Brian Fallow examines the economic priorities outlined so far by the leaders of the two main political parties and finds 'pious waffle berefit of new policy' with rhetoric that is almost identical

Brian Fallow examines the economic priorities outlined so far by the leaders of the two main political parties and finds 'pious waffle berefit of new policy' with rhetoric that is almost identical

By Brian Fallow

In two recent speeches the leaders of the Labour and National parties have sketched their economic “plans”.

They are remarkably similar, not just in consisting of pious waffle bereft of any new policy, but also in that the rhetoric is almost identical.

If there is a difference it is that the prime minister can point to the rather messy building site of existing initiatives, while the leader of the opposition can only point to a drawing board from which, he assures us, policy blueprints will emerge over the next two months.

Both make reference to ideological genetics.

“We are the party that puts people first. It is in our DNA,” declared Jacinda Ardern in her speech to the Labour Party conference on July 5.

Todd Muller’s gloss on that is that “[Labour’s] DNA would see it opt for the higher taxes on income and the new taxes on houses, KiwiSaver funds and other assets that the Labour leader is not ruling out.” That is an unjust way of characterising Ardern’s refusal to either condemn or endorse the Greens’ tax policy.

Still, we have yet to see a tax policy from Labour, despite the need to service the rapidly mounting public debt it is piling up. Interest rates will not stay this low indefinitely, or it will be a very bad sign if they do.

National’s DNA, Muller declared in his speech last Thursday, is responsible economic management.

Being responsible involves “strong and secure borders, not the chaos we have been seeing.”

But “we cannot passively wait for a vaccine that may never come,” he said. It was unthinkable there would be no foreign tourists in Canterbury next winter or even 2022.

In another speech, to the Wellington Chamber of Commerce two weeks ago, he called on the Government to tell us what its plan is for reopening the border. He did not offer one of his own.

Ardern said, about the prospects for a trans-Tasman bubble and reconnecting with our Pacific neighbours,  that a framework is in place which would help Cabinet make a decision on when quarantine-free travel with those parts of the world – and more broadly – should resume, but only when it is safe to do so.

It should let the rest of us in on that framework, because at the moment the global coronavirus infection tally is increasing at a rate of 1 million people a week, and the death toll by 25,000 a week.

National’s definition of responsible economic management, meanwhile, includes getting back to fiscal surplus and then getting net public debt back down to 20% of gross domestic product – as if that number was Holy Writ. The average level of net government debt to GDP across advanced economies pre-Covid was already 76%, so freaking out about the Budget’s projected peak of 54% by 2024 at best smacks of insularity or at worst of an ideological determination – at odds with other parts of Muller’s speech – to shrink the state at any cost.

If $140 billion of additional debt is too much, what does National think would not be too much? We won’t be told until after it has seen the pre-election economic and fiscal update, and may-be not in until two weeks before the election.

Its cut-price recovery will be achieved by focusing on the quality of public spending, as if that had not occurred to any Government before.

In the mean time National will  “not raise the taxes you pay or cut the benefits paid to those who need help”. The latter is not much of commitment given how low slung the social safety net is.

Pots of money

For her part Ardern is sitting on two large pots of unallocated  money: around $20 billion is left in the kitty of the Covid-19 Response and Recovery Fund, while most of the $12 billion infrastructure fund announced in January and boosted by another $3 billion in the Budget remains uncommitted. Given how depressed confidence in the construction sector is, some more clarity there would be timely.

The first priority of Ardern’s five-point plan for the economy is to “invest in our people”. Under this heading, as well as some increase in welfare support, is $1.6 billion for trades training and apprenticeships.

National also has “reskilling and retraining our workforce” as one of its five points, but with no specifics in Thursday’s speech apart from not proceeding with Labour’s restructuring of the polytechnics.

The second leg of Labour’s five-point plan is investing in infrastructure, housing and the environment.

That includes building 8000 more “public houses”. But that evidently means an increase in social housing rather than 8000 more pubs.

Muller for his part promises that before the month is out he will announce the biggest infrastructure package in the country’s history, including roads, rail, public transport, hospitals, schools and water.

Reform of the Resource Management Act is also urgent if infrastructure is to be delivered, he said. It is something the Government has embarked on, at least, and that National never got around to during its last nine years in office.

Singing from the same sheet

The two parties sound like they are singing from the same hymnal when it comes to the third element of Ardern’s five-point plan, which is preparing for a future that will be both decarbonised and digitally transformed.

