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.