Are we “roaring out of recession”? No. Is there an “aggressive recovery”? No. What’s going wrong? The problem is that the Nats are squeezing the life out of the economy.
I’ve written on one aspect of this before. The Nats believe that the correct response to these hard economic times is to cut cut cut. Cut a billion dollars out of public spending. Cut funding for adult and community education, cut support for early childhood education, cut support for community groups. Cut jobs. Cut Working for Families. Cut incentives to save. There is an economic theory – expansionary austerity – which claims that cutbacks in government spending can stimulate economic growth. The trouble with this theory is that it’s complete nonsense. National’s cuts aren’t helping, they’re making things worse.
In the weekend Stuff carried a piece which explains another piece of the puzzle:
Frozen family support blamed for economy
Reducing support to lower and middle income families worsens the impact of recession and contributes to the widening gap with Australia, Auckland University’s retirement think tank says.
The Retirement Policy and Research Centre investigated whether New Zealand and Australia’s economies have grown further apart since the global financial crisis.
The New Zealand Government, originally committed to closing the 35 per cent or so income gap with Australia by 2025, now says the target is aspirational.
Aspirational is fast becoming my new least-favourite-word.
… A fellow of the Australian Centre for Policy Development at Sydney’s Macquarie University, he said growing out of recessionary times is more of a challenge in New Zealand … “If the lower and middle income families don’t have much money to spend, you can’t support growth in the retail and construction industry, and it makes you more susceptible to the worst effects of the recession.”
The absence of this shock absorber tends to exaggerate the recessionary cycle in New Zealand and inhibits consistent growth.
Dr Spies-Butcher said that even without the mining boom, Australia’s family payment system is “more robust in terms of it being a shock absorber”. “Here you are freezing Working for Families support at $35,000. “Australia is freezing it at A$150,000 (NZ$196,000).”
And there you have it. The ordinary people, the vast majority, the middle and low income earners, are the ones who determine the health of the economy. National is squeezing them, with reduced support, by holding wages down, and with a GST / tax swindle that enriched the well off at the expense of the majority. All this while costs are rising fast.
The rich get richer, which is always National’s goal, but it’s all so short sighted and self defeating. Without an economically healthy majority, you can’t have a healthy economy, and ultimately everyone is less well off.