Gordon Campbell | Parliament TV | Parliament Today | Video | Questions Of the Day | Search


Beyond Brexit

Rt Hon Winston Peters
New Zealand First Leader
Member of Parliament for Northland
29 JUNE 2016

Speech by New Zealand First Leader and Northland MP Rt Hon Winston Peters
Cullen Breakfast Club,
The Wellington Club,
Level 5, 88 The Terrace,
7.35am, Wednesday, 29 June, 2016

Beyond Brexit

Beyond Brexit, the Refugee Crisis and the US elections lies a much more profound risk to international stability and order.

That risk centres on the prodigious amounts of debt that have accumulated globally since the GFC and the fact that yields on government bonds are at historic lows – and in many cases they are now negative. If there were a significant default, such an event could trigger havoc with unknown consequences.

It really is an incredible situation and one that would have been dismissed as fantasy if someone had suggested such a scenario when Central Banks started the era of quantitative easing and money printing 8 years ago. But in a time of international anxiety about economic and political risk, people are so fearful that they will invest in German, Swiss or Japanese government bonds with a negative rate of return.

Some 10 trillion dollars of government bonds now pay negative nominal interest. That is investors are going to receive a return that is less than nothing!

Any return to “normal” debt and interest rates levels is nowhere to be seen on the horizon. The debt mountain is massive and widespread.

For example, it is estimated that China’s corporate and government debt is around 250% of China’s GDP.

The economic text books are in the dustbin. Because this situation is without precedent conventional economic theory is of little use. Classically, economics says that there are four functions of money,

Money serves as a:

1. Medium of exchange

2. Unit of account

3. Safe way of holding wealth

4. Precaution against unexpected expenses.

Minimal or negative interest rates are knocking out 3 and 4. So without a rate of return why bother with banks?

Implications for New Zealand

No one knows how global events will unfold and no one can hold a New Zealand government responsible for events beyond its control.

However, a reasonable and prudent government might well conclude that the current situation is neither stable nor sustainable.

That being the case, there are things a wise NZ government could do to mitigate the impact of a global crisis

First, face facts – alert the public to what is happening. Stop pretending that everything in the garden is rosy.

For example, it would do no harm to remind people buying into Auckland’s property bubble that to assume the best case scenario will always continue may not be smart. Internationally, negative rates are a sign of extreme risk aversion by investors.

In his Budget Speech Bill English made no reference to the global debt mountain and the spreading contagion of negative interest rates.

Clearly, he did not want uncomfortable facts to cloud his message of sunny optimism.

Second, take action to buffer the impact of an external crisis on New Zealand.

As a priority the government must stop the blatant boosting of the GDP growth rate by means of massive immigration.

Superficially, the flood of migrants does make NZ look good by comparison with other countries. We are in world of anaemic growth but other countries face the facts. They are not trying to manipulate their growth rate by an open door immigration policy.

New Zealanders are seeing the bills from this influx even if the government is still pretending immigration is pure benefit – some sort of elixir for costless economic growth. The costs of immigration are being paid for in the housing crisis, overloaded infrastructure and health and education services under heavy pressure.

Third, government must recognise that low interest rates are a disincentive to save and an incentive to speculate.

A wise responsible government would be looking for ways to encourage savings and investment from domestic sources rather than continued heavy reliance on Australian owned banks to be borrowing overseas.

Another area needing an urgent rethink is government guarantees on bank deposits (up to a modest level for average savers).

Unlike in most OECD countries, there is no government guarantee on bank deposits in New Zealand – hence all savers are vulnerable to an unexpected “haircut” if government in a crisis decides this is needed to preserve a bank’s liquidity. (This is the New Zealand Reserve Bank’s Open Bank Resolution policy)

Taking action in the three areas outlined will take fresh thinking and courage. Neither of which are National’s strong suits.

The spread of negative yields on government bonds internationally is a big deal. It is a symptom of deep seated problems in the global economy and financial markets.

External economic conditions must be taken into account in the economic management of the New Zealand economy.

A wise responsible New Zealand government would have used the Budget to tell New Zealanders what is going on.

Instead, our government is recklessly refusing to prepare the country for difficult and dangerous times.

Another area needing an urgent rethink is government guarantees on bank deposits (up to a modest level for average savers).

Unlike in most OECD countries, there is no government guarantee on bank deposits in New Zealand – hence all savers are vulnerable to an unexpected “haircut” if government in a crisis decides this is needed to preserve a bank’s liquidity. (This is the NZ Reserve Bank’s Open Bank Resolution policy)

Fall out from Brexit vote

This has been a turbulent though utterly predictable four days since the Brexit result in the UK.

As predicted the market reef fish have reverted to type. They were absolutely confident of their safety and mental acuity relating to their environment until 35 per cent of the Brexit referendum votes were counted. Then they simply lost it.

The point is, that the market had relied upon the economic and business experts to tell them what was going to happen in a political event. Of course, if these economic and business experts were what they said they were they would have factored in the eventual results days before it happened. They are not experts and that’s why they didn’t.

