Labour needed to make inroads early in this campaign. It had to capture voter attention – hey, maybe this could be a real fight after all – and maintain the momentum. Instead, it frittered away the good beginning by Labour leader Phil Goff (on Monday’s televised debate) with a horrendous public meeting in Christchurch, in which John Key was given free rein to depict Labour as having a costings hole that could only be filled by further borrowing and/or higher taxes.
In the process, Key got away scot free with his own plans to balance the books by selling down high earning state assets to pay for the country’s everyday running costs. As No Right Turn commented, this is like selling the car to pay for the groceries.
We should all be worried. Economic credibility is in short supply in this campaign. As RNZ’s Brent Edwards said this morning, both the major parties are relying on rosy Treasury forecasts that the country will return to surplus in the 2014/2015 financial year – and this optimism endures despite the parlous state of the international economy (Greece today, Italy tomorrow!), declining commodity prices, and forecast downturns in demand even from our new patrons in China and Australia. Meaning: if Treasury’s forecasts prove to be unduly optimistic, New Zealand will be reaching for the borrowing bowl regardless of whether National or Labour is heading the next government.
Belatedly, Labour has finally released its election costings [Audio of Labour’s ‘fiscal framework’ press conference here]. As expected, they show that retaining full ownership of the state’s energy assets will require higher levels of borrowing – at least until economic recovery kicks in, and brings significant returns from the capital gains tax in its wake. In the coming hours and days National can be expected to depict this as marking a return to the ‘borrow and hope” policies of the past. No surprises there.
The political consequence will be that Labour will end this first week of the campaign where it didn’t want to be – on the defensive, and counter punching from the back foot. It will have achieved next to nothing, either in getting traction on National, or in halting the erosion of the centre left vote to the Greens – who have quietly done well out of this initial round of campaign activity.
As for National, sitting ducks have never had it so easy. Three years into its first term, the government still seems to have no credible plan for economic growth – or for fostering youth employment, or for any other of the country’s social and economic problems. It has chosen to live in denial about National Superannuation, at least until it has finally seen Winston Peters off the political stage.
This week, National launched a welfare reform crackdown (to force people off welfare and into jobs) while unemployment is still on the rise. Now that the RWC circus is over, the government is pinning its hopes for economic recovery almost entirely on the Christchurch rebuild. A recent Main Report business newsletter headlined it like this: “Economy Struggling On One Crutch : Canterbury Rebuild Supporting Limping Economy.” Exactly.
Point being, there is precious little substance to the government’s claim to be a more efficient manager of the economy. While the polls show that voters are still enamoured with John Key, the bloom surely must be going off the rose within the nation’s boardrooms. “We have met the enemy,” the cartoon character Pogo memorably said back in 1971, “and he is us.” Pogo was referring to the environmental damage being done by humans (and their trash) to the primeval forest…but these days, the business sector seems to be having something of a Pogo moment about John Key. Especially over the asset sales policy.
After all, it can make no economic sense to sell down the state’s stake in energy assets that stand to earn high dividends in perpetuity – and as the Greens argue, could provide a launching pad for the export of high added value green technology – in order to generate a short term windfall, and then pour that money into schools and hospitals that will generate no economic gain at all. A few robber barons may want to take the asset sales money and run. But the more thoughtful members of the business community will see this asset sales policy as unsustainable. Investing in irrigation – as proposed around Budget time – doesn’t pass the sniff test, either. (As Rod Oram has pointed out, the returns from irrigation have been assessed in Cabinet papers as delivering a meagre 6.4% return.)
For a sector already nervous at the government’s apparent lack of an economic plan for growth, the energy asset sell-down must be of concern. Both in itself, and for the uses to which it has been earmarked. Rather than use this one time only windfall to pay down debt – as any prudent manager would do, especially when government debt is rising in a risk averse world – the government is planning to pour it into daily running costs. It doesn’t take a financial genius to work out that the spending on schools and hospitals could be paid for more cheaply (in the short term) by borrowing, and in the longer term by the dividends from the fully retained assets.
To the centre-left of course, the asset sales programme has always seemed an outrage. Being given a chance to compete with foreigners to buy back something that New Zealanders already own – and in the case of Air New Zealand have bought twice before – has never seemed like a bargain. Usually, Act and National supporters decry the state doling out handouts rather than hand-ups. But selling down the family silver to give Stock Exchange speculators a gilt-edged asset to invest in looks like the Mother of All Handouts. Is capitalism in this country so bereft that it has to rely on the state to create assets worth investing in? It seems that way, if the asset sales programme is any guide.
Some of the centre-right disquiet about the asset programme has been anecdotal. Some of it is being expressed in say, the threads on Bernard Hickey’s Interest.co.nz site – which have been rife with criticism of late about the government’s apparent lack of financial nous. In that respect, you still can’t beat a good classical education for providing the tools of invective. A couple of weeks ago, the comments thread on Hickey’s site contained this gem, and no prizes for guessing the intended target:
A nation can survive its fools, and even the ambitious. But it cannot survive treason from within. An enemy at the gates is less formidable, for he is known and carries his banner openly. But the traitor moves amongst those within the gate freely, his sly whispers rustling through all the alleys, heard in the very halls of government itself. For the traitor appears not a traitor; he speaks in accents familiar to his victims, and he wears their face and their arguments, he appeals to the baseness that lies deep in the hearts of all men. He rots the soul of a nation, he works secretly and unknown in the night to undermine the pillars of the city, he infects the body politic so that it can no longer resist. A murderer is less to fear. The traitor is the plague.”- Cicero 58 B.C.
Next week : Epsom and Ohariu, and the merry go round of voter trade-offs.