Much has rightly been made of the leadership quality of Prime Minister Ardern this year. But the PREFU results announced today shows that Minister of FInance Grant Robertson is by a long way the most effective Minister of Finance we have had since Dr Michael Cullen.
What he and his team have done is softened the very worst of the economic and social devastation of Covid 19 upon us in New Zealand. As much as it could, his plan worked.
The Pre-election Economic and Fiscal Update released today shows that near-term economic recovery has been stronger than the Treasury and many economists predicted at the May 2020 Budget, as the economy bounced back strongly after lockdown.
Treasury is now expecting unemployment to peak at 7.8% which is down from the nearly 10% they had forecast early this year. By comparison Australia is expected to have its own national unemployment rate peak at 10%, and other big trading partners like the United States and Canada have already got unemployment at 13% or higher.
In my lifetime I have never seen a government act so fast and so huge to stabilise our economy – or any other economy. I thank my lucky stars Labour was at the helm when it had to be done. They have spent tens of billions on the Wage Subsidy, business tax refunds, small business cashflow loans, and infrastructure projects large and small to project jobs and keep businesses going – right across the country. “Taking on debt”, said the Minister today, “is the right thing to do as we fight COVID-19. There is no free lunch here. These measures require significant investment. It has been necessary to use the Government’s strong financial position to do this.”
CTU Economist Andrea Black fully sees how right the interventions have been: ”
It’s clear that the government’s strategy to make large scale investment in the wake of COVD has successfully cushioned the blow to our nation. We have been necessary and unprecedented spending. … This decisive leadership had kept over 1.5 million people in their jobs.”
It’s quite hard to define a transformational moment in government when it is framed in the negative, but this is it: staving off this degree of shock to our jobs and to our society, and done with such effective speed and clarity, is like pulling the wheel of a car really hard to the left when it was about to fly right off a cliff. We’re so used to big permanent structural moves being the very definition of “transformation”. But this time the transformation is a massive country-wide operational intervention – and it sets our course for several electoral terms to come.
Minister Robertson is quite within his rights to remind people now how much they were wrong in begging him to spend really big much earlier. “What counts is our track record. Before COVID-19, despite constant urging to the contrary we stayed disciplined with our spending and reduced debt below 20% of GDP while successfully investing in critical public services.”
Also, in quick riposte to criticism last week for the Super Rugby going to Australia, we’ve secured the Bledisloe Cup series. Almost like he planned it.
Our economic situation could have been waaay, way worse. And it is still bad. But across the media landscape today there is barely a critical voice raised about Labour’s handling of the economy even within the worst crisis that we have faced in a century. In July this year only 38% of us believed our jobs were safe. By the end of August this confidence had risen to 46%, with only 7% feel like their jobs will likely be lost in the next year. We feel it.
As economies contract right around the developed world next year, we are now walking a narrow and high path fully propped up on either side by Government spending.
Thankfully, as citizens we have the ability to continue the leadership of Prime Minister Ardern and Minister Robertson upon this steady, difficult path in just a few weeks’ time.