But what has been astonishing is that since the Brexit result how many in the market, banking, and in politics have exercised restraint in giving freely of their opinions.

There has never been a national referendum in any country where so many outsiders, foreign power brokers, and financial market manipulators have intruded.

“Expert after expert” were telling us that Doomsday for the British was soon to come if they voted to leave.

Now the thing about these economists is that they think they are experts when many of them are neo-liberal twits.

There are experts in the medical profession and there are experts flying aeroplanes but if economists were involved in either medicine or aviation half the country would be sick and aircraft would be crashing daily.

Once again, in the British context, they got it entirely wrong.

Having ignored the mass majority of the British people for decades they woke up to a serious drop in the stock market and in the value of the pound sterling. Once again, if they were experts they would have factored this in before the vote – they’re not and they didn’t.

However, that won’t stop them or the commentariat boring the British people witless with what they don’t know.

For New Zealand it is a tremendous window of opportunity. We can get a trade deal with the UK. We can’t get a decent trade deal with the EU and whilst the UK was in the EU we were denied access to them.

If our government had known what it was doing they would have been talking to the British about this a long time ago. They don’t and they haven’t.
Prime Minister Cameron made a giant blunder in his approach to the referendum.

And typically his “good friend” Prime Minister Key made a similar blunder when he said the British should stay.

Whoever we send to negotiate the free trade deal with the UK should not be John Key.

The stunning thing was that the biggest loser was the British Labour Party - so out of touch with ordinary workers. That may well describe comments from a Green Party leader in New Zealand who as good as said working men and women have got it wrong. That the elitism of the Left - it is as bad as the Right.

Anyone watching the BBC saw all these people giving their views and no one went to the working people and asked for their commentary, but suit after suit was talking about working people’s situation.

The power class are so up themselves they can’t even see the obvious irony of what they are doing. And that phenomena exists in NZ as well.

Last year the OECD, the think-tank for the world’s rich countries, said something quite astonishing. “It acknowledged that the share of UK economic growth enjoyed by workers is now at its lowest since the Second World War. Even more remarkably, it said the same or worse applied to workers across the capitalist West.”

Ladies and gentlemen, something very similar has happened in this country, and you are going to have to respond to it.

Yesterday’s inequality index from Statistics NZ showed 60% of the nation’s wealth is concentrated in the top 10 per cent of the population, but the bottom 40 per cent have just 3 per cent of the wealth.

Presumably the other 37 per cent of the country’s wealth is owned by two groups, foreigners and the remaining 50 per cent of New Zealanders.

That is why a significant political shift has been taking place in New Zealand.


© Scoop Media

Parliament Headlines | Politics Headlines | Regional Headlines

Budget '17: Budget Spends Down Future Surpluses

Tax cuts for every working New Zealander, targeted to low and middle income earners, more generous assistance for families and renters, and a massive spend-up on public services infrastructure mark Finance Minister Steven Joyce’s election year Budget.

The package of changes to income tax thresholds, the Working for Families programme, and the Accommodation Supplement is the Budget’s political centrepiece and will cost $2 billion a year. More>>

Scoop Full Coverage: of Budget Announcements & Reaction
Latest: Scoop Search



Auditor-General Stands Down For Investigation: Gordon Campbell On (Not) Taking Responsibility

So Martin Matthews, our current Auditor-General wishes he could have detected “earlier” the fraud that occurred on his watch at the Ministry of Transport. Hmmm. But he could have detected it earlier, surely? That’s the point. More>>


NGOs Pleased: Govt To Halt Collection Of Client Data

Brenda Pilott, the chair of ComVoices and national manager of Social Service Providers Aotearoa, congratulates the government on its decision to call a halt to the collection of individual client data until the concerns of not-for-profit service providers have been worked through. More>>


Gosh: Blasphemy Law Repeal Struck Down

Chris Hipkins, the MP who tabled a Supplementary Order Paper to add our Blasphemy Law to the Statutes Repeal Bill, said this was a "sad day for freedom of speech, tolerance, and leadership". More>>


Gordon Campbell: On The Navy’s Dealings With Fat Leonard, And Twin Peaks

At an official level, our “she’ll be right” attitude routinely spills over into a keen resentment of anyone who suggests the outcomes may be less than satisfactory… The Navy has now gone one step beyond. It won’t even ask itself whether it did a good job. More>>


NZDF: Fifth Rotation Of Troops Heads To Iraq

The fifth rotation of New Zealand Defence Force troops left today for a six-month mission training Iraqi soldiers. More>>


Gordon Campbell: On The Demonising Of Iran

Will New Zealand still be willing to pursue its recent trade overtures to Iran, now that US President Donald Trump has used his speech in Riyadh to single out Iran as the main source of terrorism and instability in the Middle East? More>>



Opening The Election Supporters




Featured InfoPages

Opening the Election