Politics Jane Clifton
We managed to avoid the worst of the fallout from Wall Street’s tumble.
It’s all fun and games until someone loses an eye. Or breaks a nail. Despite liberal use of such terms as “bloodbath”, it’s still not clear how serious what happened on Wall Street on Waitangi Day actually was. At the time, it resembled a full-on re-enactment of the Pamplona bulls’ rush in reverse, with Jeremiahs carolling about a new global financial crisis. By close of play, the chin-strokers were approvingly calling it a “correction”, even “a much-needed correction”. Then the “I told you so” brigade took over for a shift. By the time we came to reopen our holidaying stock exchange, no one knew what to expect, except it was pretty clear Champagne would not be required.
By Listener press time, even hot, sweet tea seemed a bit hysterical. Our stocks made merely a polite bow to acknowledge the carnage elsewhere, before a 6% global dairy-price boost and the lowest employment stats in nine years cheered everyone up again.
The immediate bottom line for New Zealand is that, unlike the US sharemarket, ours has not had a crazy Trumpian growth rampage, but rather more modest, plodding growth, prudently underpinned with capital. As for a new global financial crisis, this country’s public-debt exposure is more conservative than most countries’, so it seems unlikely a recession would send us to hell in a handcart, aka World Bank/International Monetary Fund supervision.
However, this was a deeply unsettling bubble-burster, especially given that our political year has so far felt a bit like a Moonie love-bombing. In unprecedented warmth and sunshine, politics has been all babies and barbies – even at Waitangi. No biffo, one protest for which there was barely a quorum and not even the babies threw toys. The election outcome subdued recent years’ snarling and snubbing at Ratana.
And even an outbreak of Opposition coup plotting proved to be less Kill Bill than Mildly Irritate Bill. As on Wall Street, where one person’s bloodbath is another’s welcome correction, a coup can sometimes be seen as just a healthy spot of long-term succession planning.
THORNY ISSUES
It’s been easy to forget how many thorny issues our coalition Government faces. Finance Minister Grant Robertson has been laying the groundwork for less-generous social spending than earlier portended. Some complex policy issues with profound economic implications are now at the head of the political queue – notably water pricing, thanks to the momentum of iwi governance claims. Petrol and power pricing is soon to be revisited, too. Though this may end up bringing net positives to consumers and businesses, the rethink process creates uncertainty, which is politically and economically hazardous.
Although our overheated housing market appears to be making the prayed-for soft landing, that could change given global market collywobbles. It’s not as though there’s
Our overheated housing market appears to be making the prayed-for soft landing.
any shortage of crises-in-the-making. Besides North Korea, the Middle
East and Russia, there are President Donald Trump’s antics and his potential legal predicaments and Brexit’s protracted, niggly enactment bedevilling Europe.
Global economic growth is projected to remain lively, boding well for our exports and our growth in turn, but foreign-investor distractedness over geopolitics can play merry hell with the mostly soundly based forecasts.
In the meantime, it helps to view the see-sawing rhetoric over the global sharemarkets in the light of what a former US Federal Reserve chairman once said about the role of central bankers: to take the punch
bowl away just when the party’s getting started.
Arguably, the developed world’s low-interestrate party has been going way past the “For pity’s sake, call Noise Abatement!” stage, which is why Tuesday’s plunge was so severe. US companies in particular have bulked up their cheap borrowing, and now the sniff of inflation has spooked investors. Next comes a blame-game. Have central bankers been artificially or irresponsibly letting inflationary pressure build up? Or is this the markets’ fault for imprudent gearing and having learnt nothing from the causes of the global financial crisis? Or is it just a healthily functioning market (we’ve all been a bit silly, so now we take our lumps and carry on)?
IMPORTANT TURF DISTINCTIONS
Meanwhile, domestic politics has become just that little less governable for Labour with the Greens’ co-leader elections. Second-termer Marama Davidson is standing with a platform that puts the Government on notice: under her watch, the party would undermine, with extreme prejudice, certain of its policies.
It’s hardly a catastrophe to have a confidenceand-supply partner manning the barricades against the new Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the state security agencies, but important turf distinctions can be drowned in stridency. If voters hear too much “down with the Government!” from inside the tent, they are likely to conclude the coalition is unstable.
Are the Greens in government or not? Davidson’s approach may protect the Greens against the traditional next-election punishment meted out to most minor parties who enter coalitions, for seeming too cosy with the enemy. But MMP voters know no party can have its entire manifesto in an MMP government. If the Greens can’t show an ability to defer or compromise, even for the sake of supporting some of the ambitious new environmental goals their ministers are trying to achieve, then voters might punish them for that.
New Zealand First is, unexpectedly, trying a more measured, user-friendly approach, having acceded to the CPTPP, but refused to support the scrapping of 90-day employment trials. Its MPs stood on the Treaty Grounds without saying boo about the imperative of stripping reference to the document from all statutes.
It’s as though Winston Peters found Peter Dunne’s old Captain Sensible kit left behind in a cupboard and has been having a play with it. The polls suggest his party has little to lose. Not being a contrarian pain-in-the-behind at every turn doesn’t come naturally to Peters, but he managed it for a term under Helen Clark’s administration, and could do it again for Jacinda Ardern’s.
He’ll be feeling vindicated by Tuesday’s mayhem, given his predictions of world economic doom on coalition night, and if he sees the Greens playing up, he will feel a bloody-minded compulsion to do the opposite.
It’s as though Winston Peters found Peter Dunne’s old Captain Sensible kit left behind in a cupboard.