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Exchange rates, Kiwisaver, breaking promises, & the art of doing nothing

Written By: - Date published: 2:35 pm, October 31st, 2009 - 8 comments
Categories: economy, kiwisaver, national/act government, superannuation, unemployment - Tags: , , , , ,

A range of interesting political/economic comment today in the Herald:

Fran O’Sullivan joins the left-wing and groups like Federated Farmers in calling on the Key Government to sort out monetary policy. At the moment, the Reserve Bank is tasked solely with controlling inflation with interest rates as its only real tool, while the exchange is free and no-one has a job of keeping it in a stable range to assist exporters. The result is massive currency fluctations as hot money from overseas comes in to take advnatage of our higher interest rates then flees at the slightest sign of trouble. Something does need to be done but I think O’Sullivan’s barking up the wrong tree if she expects a former currency trader and a former Treasury official Dipton-based farmer to do anything about it.

Brian Gaynor writes about the success of Kiwisaver, which will compete with the Cullen Fund, Working for Families, minimum wage increases, improved work rights, restored public services, and interest-free student loans as the greatest legacy of the Fifth Labour Government. He reveals that, despite National’s claims that reducing the minimum contributions from employers and Kiwisavers to 2% would help more people join, in fact most new members since the change are contributing 4% (350,000 more members since November – 850,000 to 1.2 million – 150,000, 12%, on contributing 2%). Like The Standard‘s writers were saying at the time, the Kiwisaver clawbacks were all about National looking after business, reducing the cost to them, not getting more people in Kiwisaver.

The Herald editorial calls on Key to “rescind” his promise to resign from Parliament before changing superannuation entitlements. That’s basically the Herald saying ‘if you do it, John, we’ll give you a free-ride, nudge, nudge’.

Well, I don’t know about you but where I come from, you can’t just “rescind” a promise, especially when people have voted in good faith based on that promise. The promise not to muck around with super, like the promise not to privatise public assets, was important in shoring up National’s support when it had been plunging following Bill English’s drunken comments about selling Kiwibank. New Zealanders elected Key after he made his empathatic promise that super was safe. They won’t forgive him if he breaks his word on that one.

Brian Fallow skewers Key’s ‘do-nothing’ approach to running the economy:

the measures the Government undertook to “take the sharp edges off the recession” have been useful but pretty marginal in the overall scheme of things.

The ReStart package of assistance for people made redundant has benefited just over 5000 people since its inception in December. But there are 138,000 people officially unemployed and 60,000 drawing the unemployment benefit.

The Job Support scheme, supporting firms which shift to a nine-day fortnight, has just 39 businesses taking part. There have been tax changes to ease cashflow pressures on smaller businesses, though they do not reduce their final tax bills. The “rolling maul” and the Jobs Summit have not left deep footprints.

What then of progress towards addressing the economy’s deep-seated structural weaknesses and achieving the “step change” in economic performance the Prime Minister likes to speak of?

Brian says things will need to change next year and the government will start to take more action. But with a PM whose priority is being popular and a finance minister who, as others have noted, seems to think of him as a mere observer of events, I’m not sure.

8 comments on “Exchange rates, Kiwisaver, breaking promises, & the art of doing nothing ”

  1. Pascal's bookie 1

    I think they spelt ‘renege’ wrong.

    And yeah, it’s next year that we’ll find out how well the economy is holding up. If it’s a w shape recession, with this being a dead cat bounce, then they’ll have to respond. Though I suspect it makes more sense to have everything in place first.

  2. Ianmac 2

    That nice Mr Key can smile and point out since the Labour lead Government made such a hash of things and since this has forced us to rethink Super entitlements, (he smiles again) and says ” The circumstances have changed and I’m relaxed about it, so we will reconsider the raising of the entry level for Super and………….”
    “Yay! cries Mr 45 year old. “Good on yer John!”

  3. bobo 3

    P.S what happened to the Foreshore & Seabed policy announcement that Turia was saying 2 weeks ago was going to be announced about now?? Is National going to delay till Parliament resumes next year and avoid a summer of discontent.?

  4. Finally you are learning. Two years at Treasury before running back to be a Dipton farmer does not make you a former treasury official.

  5. George.com 5

    Key has had a lot of luck run his way thus far. Seems 60+ % of kiwis think he did a average or better job of dealing with the recession. Whilst Key bounced from cloud to cloud the truth is that Key and his govt did remarkably little. A bit of tinkering and some crossing of fingers that things would be ok. NZ benefited from action taken overseas by other leaders and Key benefited from actions put in place by Labour.

    Cullen put a huge swag of dough into the economy in October last year. National followed on with its April tax cut. Key inherited an economy with very sound books and low unemployment. The books afforded him some room to take on debt. The low unemployment has meant the unemployment peak will likely round out somewhere near 7% rather than closer to a reputation killing 10% had the pre slump rate been higher.

    The Nats ‘brought forward’ infrastructure plans Labour already had on the books. It made it look like he was doing something whilst really doing little more than what had already been put in place for him. Key tinkered with his 9 day fortnight that has saved some jobs, maybe a couple of thousand or so, perhaps. His cycle way has created in new jobs to my knowledge. Any bad stuff that didn’t come right he could of course blame on Labour.

    That said, if the world plunges back into a cold bath, Key & his govt may have to start doing some work themselves.

    In the meantime some big economic fundamentals need fixing. There is the national fixation with housing as an investment and how we manage our exchage rate. Cullen took a major step forward toward fixing our savings habit with Kiwisaver. He tinkered with the exchange rate and housing but backed off quickly when National started politiking. So now it is Keys turn to addres the problems Labour didn’t. There are enough ideas around for his government to utilise. Sooner or later luck has to change to substance. *Waits*.

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