Cambpell on Key(nesian) economic policy

Gordon Campbell sums up National’s economic policy announcements very neatly — “‘Vote National: Mortgage Your Children’ was the message in a nutshell.”

I’ve already posted on this more than once, but Campbell adds some interesting angles. Here’s the crux of it:

“What this means is that the public/private partnerships that are the favoured format for delivering the Think Big projects that National has in mind will have to function to near perfection in order to fit within the extra 2% debt ratio parameters. This is unlikely. Why ? Because a Key government is also planning to cut back its regulatory oversight of the economy – just as the PPPs will need to be highly and competently regulated in order to save taxpayers from being rorted by their big business project partners. All up, something like a 25 % debt ratio seems a far more realistic figure in future This will add significantly – a billion a year, the Labour-Green supporting Standard website estimates – to debt servicing costs. In each successive year, such costs alone will create a chronic pressure to cut social services.”

So, while both parties are offering tax cuts, it’s National’s that are proligate, forcing us to borrow overseas to pay for them. And to “strip mine” state assets later, regardless of their performance.

We now know a great deal more about the privatisation part of the plan thanks to a National conference goer with a recorder.

Guess who suffers when National flogs off Kiwibank? Not hard to answer, of course. As Consumer New Zealand CEO Sue Chetwin points out: “Kiwibank mainly targets more modest or low income people but it has actually been very competitive in what it does.”

Chetwin thinks that Kiwibank plays a significant role in keeping mortgage rates down and has kept some of the bigger banks from closing their branches outside the cities. If Kiwibank was sold to an off-shore company, the internationally owned banks would have “an even more cosier relationship then they do now.”

As well National is also looking at private prisons and roads, and privatising water and waste water services.

All this so that “ordinary New Zealanders” earning $100,000+ can enjoy bigger tax cuts. And National’s ideological fringe doesn’t get so “angsty”.

It wouldn’t be so bad if the announced policies were going to fix the growth problem. As Campbell notes, “a striking omission from the Key/English vision statements was the lack of any programme to boost productivity – beyond cut taxes, borrow from foreign bankers to cover the shortfall, cross your fingers and hope.” (He seemed to miss the reference to higher productivity arising from more roads, but this would only be a short-term increase anyway.)

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7 Responses to “Cambpell on Key(nesian) economic policy”

  1. macdoctor01 Says:

    JP: Its an extra 2% for clearly important infrastructure. Campbell is just sucking figures out of thin air. I note he quotes the Standard for an “unbiased” estimate of cost! ROTFL!

    And I am completely stunned by the amazing extrapolations given to an off-hand remark made by Bill English at – what sounds like – a bar. Poor bloke can’t even have a drink and a chat without some moron taping him and flogging it to the media.

  2. AndrewE Says:

    I have to agree. You are really jumping the shark when you use the Standard as a source of figures.

    And macdoc, welcome to the future of politics worldwide. You’ll find that politicians are always on the record now. They won’t even be able to mull over ideas in private anymore for fear of what they say being taken out of context.

  3. jafapete Says:

    Glad you got a laugh out of that MacDoc.

    I did have second thoughts about the Standard’s estimate, but it’s an easy thing to calculate — don’t know why Campbell didn’t do that himself — and I don’t think the Standardistas are far off the mark.

    You will note on the previous post on this topic that I make the point that borrowing for capital spending is fairer and okay, up to a point. I’m more concerned that the borrowing will be used to hide a structural deficit. It is ironic that the sound financial position which this Government has worked so hard to get us to should be used to the political benefit of the Nats. More fool Cullen you’d probably say.

  4. adamsmith1922 Says:

    What sound financial position, given the poor quality of much spending. Apart from anything else the position has been engendered by fiscal drag and compound growth in GDP albeit limited.

    The position has to a large extent arisen because of frameworks put in place by Douglas and Richardson, not by Cullen.

    It is not sound to put in place policies such as WFF which deliver middle class welfare with high marginal tax rates.

    No doubt you consider that having so many dependent on government benefits is sound?

    In fact we have a poor undiversified economy

  5. roger nome Says:

    “In fact we have a poor undiversified economy”

    lol – welcome to globalisation (gutted manufacturing sector due to free market economics).

    “What sound financial position”

    Think he was talking about the low debt levels. Thought that was obvious.

    “It is not sound to put in place policies such as WFF which deliver middle class welfare with high marginal tax rates.”

    More ignorance. We are in fact third lowest-taxed developed country on the planet (if you count Mexico as developed). Next…

  6. jafapete Says:

    “What sound financial position?”

    Thanks Nome, I was talking about the level of official debt. As Clark has pointed out, NZ’s trade imbalances don’t impress international capitalists none, so we do need to show some fiscal prudence. Heard Rod Oram saying exactly the same thing on the radio later in the day.

    I’m not sure that the spending has been of “poor quality”. Thanks to very low unemployment, social security payments are lower, if that’s the sort of thing Adam’s talking about.

  7. Kevyn Says:

    Jafapete, Have you run the numbers on the method the ARC voted to use to fund the rail electrification. Remember to allow for the government providing half the money and taking half the money (from the petrol tax).

    This proposal is even more insane than National’s proposal because the raison d’tre for electification is the impact of rising oil prices and preparing for peak oil. Poor old future ratepayers.

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