Written By: - Date published: 7:04 am, October 21st, 2010 - 24 comments
Categories: bill english, economy, jobs, john key, labour, monetary policy, national - Tags: clueless, economic management, financial crisis
In three short years John Key and National have gone from economic bravado, to failure, to lies, excuses and whining. The Nats are desperately trying to spin excuses for their failure. How did we get here? Let’s take a stroll down memory lane.
The recession and Labour’s legacy
In 2008 the world was slipping into what was obviously going to be a very difficult recession. Economic projections were dire, but 9 years of prudent management of the economy by Cullen and Labour had left New Zealand well placed. Treasury said so at the time in their briefing to the incoming government:
A stable macroeconomic environment gives investors confidence in the New Zealand economy as a place to invest. It gives New Zealand businesses a degree of certainty for making business decisions. Successive governments have done a good job of getting the New Zealand economy in a position where it can respond well to economic shocks. Low levels of public debt allow freedom to look through short-term cyclical fluctuations and there is room to adjust monetary policy to support demand.
Bill English said so too, on Dec 18 2008:
“I want to stress that New Zealand starts from a reasonable position in dealing with the uncertainty of our economic outlook.” “In New Zealand we have room to respond. This is the rainy day that Government has been saving up for,” he told reporters at the Treasury briefing on the state of the economy and forecasts.
Bill is still saying the same, in May 2010. The IMF agreed, and according to Reserve bank Governor Dr Allan Bollard in 2008: “We have enjoyed a decade of growth, the longest period of economic growth since the post-World War 2 era.” More details here.
In short, the coming problems were clear, the economic projections were dire, but New Zealand was well placed to respond. This was the context in which the 2008 election was fought, and in which the new National government took office. So – what were they saying about the economy?
National’s economic bravado: Before the election
Before the election John Key was in no doubt at all about the nature or extent of the economic crisis. He said:
Ladies and Gentlemen, this is no ordinary election campaign. Because this election comes at a time when the global economy is in turmoil and at a time when we are all concerned about what the future may contain. … Earlier this week … I released National’s economic management plan. It’s a plan to bring discipline to government spending, to reduce red tape, to reduce personal taxes, to boost infrastructure investment, and to raise education standards. It’s a recovery plan to ensure our country and our families get through these tough times. …
Key and National were chock full of economic bravado. Of their tax cut bribe Bill English promised:
“National has structured its credible economic package to take account of the changing international climate. Our tax cut programme will not require any additional borrowing.” A few days later, Mr Key launched “a tax package for our times” that is “appropriate for the current conditions”. He said it would require “no additional borrowing, or cuts to frontline services to fund it. …
On December 16, Mr English was up in the House confirming “National will not be going back on any of those promises, as we fully costed and funded them”.
Tax cuts were, of course, the centrepiece of National’s five point recovery plan:
Only National can provide a government that is focused on the big economic challenges our country is facing. Only National has a serious, considered plan for delivering financial security to New Zealanders. …
Our economic plan focuses on the long-term needs of New Zealand. It isn’t a short-term set of band-aid solutions. It is a considered plan to get New Zealand through this downturn, put the economy back on its feet and raise incomes. Because in good times and in bad, National will be resolutely focused on strengthening our economy and delivering better wages and living conditions to New Zealanders. We won’t just care about those things in election year.
In short, John Key told us that he was fully aware of the state of the economy and the extent of the global problems, and he promised us that National had a recovery plan to get us through. Key promised to deliver a strong economy and good wages.
National’s economic bravado: After the election
Key’s vacuously “sunny” optimism continued after the election. In 2009:
“…we’re starting to come out of the recession which is good news,” Key said. … “The government has a comprehensive plan, not just for managing through the current recession but also for improving the fundamentals of the New Zealand economy,” he said. “The six policy drivers I have outlined will help to create an environment that allows businesses to thrive.”
I also want to pay a special acknowledgement to my friend and deputy, Bill English. What a great job he is doing as Finance Minister. He’s delivered two Budgets that have steered New Zealand out of recession and put the economy firmly back on track to grow and create jobs.
So much for the promises and rhetoric. How did it all turn out in reality?
It all turns to custard
I’ll spare you another big mess of quotes. We’ve all seen the news.
August 2010: Unemployment rate jumps.
August 2010: Tasman wage gap $40 a week wider
September 2010: Kiwi dollar tumbles on weak GDP.
October 2010: Economy ‘fragile’ – Reserve Bank gov.
October 2010: Economy contracted last quarter, says NZIER.
And so on and so on. It doesn’t sit very well with all of National’s bravado does it?
And now the whining starts
National have been caught out badly. They promised that they understood the problem and had a recovery plan. The reality is that they did nothing (except cut taxes, which is somehow supposed to fix everything by magic). The reality is that National have failed badly, and it is becoming more and more obvious. So how do they respond?
(A) Tell lies!
The Nats are spinning all sorts of nonsense about the economy. Fellow Standardista Marty G has been taking these lies apart for weeks (e.g. here, here, here, here). The Nats are claiming that average wages are increasing! Keith Ng takes that lie apart (well yes, because so many low wage people have lost their jobs). The Nats are claiming that the current low inflation is an economic victory! Gordon Campbell demolishes that one (there’s a lot of desperate sale pricing of luxuries but the essentials are still rising). And so on.
(B) Whine and blame Labour!
Perhaps sensing that the lies are too transparent to last, Key has fallen back quickly to Plan B — whine and blame Labour:
“Tens of thousand of Kiwis are finding they just can’t pay their bills,” says Labour leader Phil Goff. Mr Key says that’s not his Government’s fault – he blames Labour. “It’s a lagging indicator, and these people are having to deal with the mess Labour left the country in,” he says.
People can’t pay their bills and that’s a “lagging indicator”? Hello! Out of touch much? Let’s go full circle back to the start of this post — Labour left the economy well placed heading in to this recession (even Bill English said so). Key campaigned on a recovery plan, and said that only National could fix the problems. Key claimed that two National budgets “have steered New Zealand out of recession and put the economy firmly back on track to grow and create jobs”. And now when all the bravado is revealed as bullshit he wants to blame Labour? Yeah good luck with that.
Time to learn the lessons John
John Key, you need to face up to some basic lessons:
(1) Your “tax cuts will solve everything” sham of a “plan” for the economy is a failure. Labour left you well placed to respond to the crisis, and you’ve blown it. As early as June 2009 we were out of recession, but because of your do-nothing “plan”, two budgets later, we are slipping back in.
(2) What is happening in New Zealand is only a microcosm of what is happening internationally. Neo-liberal economics has failed. It died in the heat of the global financial crisis of 2008, and only trillions of dollars worth of “socialist” tax payer bailouts have animated the corpse since then. Even that half life is likely to end soon on the twin pyres of sovereign debt and American foreclosure fraud.
This is a time for fresh thinking, both globally and locally.
Some people get it. People like Bernard Hickey, who has renounced neo-liberal economic orthodoxy. Some organisations get it. Organisations like the Labour Party, who used their recent conference to break the economic mould and promise fresh new thinking.
On the other hand, some don’t get it at all. John Key doesn’t get it. The National Party doesn’t get it. As long as they are in power they will have nothing to offer economically except tax cuts for the rich. As the economy languishes they will have nothing to offer except more lies and pathetic attempts to blame Labour. If the economy does stagger back to health it will be despite National not because of them.
Trace National’s path from economic bravado, to failure, to whining. Consider the alternatives. A reinvigorated and open-minded Labour, or a closed-minded National clinging to failed policies and excuses. That’s the choice facing New Zealand at the next election.