Why I finally care who wins the next election

IThis is the largest peace-time expansion of the state in the country’s history.

arrived in this country sometime in the late 1980s. The details are murky, as is much of my life during those turbulent times. During the intervening decades I have not cared who was running the country after the fall of Roger Douglas in 1988.

Palmer, Moore, Bolger, Shipley, Clark, Key, and some farmer from Southland whose name escapes me, were interchangeable. They fiddled around the edges, some more fiscally responsible than others, but they left unchanged the framework Douglas had set in place.

I had no reason to believe that Ardern would shift from this mould. When she won re-election I wrote that, even free from the constraints of Winston Peters, she would govern from the centre.

For regular readers, there will be no surprise in seeing me admit that, along with my relentlessly pessimistic economic predictions, this is yet another forecast that I got wrong.

Untethered, this administration has become unhinged. The Ardern government is doing sustained and serious damage to New Zealand; and that is a problem because this is where I keep my stuff.

My economic fortunes are tied to this country. My business is here. Like Richard Gere in An Officer and a Gentlemen, I have nowhere else to go.

The mistakes began quickly. One of the most important features of our economic infrastructure and success has been the Reserve Bank’s single objective of price stability. We enjoyed three decades of low inflation as a result.

This achievement did not come cheaply. Interest rates were pushed into double figures in the 1990s and beyond in order to strangle the inflationary beast. Jobs were deliberately destroyed, firms failed and wages throttled back in a brutal but successful drive to eliminate not only inflation but the expectations upon which it feeds.

The casual way this achievement has been squandered is shocking. It is, apparently, of no moment to either Robertson or his pliant central bank that they have dug up the contagion of price inflation.

They either do not comprehend, or do not care about, the damage they have wrought. I do not know which is worse.

Robertson laid the groundwork when he added maximum sustainable employment to the bank’s mandate. This was popular at the time; what is wrong with wanting maximum sustainable employment? The answer is because the two goals are incompatible; you can achieve one only at the expense of the other.

At the time I confidently and, uncharacteristically, accurately predicted that this would result in the Reserve Bank opting for a little inflation when confronted with economic turbulence.

The turbulence arrived and loose monetary policy was used to buffer the economy from the pandemic. This, perhaps, made sense if you could assume that we would not face any more economic turmoil for a generation.

This pandemic isn’t even over and the recklessness of the response is now evident.

The return of tank warfare in Europe has triggered massive economic disruption in commodity markets, as well as the inevitable financial contagion of the Russian economy collapsing and their foreign reserves being frozen.

There is a lot of talk about the ratcheting up of oil prices thanks to the global fatwa on Russian energy exports, but equally disconcerting is the potential for scarcity in the supply of wheat. The Financial Times reports that the price has risen 50 per cent since the invasion.

None of this is the fault of Ardern and Robertson, but it exposes the lack of wisdom in the fiscal and monetary response to Covid. We now have much less capacity to draw on to provide a buffer when the economic fallout from the events in Ukraine land on our shores.

Robertson has also been magnificently irresponsible with his fiscal management. The Crown is going to spend $52 billion more per year than in 2017. This is the largest peace-time expansion of the state in the country’s history.

While Robertson and Ardern revel in the benign and temporary economic conditions created by their fiscal and monetary recklessness, they have set the stage for a brutal economic contraction, for which they will almost certainly not be in office to oversee.

Yet as bad as things are, they are going to get worse.

The Fair Pay Agreements are designed to reintroduce unions and collective bargaining back into the heart of our industrial relations. This will do nothing to improve productivity or lift the overall level of wages. It will introduce unnecessary friction into the labour market.

Even more damaging is the proposed unemployment insurance that will amount to a 2.7 per cent additional tax on wages, reducing the take home pay of workers by at least that amount.

Fundamentally, the standard of living for those living within our shores is a function of their productivity.

This is being damaged by the economic policies being set by this administration and will be further eroded by those announced programmes.

I am not convinced that Christopher Luxon has the desire or ideological commitment to unwind the failed policies that is reducing the quality of life of New Zealanders, but I am certain that he will, once elected, not compound the damage.

Those around him, especially Bridges and Seymour, appear impatient to return this country back to the path of economic orthodoxy, and it is on these gentlemen that our economic future rests.

For the first time since my arrival on these islands, I care about who wins the next election.