John Key is popular like McDonalds and for much the same reasons. But he’s a politician without substance or mana. Substantive politicians don’t tell lies, like the ones Key told last week in Parliament about the widening wage gap with Australia. Or this one, that Key lobbed out in the middle of that dismal performance:
It took 9 years for Labour to make a complete and utter mess of the economy; it might take a bit longer than that for us to sort it out.
This lie is common from the fodder on the blogs, but I was surprised and disappointed to hear Key repeating it. So let’s take a look at Labour and National’s economic records shall we.
Labour’s legacy
Labour left the economy in good shape in 2008. 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:
[New Zealand] was better placed, in terms of its starting point going into the crisis, than many countries. The basic nature of its banking system, the floating exchange rate, and low Government debt should stand it in good stead. … As well, “significant” stimulus from monetary and fiscal policy was happening, even if its full benefits had yet to be felt. “The average advanced country is starting with [government] debt of around 80 per cent of GDP,” Mr Brooks said. “New Zealand’s gross debt is around 20 per cent and in net terms it has positive financial assets. That’s important.”
Far from 9 years of economic “mess”, Labour oversaw a decade of growth. 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. Inflation has been low, averaging 2.2 per cent since 1998.
Labour paid off debt from the past, grew the economy quicker than comparable countries, stopped the widening pay gap with Australia, took unemployment to 30 year lows, alleviated poverty with Working for Families, and started planning for the future (and stimulating the economy) with Kiwisaver and the Cullen fund. That’s an economic record to be proud of.
2008 recession
For a variety if reasons – none of them economic mismanagement – the New Zealand economy technically went in to recession in 2008. Dr Bollard sums up:
‘The international financial crisis actually played little role in the early part of New Zealand’s economic recession. Rather, it was drought, falling house prices and high petrol prices that dragged New Zealand GDP growth negative over the first three quarters of 2008″.
Despite being then caught up in the unfolding global recession, the resilient economy left by Labour recovered, and we were technically out of recession by the June quarter 2009. In other words the recovery was underway before the new National government’s first budget. National claim the credit of course, but we were out of recession before they even so much as twitched the reins of the economy.
The ongoing slowdown has certainly been harsh for New Zealand – especially to the many thousands who have lost their jobs – but the blame now fairly belongs to National. Labour left the economy in good shape, but National wasted the opportunity for a stronger rebound. Wasted it, because (unlike Australia) they have no idea and no plan for growth.
2008 election
It was obvious before the election that Labour both understood the magnitude of the global recession, and had a detailed plan and stimulus package ready for the economy. National, in contrast, was only focused on buying the election with irresponsible promises of massive tax cuts (a promise dropped as soon as their bums hit the ministerial seats). They had no realistic plan. John Armstrong summed up:
If actions speak louder than words, Labour was the winner on Day One of the official election campaign – game, set and match. In the fight over which of the two major parties is best at running the economy, Labour scored a significant tactical victory. …
Key’s earlier speech at National’s campaign opening in Auckland’s SkyCity Convention Centre said nothing new on economic policy. In fact, it said nothing new about anything.
If that was not bad enough, Labour was getting ready to lay out something really meaty just a few blocks away in the Auckland Town Hall. There, Helen Clark trumped Key by delivering the recovery package he had been demanding, including contingency plans to save jobs and the promise of a mini-budget in December. The upshot was that Labour looked like it was governing; National looked complacent and flat-footed.
The new National government
In the face of the worst global recession in decades, the incoming National government infamously went on holiday:
Govt’s ‘100 days of action’ includes 28-day holiday
It was supposed to be “100 days of action” … . but the new Government’s urgent agenda includes 28 days of a skeleton holiday-time operation. Despite the global economic crisis, Prime Minister John Key is on leave at his Hawaii getaway and – as in past summers – other ministers have been acting as the lone “duty minister”.
