KEY POINTS:
The list of National's economic policy flip-flops has now grown so big that it's tempting to wonder if John Key is auditioning to be Helen Clark in drag.
If so, he's making quite a success of it judging by the latest political ratings in the Herald's Digipoll.
Under Key's leadership, National has now embraced all Labour's flagship economic policies including: The Cullen Fund (NZ Superannuation Fund); KiwiSaver; Keeping Kiwibank and KiwiRail in state ownership; A moratorium on privatisations if only for National Government's first term; Student loans interest write-offs; Working for Families.
But even though the New Zealand economy is in recession and forecast Government revenues are dipping increasingly into the red, Key expects the business sector (and voters) to believe he can dish out a generous personal tax-cutting programme at this election without having to subsequently slash spending programmes or significantly increase borrowings.
If Key cannot spell out at this weekend's National Party conference in Wellington just how he intends to finance a personal tax-cutting programme that will far exceed Labour's plan, he does not deserve to enjoy the confidence demonstrated by National's current poll ratings.
It would appear obvious - to those within the business elite who are privy to National's plans - that Key and his finance spokesman Bill English plan to re-engineer the Government's balance sheet so that a number of directly funded infrastructure programmes are shifted off-balance sheet to be funded through public-private partnerships and/or infrastructure bonds.
Cullen has already started down this track.
But the "trust us" type of responses that Key and English have given when queried on how they plan to fund their coming election package tempts credulity. Key said the tax package will be released in the first week of the campaign - but that is not sufficient reason to continue to withhold major elements of the overall programme.
There are a number of areas ripe for the plucking: for instance the delivery of NZ Trade and Enterprise programmes offshore could be made contestable so that private sector operators could bid.
If National wants to be adventurous it would offer incentives for major greenfields foreign direct investments, introduce export zones with favourable tax rates, court our skilled offshore Kiwis to invest in New Zealand's future - and more.
But even though a future National Government may achieve more bang for its buck, it takes a while for the benefits to filter through.
In the meantime, New Zealanders don't know what is the acceptable level of public debt that National would tolerate, or whether it would back-end major tax cuts until it was sure the Government's coffers could support them. This is important as it takes only a very small movement in overall growth percentages for Budget surpluses to morph in to deficits.
It's a moot point that the Labour policy "me-tooisms" listed above are not what Key had in mind when he promised last year's annual party conference that: "We believe in individual freedom and individual responsibility. We believe the government should underpin our society but not dominate it."
Or as he also said at that same conference with direct reference to National's (then) plan to address high marginal tax rates problems with the Working for Families scheme, "a government I lead will take from taxpayers only what it needs. It won't take more than it needs, return it to you via the welfare system, and expect you to be grateful for the privilege".
In total the "big bang" policies devised under the leadership of Clark's Finance Minister Michael Cullen have gone a long way towards the introduction of a savings culture in New Zealand. But they present an enormous drag on current Government income and run directly counter to the philosophy that Key was espousing just one year ago.
It's true that the Cullen legacy programme was made possible during a time of record Budget surpluses.
But now that the economy is in recession and tax revenues are coming under sharp (and what will turn out to be prolonged) pressure, the ability of future Governments to fund such an expensive array of programmes will be circumscribed.
Even before the recession was confirmed, Cullen was warning that whichever party becomes Government later this year, they will still be forced to reprioritise government spending in light of the less clement economic conditions.
That was then.
Yesterday, Cullen confirmed that tax receipts for the year ended June 30 were $700 million down on forecast due to lower economic growth.
Cullen's own $10.6 billion programme of personal tax cuts was forecast in the May Budget to push the cash deficit to $3.48 billion in the year to June 30, 2009 with similar deficits forecasts for the three following years. Two weeks ago, the Finance Minister was quietly warning business circles that the Government's accounts were coming under pressure. Yesterday he confirmed that the pre-election economic and fiscal update would (likely) show an increase in the cash deficits.
There is really no likelihood about this. It is a certainty.
A number of chickens have come home to roost since the May Budget.
Not only are company tax revenues under pressure due to more straitened domestic circumstances, but the continuing high oil prices have put a hole in the roading budget due to a significantly lessened excise tax take. Over-subscription to KiwiSaver - in excess of forecasts - means the Government will have to shell out more on tax rebates.
This comes against a background of the summer drought which caused a production downturn on the farms, lost business production and higher costs due to the electricity crisis, the loss of close to $2 billion in savings due to the finance company sector collapse, the steady collapse in property values and continuing high food and petrol prices.
Add in the fact that the global economy is now under major pressure: The US posting its biggest fiscal deficit in history with questions raised as to whether its Government can bail out any more financial institutions; a downturn in China's growth rate due to less export orders from the Western world, the serious troubles afflicting some of the Australia banks which have significant subsidiaries in this country and it is clear the downturn could bump along for a considerable period as the credit crunch works out.
As of right now there are few National policies on display that demonstrate the party that looks odds-on to claim the Government benches this year is thinking deeply about the economic environment it will inherit.
It's said it will tackle the Government bureaucracy and invest in broadband infrastructure.
But National has yet to spell out its own policy suite to underpin Key's promise at National's last conference to cut greenhouse gas emissions by 50 per cent by the year 2050. At that conference he said he would "unfold a lot more policy over the next year leading up to the 2008 election".
Three months out there is not much publicly on offer.
