Two pieces of information were released yesterday that show that the economic tide has turned against the Labour Government. The first was the revelation that government spending has exploded rather dramatically, by a massive 41.3% in just four years. But the news gets worse, as the latest forecast for this year is for core Crown expenses of $128 billion. That is a 67.8% increase over five years ago.
That is spending that this Government is wholly responsible for. Grant Robertson, the financial genius who learned everything he knows about accounting and economics sitting on the knee of his fraudster father, thinks that none of that spending is inflationary.
The government poured petrol on a bonfire and stood there enjoying the conflagration until the fire service turned up and asked them who did it, at which point they pointed the finger at the Russians.
In the simplest terms, inflation occurs when there’s too much money in the system. The people who put that money into the system were the economic nonces in government, no one else. Domestic inflation reflects domestic monetary policy.
Which has led to the next piece of bad news. That inflation is running away like the proverbial runaway train.
Stats NZ has confirmed that the cost of living in New Zealand is increasing at the fastest rate in 32 years at 6.9%. They can’t escape the blame for that. This is on them, not anyone else.
While there are some international factors at play that are providing inflationary pressure, it is downright dishonest for the media and the government to gloss over the 68% increase in government spending since Labour took office, combined with the huge borrowing done by the Reserve Bank at the behest of the same government.
The economic tide has gone out on the Government and they’ve been caught swimming with no undies on. The terrible mind bleach situation that comes from that metaphor aside, we are going to see some real pain develop in the economy.
The difficulty for Jacinda Ardern’s Government will come when the public sees where their decisions lead – higher inflation, higher interest rates, higher taxes, sluggish growth, and a jobless recovery.
Many businesses are already zombie businesses – on their knees; inflationary pressures are robbing those businesses and owners and staff far more effectively and way harsher and far more devastating than an armed mugger.
The problem is, these clowns will more than likely spend even more on the taxpayer’s credit card. But their solution, quantitative easing, is just making matters worse:
When your inflation is running out of control it makes trading offshore more difficult, especially when your inflation is way higher than the inflation of your trading partners.
The list below compares New Zealand to our top 15 trading partners. Only three of our top 15 trading partners have a higher inflation rate.
- US 8.5%
- Germany 7.3%
- UK 7.0%
- New Zealand 6.9%
- Italy 6.5%
- Thailand 5.7%
- France 4.5%
- Singapore 4.3%
- South Korea 4.1%
- Australia 3.5%
- Indonesia 2.6%
- UAE 2.5%
- Vietnam 2.4%
- Malaysia 2.2%
- China 1.5%
- Japan 0.9%
So, don’t let the media or the government get away with telling you that inflation is imported. It isn’t. The inflation that is destroying our economy is wholly attributable to a wasteful, spendthrift government that seems to think money grows on trees.
The economic pain that is coming will be immense. When house prices inevitably drop by a large percentage, as the Reserve Bank constrains the money supply by tightening lending rules and increasing interest rates, many people will find that they too are swimming with no undies on.
Their lifestyle, funded by what they stupidly thought were ever-increasing property prices, will come crashing to a halt. They will find themselves upside down on their house, owing far more than the house is actually worth on the open market. The banks will see this and ask for the homeowner to correct the deficit and if they can’t, or won’t, then they will face the bank taking control.
The haircuts are going to look like a good hard scalping, with no ability for re-growth. Even if we change the government next year the damage that has been done to the economy is going to necessitate drastic and painful spending cuts. Sooner or later the dolts in this Labour Government will realise it too and will have to make decisions that are unpalatable for a government used to spending like a drunken sailor.
Tough times are ahead of us, and no amount of selfies eating toast will be able to distract from the painful truth that they’ve fiddled while New Zealand burned.
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