There's a lot in just one clause

In 2008, not long after John Key became Prime Minister, Bill English sent a letter to the then governor of the Reserve Bank of New Zealand (RBNZ) proposing a change to a clause in the Policy Targets Agreement (PTA). The PTA is an agreement between the Minister of Finance and the RBNZ that outlines RBNZ policy. Bill proposed that clause 1b be changed from:

The objective of the Government's economic policy is to promote sustainable and balanced economic development in order to create full employment, higher real incomes and a more equitable distribution of incomes. Price stability plays an important part in supporting the achievement of wider economic and social objectives.

To:

The Government's economic objective is to promote a growing, open and competitive economy as the best means of delivering permanently higher incomes and living standards for New Zealanders. Price stability plays an important part in supporting this objective.

The proposition was accepted, a new PTA was signed, and that PTA is still current today.

I've highlighted key parts of the original clause that have been removed, and for me this is very telling. It is clear to me that the objective of the current government's economic policy does not include reducing inequality or unemployment; otherwise why would Bill wish to remove these parts? Note that you can have higher incomes and living standards (as stated in the new clause) on average, without necessarily reducing either unemployment or inequality. At worst it suggests the government doesn't care about such things. At best it suggests the government trusts "the market" to deliver.

Also note that the objective of the current government's economic policy is not focused on actually achieving outcomes (as was explicitly stated in the previous clause), but instead is interested in promoting the idea of a "growing, open and competitive economy" as a way to achieve those outcomes. This distinction is subtle, but important as it points to a policy that is all about selling an idea to the public, regardless of whether or not that idea - when implemented - is actually any good for the public!

John Key telling porkies about Government debt....again

John Key today (14^th April 2015) on Newstalk ZB, talking about government spending, with my commentary in italics:

"When we live within our means, we are in a situation where we’re not borrowing internationally to run the government books."

Wrong. The government doesn’t really borrow from anyone. When the government issues debt, it simply swaps one type of government liability (New Zealand government bonds) for another (New Zealand dollars). And when the government does this, the RBNZ (an agent of the government) may perform liquidity operations that result in the RBNZ creating New Zealand dollars out of thin air to ensure there is liquidity in the banking system so that banks and other institutions can “purchase” the bonds.

"We are in a position where, you know, the international financial markets like that."

Wrong, if by that, John means that the financial markets will demand higher interest rates from New Zealand’s government bonds. This doesn’t actually happen at all, as the RBNZ effectively sets interest rates along the yield curve through the OCR and commentary on future OCR expectations. There is really no relationship between interest rates and levels of government debt for countries that have own free-floating, non-convertible currencies.

"And we’re also in a stronger position for a rainy day if that comes and, you know, happens again."

Wrong again! The government can - and will always be able to - spend no matter what the level of outstanding government debt is, regardless of the prevailing economic climate.