Muller talks of a “greener, smarter future”.

In both cases details are “t.b.a.”

Fourth in Labour’s five-point plan is supporting small businesses.

But the main form of that support, the wage subsidy, runs out in September.

That leaves the soft loan programme being administered by Inland Revenue, which is now to be extended to the end of the year. Ardern said it had received more than 90,000 applications so far and paid out over $1.5 billion in loans.

Muller, who would take the small business portfolio were he to become prime minister, pointed to National’s already announced JobStart programme to pay $10,000 for each new permanent, full-time job created during the five months to the end of March next year.

But he was non-committal when I asked him two weeks ago whether the most expensive item in National’s policy offering so far would still be their policy come election day. It is a GST refund for businesses which can show their revenue has dropped more than 50% across two successive months because of the lockdown.  If they can demonstrate that then they would be able to claim back the GST they paid during the six months to 1 January 2020, up to a maximum of $100,000.

Bizarrely the fifth plank of Labour’s five-point plan is predicated on the assertion that it will be an export-led recovery, even though in the same speech Ardern acknowledged that the International Monetary Fund expects global output to fall by nearly 5% this year.

She pointed to a $200 million provision to help exporters re-engage with international markets and the $400 million fund for the beleaguered tourism sector.

Ebb tide is running

The reality is, however, that the ebb tide already running on globalisation pre-Covid has only intensified. Trade Minister David Parker was scathing about the leaked initial offer from the European Union under that negotiation, while observers of US trade policy warn not to expect a return to the status quo ante Trump, assuming that malign influence on global affairs is removed in six months’ time.

The fifth plank of Muller’s plan – a personal passion, he tells us – is building stronger communities.

“The local marae, the local sports club and the local voluntary organisation – these are ultimately what binds us together. They help us to get to know our neighbours, to know when one of them needs a helping hand and they provide the structure for us to deliver that helping hand.”

Many of those institutions were damaged a generation ago, he said. “And I don’t believe they have been repaired.”

It sounds like a repudiation of neo-liberal reforms of the late 1980s and early 1990s when whatever the problem, the solution was a market.

And it may help explain why the two main parties are now colliding in the centre.

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30 Comments

""pious waffle bereft of any new policy"" - sums it up well. So who to vote for? NZF are non-starters for obvious reasons and the Greens cannot be considered until they have more non-urban candidates and policies beyond social justice - something to do with ecology would be nice. So that leaves ACT and TOP. It simply isn't an appetising choice but not voting means handing over our future to someone who is proven willing to fund our political parties: the CCP.

TOP are evidence-based. Hard to argue against that.

They think that Maori own NZ's fresh water. Race-based resource allocation just doesn't sound very logical and "evidence-based"to me.

And until very recently they were proposing a wealth tax on all major private and commercial assets (including productive assets like factory machinery). They dumped it when they realised how politically unpalatable it is.

They did want Te Reo compulsory in schools. Don't know if that's been dropped as well

That's a great policy. We are a bicultural nation, and learning languages is great on many levels (including utilitarian as well as cultural levels such as cognitive development)

We may be enthusiastic but there seems to be a shortage of Maori wishing to train to be Te Reo teachers.
If the argument is that all children should be fluently bilingual because we are a bicultural nation then you have forgotten there are three official languages - so every child learns fluent sign language too?
Happy to concur that an introduction to basic Te Reo and an outline of the history of NZ both should be compulsary at primary and intermediate school - both are components of the general knowledge a New Zealander ought to have. At college and university maybe Mandarin might be more valuable than Te Reo - leave it to families to decide.
As someone who hated languages at school please increase availablity but not make it compulsary.

Crappe

We are not a bicultural nation. We are a multicultural nation of immigrants. The vast majority of the immigrants came in the last couple of hundred years, but there were a few immigration waves in 700-1000 years before that.

At least the Greens were first cab off the rank with tax/welfare policy - like it or not - at least they prepared new policy and had the guts to make a stand/commitment to the electorate.

Well said Kate. Interesting to see that a group of super wealthy are advocating for a wealth tax to address covid and other problems.

Brian Fallow.. always an astute commentator. He's hit the nail fairly and squarely on the head.. Both major parties are scrambling to usurp each others core policies, the resultant shambles means none of them are much different and it's down to their coalition partners to differentiate.. It'll be interesting to see who actually has partners this election, discounting NZF who'll partner with whoever they can to perpetuate their existence

This is an astute piece. You get the sense that he gets it. Love the 'Ebb' bit; that's the whole crux of the matter, we were already on the way 'down' from the peak of globalisation. Saul reckons it to have been 1995ish, and I can't fault his logic. It interested me that nobody pointed that out re Mike Moore.....

