, the CPI increased 0.9 percent in the year to the March 2013 quarter, due to increased prices for [...]

What the press release doesn't mention is the relationship that inflation has with the RBNZ, ie. the target inflation figure - the basis for measuring the performance of the independent central bank - is between one and three percent. The RBNZ Governor is in breach of his performance standards if the CPI continues outside of the band for any continued period of time (the exact period is kept vague, but more than a year would be pushing it). The last four quarters of year-on-year inflation were: 1.0%, 0.8%, 0.9%, and now 0.9% again.

It's almost impossible that the new RBNZ Governor would be sacked for under-shooting - at least at this early point in his tenure - but the question is worth asking: what would it take?

New Policy Targets Agreement signed today
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Date 20 September 2012

Finance Minister Bill English and incoming Reserve Bank Governor Graeme Wheeler today signed a new Policy Targets Agreement, which sets out specific targets for maintaining price stability.

The new Policy Targets Agreement takes effect on 26 September, when Mr Wheeler starts his five-year term as Governor.

The agreement continues to require the Reserve Bank to keep CPI inflation between 1 per cent and 3 per cent on average over the medium term.

Within this target, the new agreement now requires the Bank to focus on keeping future average inflation near 2 per cent.
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Mr Wheeler says the new PTA remains focused on maintaining price stability, as well as avoiding unnecessary instability in economic output, interest rates and the exchange rate.

“The focus on the 2 per cent midpoint will help better anchor inflation expectations,” he says.


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That's heading towards a big fail at present, though the spike when they upped the GST rate (4.5% for year ending 03/2011) will bring that long term average closer to 2%.

The information itself as broken down shows discounting is having an impact - this confirms that consumer austerity persists and that demand is still suppressed. The high NZ dollar is probably doing the most to lower inflation: keeping a lid on petrol and import prices. That is a double-edged economic sword as exporters are not slow in pointing out.

NZ is just coasting along, plateauing in the great global financial unwind, waiting for a pick up in our trade partners' growth, but the government does not seem to be doing anything substantial or proactive to stimulate internal demand or stimulate export production - it certainly isn't spending any more money (unless you include the crony deals with Chorus/Telecom with UFB, the trucking and roading interests, bailing out private schools etc.).

The underlying risk for NZ and other similarly indebted nations is that inflation is a sleeping giant and that stability of the currency value internally depends on stability in the foreign exchange and that if the latter weakens the former will awake.