On the day before Christmas, all through the nation, we jammed the malls, shared a little elation. The bills keep coming, we’re feeling the pinch, and our New Year’s guest could be The Grinch

John Key wished us all a Merry Christmas on Radio New Zealand. He urged us to get out and enjoy New Zealand, our great outdoors, great wine, great food. He was looking forward to making up some of the quality time with his family that was lost while he was off winning the election.

Good luck to him. And luck is what we are all going to need when we come back from this Christmas.

Over the last week, the news confirmed what we already knew. New Zealanders continued to spend more money than we earn offshore in the September quarter, and our Government’s end-of-year books are in even worse shape than they were before the election.

What we do not know and cannot know until the New Year is just how badly the global recession is affecting our ability to sell our major exports and our borrowing to cover our excessive spending.

We do know that we will have 430,000 less lambs to export – and that drought is impacting on beef and dairy production. We do know that Fonterra is cutting its forecasts for milk solid payouts and other pastoral product exporters are reporting difficulty in obtaining orders. The general expectations are for weaker export and domestic demand, and rising unemployment.

I suppose it is nice to be told by people like Allan Bollard at the Reserve Bank and John Whitehead at The Treasury that technically we are moving out of recession – but, at best, it is only into a period of minimal growth in the economy next year.

Right now, interest rates are down and oil prices are easing the pain at the pump. For this, probably temporary, relief – much thanks.

So, as you sit at home this Christmas figuring out whether it is worth paying the penalty to break your mortgage and go for a new one at a lower rate, and what your after-tax earnings are likely to be and what your home is currently worth, or will be worth in the New Year, spare a thought for poor Bill English.

The Finance Minister has the same problem writ large. He does not know with any precision is how much his tax revenue will be affected - not just by the recession and the forecast rise in unemployment - but also by the many tax policy changes that have recently been enacted or are coming in the pipeline - the cuts in company and income tax, changes in tax thresholds, and two new regimes for taxing investments.

The effect of changes to the Kiwisaver scheme on the continuing take-up rate, and the impact of volatility in finance markets on the investment portfolios of State entities such as the New Zealand Superannuation Fund, the Accident Compensation Commission, and the Earthquake Commission provide another set of major unknowns.

Then there are those new financial sector guarantees for retail deposits and wholesale funding. Currently, the Government is covering $125 billion worth of your deposits in 40 institutions. It is yet to be asked to provide a wholesale funding guarantee to cover borrowing by any of those institutions. Long may that continue to be the case.

Nobody knows how much of a call will be made on either of those guarantee schemes – or how much the Government will make from providing them - but the Government must reserve the ability to honour its obligations if needs be.

We can only hope that New Zealand has done a better job of obtaining some disciplines over the financial institutions we guarantee than the Bush administration has extracted for its bailout cover of the US institutions largely responsible for creating the global creditlock and the Great Recession.

Few tears were shed in America, when Goldman Sachs, which sustained modest losses in the past year, announced that annual bonuses would be cut 35%. Goldman’s bonus bill went from a record US$20.2 billion last year to just US$13 billion this year – or an average of US$420,000 for every banker, analyst and secretary in the business, according to Joseph Giannone at Thomson Reuters News.

Now, we wait to see if Barrack Obama can do better when he takes office in the New Year. We all have high expectations of this new president. However, as Thomas L.Friedman pointed out recently in the New York Times, the United States also has expectations of us.

“Thanks for your applause for our new president,” Friedman wrote. “If you want Obama to succeed though, don’t just show us your love, show us the money. Show us the troops, Show us the diplomatic effort. Show us the economic partnership.”

So, add aid for America to our list of unknowns.

Meantime, enjoy your Christmas and do not waste time pondering the imponderables. The Grinch can wait till the New Year. He isn’t going anywhere.

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