If now isn’t time for fresh thinking on our future, when is?
If this isn’t the time to take a new direction, when will be?
In my last column a fortnight ago, I said we were faced with a choice of seeking the answers to how we can rebuild the economic damage done by the pandemic, by either going backwards or forwards. The backwards option has had a lot of publicity over that fortnight as National has put its wares on display.
As was only too predictable, the centrepiece of the offering was an income tax reduction programme, albeit a temporary one. There was no pretence that this was about fairness; someone on the minimum wage will get roughly a seventh of what someone on $100,000 a year gets. Put aside the fact that the cost of these temporary tax cuts — $4.66 billion — is just over half the two fiscal holes totalling $8.2b that National created by sheer incompetence. There remains the question: will it do much to stimulate the economy?
Working-age beneficiaries, by National’s own reckoning a substantial part of the population, will not share in this temporary tax cut bonanza. Those on low to moderate incomes, those most likely to spend it all, get very little. Those on higher incomes have a larger propensity to save — not much use if the priority is getting the economy moving more quickly in the short term.
And what about the senior citizens? Next year they will get a larger increase than usual when the tax cuts flow through to the calculation of the annual adjustment. But what happens when the tax rates go up again? How will that flow through? The reality is that a National Government would come under huge pressure from many to break their fiscal promises and make the tax cuts permanent.
National has form when it comes to breaking tax promises. In 2008 they promised three rounds of income tax cuts, with no cut to the top rate and no increase in GST. In the 2009 Budget they cancelled the second and third rounds of the plan, then later revived income tax cuts accompanied by a GST increase. The great majority of people paid for one with the other. But the top tax rate was cut; those on that rate were the only net winners. This time round National has no John Key to sell the unsellable.
The only real nod to a greener future was a commitment to encourage electric cars. But since these, under National’s stated policies, will not necessarily use renewable sources of energy, and since they will be allowed to clog up public transport lanes, it is hard to discern the net benefit. With the Resource Management Act gutted, fossil fuel exploration once again facilitated, promises to do as little as possible to transform our land-based industries, alongside a growing list of anti-worker tweaks to employment relations law, it seems the best we can hope for is a mismanaged retreat into the past.
What I am still waiting for is some clear ideas from the peak organisations in the economy about coherent plans for a better, sustainable future. So far, the efforts of the great majority have gone into demanding ever more money from the Government to prop them up. Their views have become narrower as time has passed, not wider as we might hope. Tertiary institutions have demanded the laying out of the welcome mat for overseas students without any plan to manage the obvious Covid-19 risks. The tourism industry has not let a day go by without demanding more money, seemingly unwilling to face the reality of what a viable long-term path to recovery might look like. Federated Farmers has gone into full reactionary mode, rather than choosing to become an active partner with government in moving to the sustainable future which is agriculture’s best long-term chance for prosperity.
It seems as if our supposedly selfreliant, No 8 wire mentality culture has collapsed into a strange desire for some new form of nanny state in which central government by itself is meant to solve all our problems. The Government has worked with all of us to face the challenges posed by the pandemic. We continue to have extraordinarily low rates of infection and deaths by international standards. But the road to economic recovery does not consist of lining up to get on Morning Report to do bad imitations of Oliver Twist.
It lies in forming effective partnerships between the key players in various sectors to develop strategies for a better future which will benefit us all. Climate change is not going away because we have been fighting a pandemic. Nor have gross inequalities unworthy of our past and, even more, our future. If the time is not now for serious thinking about a better, fairer, greener future, when will it be?
Sir Michael Cullen is a former
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Labour Minister of Finance and Deputy Prime Minister.
The road to economic recovery does not consist of lining up to get on Morning Report to do bad imitations of Oliver Twist.