The only thing I'd ask Brian to ponder, is what 'centre' means. Together, yes, but centre? Depends where the nes spectrum starts and finishes.

J. Ralston Saul?

This hits the nail on the head:

'They are remarkably similar, not just in consisting of pious waffle bereft of any new policy, but also in that the rhetoric is almost identical.'

'Bizarrely the fifth plank of Labour’s five-point plan is predicated on the assertion that it will be an export-led recovery, even though in the same speech Ardern acknowledged that the International Monetary Fund expects global output to fall by nearly 5% this year.'

Are the powers that be thinking of ways of crashing the Kiwi dollar? That would certainly help exports.
Surely a negative OCR would assist significantly.

8000 more pubs! Wonderful idea. Maybe I misread it. Let me see, now, was that a Labour policy or a National one? Better get that right.

'And it may help explain why the two main parties are now colliding in the centre.'

The parties seem quite close - close to the centre - on economic management. Labour probably won't go much if at all to the left - why would it when it's so popular?

Nats will struggle to lower taxes in this fiscal environment, which is one of their signature moves. So they will struggle to move much to the right on economic matters. So they are a little bit 'snookered'. They could lower business tax and /or income axes if they looked at things like land taxes - but they won't of course do that, that's heretical to them. So dogma and tradition hamstrings them.

Fertile ground (although limited) lies to the right on social issues. Muller has touched on it, but needs much more. Again though, they have some philosophical challenges, on things such as immigration

Maybe the Nats have decided this is not an election to win. It would explain much of their recent behaviour.

They seem to be imploding, which I hope will see ACT pick up the votes they shed. Labour / Greens for another 3 years should be enough to ensure a swing the other way in 2023. I hope the Nats will have purged their woke/leftie contingent by then.

No mention of any plans to combat climate change from either, although Labour at least acknowledges the threat is real

Good. If the climate is changing as opposed to extreme weather events the carbon tax and any other measure is a waste of time and money. Any so called climate change policy will add significantly to the cost of business and hit consumers in the pocket. The Green proposal for State housing having solar PV units installed is a feel good and economically unviable. Same as buying an EV. Might do your conscious good but a waste of time.

Sad little comment.

Reminds me of economists - duck-shove any cost you can

Onto someone else. In your case, future generations.

Nigel, any information to back up economically unviable? Given that we're on a path towards more self sustainability, I'm interested to hear your thoughts on alternatives to the status quo.

Man made climate change is happening, and we'll all bear far greater cost if we do nothing.

My conscious is quite good, but my conscience troubles me sometimes.

There are no easy solutions to a situation where most people are profiting one way or another off a debt based system where the answer is more debt and at some point it won't work anymore. Nobody is addressing the issue. Everyone has a vested interest in keeping the train from coming off the rails. At this point its who can sell the best advertisement of why they should preside over the debt slaves of today and tomorrow. Good luck finding someone to vote for

Vague, Vague, Vague. Nothing to help make us decide.

TV3 breaking news:
Sir Stephen Tindall, a NZ rich-lister, has come out and said that those with extremely high wealth should pay more tax, following a simliar call from a hundred USA multi-millionares and billionaires. (The Tindall family are worth about $685 million).
So, there is at least one NZ rich-lister that has a conscience.
The TV mentioned Bob Jones ( worth over 2 billion) and Rob Duke, but I missed whether they were backing Stephen Tindall, or whether they were just mentioned as examples of high wealth individuals.
In fact, I would go so far as to say that if Stephen Tindall formed a political party I would fall in behind it.
Brian Fallow, I would like your thoughts on whether Stephen Tindall is on the right track here; I'm sure you would have an independent opinion on this matter despite your ties to the NZ Herald.

Just remember, Sir Steve got his money by running roughshod over the top of a lot of little locally owned rural and city retail businesses.He sourced cheap junk from China while these "competitors" were still buying locally made stuff. Don't think he is thinking of others with anything he does. A lot of people despised him for his method of making his fortune. Now, in classic manner, he is trying to get our respect back by offering to give a surprisingly small part of his fortune back.

Who knew, a wealth tax is a good idea eh? Oh wait, that's right, the Greens.

Old Hat