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WRCC:Lunch with Michael Cullen

23/05/2008

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As noted in an earlier post Adam was attending the WRCC lunch today, where Dr Michael Cullen was scheduled to be the speaker.

Therefore on a misty, grey and damp Autumnal Day in Wellington Adam made his way to the Chamber of Commerce’s reception area in the Majestic Centre.

There was a large turn-out for the occasion; plus a substantial contingent of journalists – Adam recognised amongst others, Barry Soper, Duncan Garner, Guyon and Colin Espiner, Audrey Young and Fran O’Sullivan. It will be very interesting to see how the media present this occasion.

Lunch was really quite good, a salmon starter, followed by chicken breast and vegetables as a entree with a choice of a pleasant chardonnay or sauvignon blanc if one wanted wine.

Dr Cullen was introduced by the WRCC CEO Charles Finny, who as part of the introduction commented on issues the Chamber had wished to see addressed in the 2008 Budget.

Adam was pleasantly surprised by Dr Cullen’s presentation. It was quite unlike what he had been expecting given other times he had seen the gentleman in question presenting. On reflection, Adam thinks that is because in the past he has more often than not seen Cullen giving one of his dramatic performances on the Parliamentary stage.

Cullen’s speech was fluent, cogent and logical if one agreed with his concepts of where the economy should be going and the role of government as regards spending and taxation.

He made some valid points about the need to develop infrastructure. He spent some time on the need for government to take a leading role in developing our human capital.

Early on he made an excellent point that governments through tax and spending cannot be expected to compensate workers completely for the impact of cost increases. A very valid point and one that seems to lost on some of the subjects of various media vox pop interviews.

He was not combative, the style adopted was one of seeking to persuade and perhaps one might say cajole in some ways.

The good doctor made a point that included in the spending projections was a very considerable amount in respect of Kiwisaver. Validly he noted that this was in fact a transfer of resource from government to those enrolled and not a cash distribution that would add to inflationary pressures. Although he did not belabour the point Adam would note that employees and employers would also be contributing to Kiwisaver and thus a very sizeable amount of resource was being taken out of day to day discretionary spend and moved into longer term savings and thus assisting the building of the NZ capital base.

Consequently Adam tends to find some sympathy with Dr Cullen’s view that the budget may not add to inflationary pressure as some commentators first thought.

Dr Cullen commented on the fact that the government’s broadband initiative varied from that put forward by National recently. He stated that Labour wished to encourage a wider range of options than those foreseen he thinks in the National proposition, which to Adam seems to bear a strong resemblance to the FibreCo concept propounded by David Skilling of the NZ Institute. The Minister pointed out that National’s approach would lock us into one technology, which he suggested might not be sensible. Cullen suggested also that he would like to see the private sector be more creative in it’s approach. As a side comment Adam suspects that Telecom still have a very long way to go in restoring harmony to their governmental relationship.

So whilst Adam would like to see more $ going into this option he can see some logic in what is being said.

There was quite a lot more, but Adam believes this will be well covered by the MSM.

One final point there was a question on the quality of spend. This was dealt with very well. Cullen pointing out that quality of spend is very much a political decision and one of perception.

He highlighted as an example health, he noted that on many criteria the overall health status of New Zealanders had never been better, yet many still perceived health issue sas ones with poor quality outcomes. It would not surprise Adam if we see some ‘rebranding’ and redefinition around some contentious areas.

Overall it was a very good presentation by a very clever man, a good politician who has crafted a clever and politically astute budget which he is now marketing to the electorate including business groups such as the Chamber.

He came across very well. There is no doubt he is formidable at what he does, in the Gallic sense of outstanding – impressive.

Now it will not make Adam vote for Labour, but he would not be surprised if Dr Cullen has not brought them some breathing space and perhaps a bounce in the polls.

There is no doubt either that he has crafted a political web within which to enmesh National.

Well worth attending the lunch.

3 Comments
  1. 25/05/2008 13:59

    “Concerning the deepening of capital Adam agrees with what Matt says, but would like to see the opposition and indeed economists come up with suggestions on how this might be achieved.”

    Indeed, you are exactly write – and it is a very difficult issue to come up with solutions for. Treasury did write a set of working papers this year dealing with productivity issues, and it is something I plan to write what I can about.

    I’ll be sure to say when I post something 🙂

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  2. adamsmith1922 permalink*
    24/05/2008 07:34

    Matt

    Is of course correct in what he writes above.

    It is perhaps a measure of how persuasive Dr Cullen was in his presentation that Adam failed to remember that he had read that the RBNZ had taken account of the impact of Kiwisaver in it’s forecasts.

    Concerning the deepening of capital Adam agrees with what Matt says, but would like to see the opposition and indeed economists come up with suggestions on how this might be achieved.

    Would, for example, something like the Central Provident Fund as implemented in Singapore work here or be economically viable and beneficial?

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  3. 23/05/2008 17:00

    A very good piece, thanks for that Adam.

    I have some comments on the Kiwisaver/inflation section though.

    “Although he did not belabour the point Adam would note that employees and employers would also be contributing to Kiwisaver and thus a very sizeable amount of resource was being taken out of day to day discretionary spend and moved into longer term savings and thus assisting the building of the NZ capital base.”

    This depends on the level of dis-saving that occurs from other assets. Although Kiwisaver might lead to an increase in the capital pool – I doubt it is the least cost way of deepening capital investment in New Zealand by a long way.

    “Consequently Adam tends to find some sympathy with Dr Cullen’s view that the budget may not add to inflationary pressure as some commentators first thought.”

    Many economists are concerned that inflation expectations will become entrenched at levels close too or above the inflation target top band. Government spending now is likely to make this matter significantly worse.

    Furthermore, the impact of Kiwisaver was already taken into account in economic forecasts by the RBNZ and the banks a long time ago – the only “shock” to the inflationary outlook was Dr Cullen’s tax cuts.

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