Fisking Kiwiblog: Get The Facts Right On Loans, Guys

I know the right are terrified and angered by Labour's popular new student loans policy, but I didn't think they would stoop to base deception about it to try and discredit it.

I am referring to David Farrar's post at http://www.kiwiblog.co.nz/archives/011364.html

David asserts the following:

They [Labour] claim that someone with a $15,000 loan balance who earns $34,300, and stays earning that much would take 25.5 years to repay their loan and have interest of $11,891. Plug it in and you will see.

If one goes to sorted.org.nz and plug in a $15,000 loan balance and $34,300 income it says it is paid off in 12 years 4 months and interest is $6,805 in today's dollars.

So Labour's calculator is claiming it will take 25 years instead of 12 under current policy. This is not a small error - this is almost electoral fraud. Now sorted.org is a neutral site from the Retirement Commissioner so I trust their calculator more.

David obviously did not bother to check out with the Retirement Commission what the assumptions are behind their sorted.org.nz calculator.

I did.

I rang the Retirement Commission and asked them to email me details. I'll post the email when it arrives, but their verbal confirmation to me is that they use a price inflation assumtion of 2.5%.

If I run the numbers David has used above, I get the following from the sorted.org.nz calculator (assuming I was born in 1980):

Time to pay loan - 12 yrs 4 months
Total paid in today's dollars - $19,817
Total interest in today's dollars - $6,805.

The screen shot follows below.

On Labour's calculator, if you enter in the same details - $15,000 starting balance, $34,300 salary with 2.5% growth (the same deflator used in the sorted.org.nz calculator) then you get the following details:

Current time to repay: 11yrs 4months
Current repayments: $22,607

New time to repay: 7yrs 10months
New repayments: $15,000

You will save: $7,607

Again, the screen shot is below. The difference in dollar outcomes (the Labour calculator shows slightly higher current repayments and thus a slightly higher saving) is that the Labour calculator doesn't use a deflator. The Sorted one clearly uses a growth of 2.5% on salaries, and also deflates the interest by the same amount (perfectly reasonable).

So by following David's incorrect information, Bill English has got it wrong too.

Trevor Mallard has just done a release reminding the Nats about the facts, available here.

Sorry guys. Try again later. And David, take back the accusation of fraud. It's beneath you.

Comments

[Tony]

You are correct Jordan. I have done a variety of senarios using 2.5% on the Labour calculator, and they all come out almost exactly the same. I guess this is the right grasping at straws trying to damage a very popular policy...

[Paul]

Careful Jordan,

don't blind them with the facts, they're really come after you for that.

[once more for luck]

Dear Dr Mary English

I have an embarrasing ailment and therefore I hope you can give me your advice.

I have a pair of shoelaces wedged in my rectum and am finding it difficult to move about. I think I should offer a replacement shoe to the person who inflicted this on me as I would like to smooth things over.

Now my question is this: what size does Bill take?

Yours obsequiously
David P F

[Craig Ranapia]

WTF was that last comment about? I know it was meant to be a cutting bitch slap, but it was utterly nonsensical.

[GeniusNZ]

Why are some on the right getting so desperate to discredit the policy?
It seems that when certain peopel oppose a policy (often as a result of the opposition proposing it) they immediatly assume EVERYTHING about it must be wrong.
In reality it only needs to be wrong on balance (or more precicely be inferior to other practical options such as doing nothing).
that sort of panic is a sure fire way to political suicide because you make yourself look like the irational one. It should be easy toi win the argument on this issue I think but to do so you ahve to accept some people will benefit some wont abuse it and some good things might happen it is sufficient top just argue that more people will abuse it, more bad things will happen and more people will be disadvantaged.

[Jordan]

GeniusNZ, I think the right just have a perverted view of how ordinary Kiwis behave. Most of us are not money-grubbing brutes out to seek our own quid.

[Craig Ranapia]

Jordan:

Well, I think the left have a condescending ('perverted' is way too strong a term) view that anyone who disgarees with them must be evil. Look, I'll forgive you a certain degree of post-poll euphoria - but please cut it out. Frankly, it's unworthy of you.

I don't think it's good public policy, full stop. Anyway, if you're going to rant about "money-grubbing brutes out to seek our own quid" - don't tell me this policy wasn't a direct appeal to self-interest.

[Nigel Kearney]

The calculator is misleading because it entices people to estimate that they will have no real salary growth.

It is also misleading because it doesn't discount and because it assumes everyone repays the minium.

It also fails to account for what would have otherwise been done with the money that is given away.

After taking into account all of that, anyone with a loan less than around 35k will actually be worse off as a result of this policy.

I have posted the demonstration of this on my blog.

[Mellie]

Never mind the fact that commentors are reverting to the usual twisting of the debate. Never mind that someone screwed up and it's been exposed.

Pathetic.