Not that it mattered much, because there’s very little difference between Nats on holiday and Nats asleep at the wheel. They had no plan of their own, so they tried to claim credit for the outgoing Labour government’s economic stimulus. Superb reporting by Tim Watkin at Pundit caught them out:
The $9 billion bait and switch
National claims its $9 billion stimulus package is one of the largest in the world and will protect New Zealand from the worst of the recession. But much of package is in fact old spending re-announced, including most of the previous government’s 2008 Budget and the purchase of KiwiRail that National so vehemently opposed
News sites and radio bulletins today are full of the government’s $500 million infrastructure spending plans, as part of its $9 billion stimulus plan for the economy. What they’re not telling you how the government is cutting and pasting old numbers under new headlines to make itself look more pro-active than it really is. … In truth, it’s a bunch of already budgeted-for spending plans re-announced and labelled a stimulus package. …
Tim finally got the truth:
The truth about National’s so-called stimulus: not a penny more
… Yesterday afternoon I got an answer and an admirably detailed answer at that from Bill English’s office. The short version is this: Last December the government confirmed that its new spending combined with Labour’s already committed spending would total $9b over the next three years. Every spending announcement since the business tax reform, the new bridges and schools hasn’t been about new money, it’s merely been telling us how that $9b would be spent. While the economy tanks and the rest of the world commits hundreds of billions in new spending, New Zealand hasn’t changed its fiscal plans one iota.
Desperate to be seen to be doing something, Key came up with a talk-fest “Jobs Summit”, and his astounding plan to fight the global recession with a cycleway. How’s that working out again? National have now had two budgets, in economic terms both of them wasted. Or actually damaging. Oh and by the way, unemployment is still high and the wage gap with Australia is growing ever greater too.
Signs of recovery
Not because of but in spite of the bumbling National government, the battered NZ economy is trying to battle itself back to good health. There are occasional signs of hope. As usual the Nats are desperate to claim the credit. But none of the “green shoots” are due to the government. Here’s a typical example:
Rising commodities have supported New Zealand’s economic recovery over the past 12 months after it climbed out of its deepest recession in 18 years in the June quarter last year. Central bank Governor Alan Bollard said New Zealand’s trading partners had recovered faster than expected and this had filtered through to the country’s exports.
Thanks commodity prices! Thanks trading partners! No thanks National. Similarly:
The outlook for the financial system has improved over recent months, reflecting a recovery in the New Zealand economy driven by stronger trading partner activity and a sharp lift in the terms of trade, Reserve Bank Governor Alan Bollard said today…
Thanks terms of trade! Thanks again trading partners! No thanks National. But it’s not all down to international factors – consider:
Deficit Falls Further The Government’s deficit has decreased further, with the Crown’s operating balance for the nine months to March 31 coming in $2,006 million smaller than forecast at $1,327 million mainly due to gains on the Crown’s investment portfolios held by the NZS Fund, ACC and EQC.
Thanks Super Fund, ACC and EQC, or in other words thanks Labour governments (2001, 1974, 1947)! No thanks National. Overall our performance coming out of this recession is anaemic:
June 2010 rebound much slower than usual:
The Reserve Bank is expected to keep raising interest rates, despite figures showing a much slower recovery than seen in past rebounds from recession. … The pace of this recovery is only a fraction of other rebounds seen in the past 20 years, as the economy slowly picks up after the global financial crisis.
Missing in action – no thanks National!
Summing up
The last Labour government had an economic record to be proud of, and left the country well placed to weather the global recession. National squandered that legacy. They had no plan before the 2008 election, and they still have no plan to this day. All they can do is try and illegitimately claim the credit for every minor upward blip in an indicator, and watch helplessly as they fall further and further behind on every measure for their self appointed goal of catching up with Australia. John “It took 9 years for Labour to make a complete and utter mess of the economy; it might take a bit longer than that for us to sort it out” Key is telling us the direct opposite of the truth. His government is not fit to kiss Labour’s bright red economic arse.
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