Australia’s lessons for NZ politicians
Pessimism about the economy and inflation a warning to the Government
Achange in government in Australia often foreshadows a change in New Zealand. The electoral success of the Independent Teal candidates is a warning to politicians to take climate change seriously but the killer issue was inflation.
The Roy Morgan economic confidence survey on the eve of the election revealed a majority of Australians to be pessimistic and expecting to experience inflation.
The Roy Morgan survey for New Zealand shows we are even more pessimistic and have even higher inflationary expectations.
Governments are rarely re-elected when the majority is pessimistic about the economy and inflation.
Last week will prove crucial for the electoral prospects of the Labour/ Green government with the release of the Government’s response to the Climate Change Commission’s Report and Finance Minister Grant Robertson’s fourth “Wellness Budget”. The Government’s climate change response is a hodgepodge of spending. Included in the initiatives are proposals that have nothing to do with the climate such as a change to NCEA and tertiary education, unemployment insurance, tikanga progammes and so on. The big winner from the $3 billion package is corporate New Zealand.
James Shaw, the minister responsible, was unable to explain why the commission’s recommendations have been largely ignored. A headline in this paper “James Shaw is toast” summed up the reaction of the environmental movement. If the Australian election is a guide, next election a new environment party will contest for the climate change vote.
The reaction to the Budget was also disappointment. At a 30-year high, inflation is the number one issue. As late as March, Prime Minister Jacinda Ardern was on breakfast TV denying the cost of living is a crisis. Robertson has rejected the Reserve Bank Governor’s advice that to tame inflation along with central banks’ tightening monetary policy governments must exercise fiscal restraint. Although it is clear that inflation is not transitory Robertson refuses to take the tough decisions needed to combat rising prices. He has proceeded with record spending. He admits his budget will be inflationary.
We have the lunacy of the central bank applying the brakes and the Government the accelerator. The madness of trying to reduce the effects of inflation by yet more spending.
This column predicted when the Government announced a “temporary” easing of fuel excise duty and a “temporary” public transport subsidy that the Government would find both difficult to remove. So it has proved. The Budget announced further “temporary” extensions.
No government has been able to end the totally unjustifiable free ferry trips to Waiheke Island for Gold Card holders. Why will the Government be able in November to take away $27 a week from 2.1 million voters? By then many mortgagors will be experiencing financial hardship. The Government is borrowing from the future to increase today’s incomes. It is unsustainable.
Treasury’s prediction that inflation will exceed the Reserve Bank mandate through to the election raises many questions: Has Labour abandoned the Policy Targets Agreement whereby the Reserve Bank is required to keep inflation between 1 per cent and 3 per cent?
Today’s Reserve Bank monetary statement will reveal if the bank is following its mandate or just trying to moderate inflation.
How credible is Robertson’s claim that inflation has peaked?
No union can accept pay rises less than inflation. A business that does not pass on costs risks going broke.
Inflation has given the Government record tax revenues. Now inflation will reduce what that revenue can buy. The telephone number Labour has thrown at health will be eaten away by inflation.
Labour is losing economic credibility. National is gaining credibility. When Christopher Luxon became leader he could have chosen a rainbow of issues. When the Government was claiming inflation was transitory the Opposition Leader made the smart decision to focus on the cost of living.
The polls now say National is more competent to handle the economy.
Act also rose in the latest poll. Act has put forward a costed alternative budget. The party has said where it would reduce government spending.
National has yet to nominate a single government ministry that would not be missed. The unwillingness of both the Liberals and Labor in Australia to take tough decisions saw both parties’ primary vote fall. There is a message in that for National.
Parliament is closed this week so Labour can sell the Budget and the Greens their climate response package. Already they have both failed to convince a key constituency, their own activists. There is not a single Labour Party member who bought raffle tickets so a Labour government could provide temporary income support. There is not one Green Party member who door knocked so Green MPs could provide corporate welfare.
Enthusiasm is something the polls cannot measure but it is vital. Enthusiasm motivates volunteers to donate, door knock, deliver pamphlets, enroll and vote.
A UN job must be looking more and more attractive to Ardern.