Yesterday, the Treasury’s pre-election portrait was significantly out of whack with National’s repeated claims of rampant government mis-management of the economy. Instead, it seems that the recession has been averted, inflation is falling, unemployment is rising but still at historically low levels, wages are running ahead of inflation, government debt is still at low levels compared to every other developed country in the world, the international credit ratings agencies keep on nodding in general approval of Labour’s handling of the economy… With risks from the current account deficit being seen as likely to be self-correcting, as the economy continues to slow down over the coming year.
Yet you would struggle to find the evidence of adherence to orthodox economic practice being reflected in the dominant media discourse. Quite the reverse, in fact. Such has been National’s success in promoting dire perceptions of wholesale incompetence and imminent disaster that Finance Minister Grant Robertson could be asked on RNZ this morning why New Zealanders should believe his claims of moderation, given Labour’s track record. It was a minor, but telling example of how if partisan political positions are allowed to be repeated often enough, they become the received wisdom.
In reality, even the negative aspects of the Treasury report were consistent with global trends. Inflation is falling, but will not be back within the Reserve Bank’s 1-3% comfort zone until late next year, and interest rates will either be holding steady or may even be deemed to require one last rate rise. This is the same outlook evident in the United States, the United Kingdom across the European Union and in Australia i.e. inflation is proving to be stickier than expected, the labour market is being more resilient than expected, and household spending is holding up longer than expected, but the overall trends are in line with the orthodoxy. As a result of all the above, interest rates will not begin to fall for a slightly longer time than initially expected. In sum, New Zealand is NOT experiencing a socialism-induced Armageddon, but is entirely in accord with the global norm.
Regardless, we continue to see National successfully promoting a Chicken Licken view of the economy where to quote Nicola Willis, government debt is “exploding.” That’s absurd. (To repeat: New Zealand can continue to expect a low government debt to GDP ratio by world standards.) Willis is being just as absurd as Christopher Luxon, when Luxon claims – as he did earlier today on RNZ – that while Labour’s spending is wildly inflationary, his own tax cuts will not be inflationary at all. Go figure.
As Robertson said on RNZ this morning, the vast majority of the spending in Budget 2023/24 went into fixed payment rises e.g. to pensions and benefits adjusted for wages /inflation. Where government had more discretion – on reaching pay settlements for nurses, teachers, and Police, would National oppose paying these people properly?
Would National also oppose offering funding relief to the victims of Cyclone Gabrielle? Unemployment is being forecast to rise next year – would National also oppose setting aside money for the related rise in benefits to those people and their children until the economy can re-employ them?
Meaning: The bulk of Labour’s spending has been on what a normally responsible government would do. It has largely been a response to the very kind of circumstances for which people pay their taxes. By comparison to those commitments, the amounts being spent on contractors and back room consultants – a system created as a cheaper option than doing the work in-house – is peanuts.
Finally… The spending in other discretionary areas (e.g. on transport infrastructure) are part and parcel of planning for the future, which has never been National’s strong suit. In sum, there has been almost zero evidence over the past five years of out-of-control government spending. What over spending that has occurred has largely been with the wisdom of hindsight. At the time during Covid, individual firms and sectors like tourism and hospitality were not only kept afloat by government spending but those businesses were actually screaming for more support packages and bigger subsidies kept in place for longer.
Since election 2020, such has been Labour’s dogged commitment to economic orthodoxy that its own centre-left supporters have despaired of Labour’s reluctance to be more bold, and more generous to those in need. In despair at Labour’s bean-counting parsimony, many of those centre-left voters are – as we speak – heading off to the Greens.
Footnote: The dominant media discourse on government spending is a sign of a wider trend. Last year, I wrote a long essay about the moral panic concerning social media’s role in promoting bad faith extremists peddling disinformation to the gullible… When in reality the main conduit for bad faith actors peddling misleading messages to the gullible is – and always has been – the mainstream media. Rupert Murdoch’s empire was built on perfecting ways to exploit public sentiments, at the expense of truth.
Ultimately, the mainstream media’s commitment to the dubious notion of objectivity has pretty much cancelled out its duties to evaluative journalism. The media has never found a way to effectively challenge claims by mainstream politicians that are patently untrue. As a result, the media has become a megaphone for that dis-information. It has been doing so for long enough to know better.
Yet we’re all stuck with it, regardless. On a daily basis National and ACT in particular, keep peddling fictions with virtual impunity on the nation’s news bulletins. To my mind that’s a bigger problem than having some nutter on Youtube railing against the global banking conspiracy.
On this track from reggae’s golden period, the Ethiopians told a simple truth. Politics is a matter of promises promises being made by those with a full belly, and who are leading people to a land of make believe: