John Roughan: We could easily poison this economy

The longer the good times last the more I wonder, how are we going to screw this up?

Contentment is not the natural human condition. We are in an economy that has come through several international crises in better shape than most. The population is growing again at long last, immigration is at record levels, business is good, jobs are plentiful, the budget is flush. How are we going to ruin this?

And I mean "we", not politicians. They ultimately do what we demand. It was British voters, not a majority of its politicians, who decided to pull their economy out of the richest multinational market in the world. It was ordinary Americans, not their political "elite", who elected Donald Trump.

The French this month were wiser but France's economy is in a sorry state. The United Kingdom and the United States had been recovering steadily, if belatedly, from the global financial crisis. It is a mistake, I think, to look for problems to explain Brexit and Trump. History records revolutions have more often happened when conditions were comparatively good.

It is human nature, we are never content. We turn progress into a problem and that is usually how we poison it.

We may have already done so, by demanding the Government do something about immigration. It finally responded a few months ago, putting up a new financial barrier to foreign workers coming here for low skilled jobs such as cooking ethnic meals, waiting at tables, making coffee, cutting hair and harvesting crops.

Public opinion says young Kiwis could be doing this work and would do it if the pay was better. The employers in these sectors say they would happily hire locally if any of the unemployed answered their ad and could pass a drug test.

Public opinion doesn't want to believe that. So for the sake of dropouts who have shown no interest in employment, education or training, the Government has ruled foreigners will not get visas unless they are coming to a job paying at least the national median, currently nearly $49,000 a year.

Maybe that will turn out well, lifting wage levels across the economy. Or maybe it will put people out of business, reduce employment, produce less tax and higher welfare bills, and stop economic growth. That could be how we screw up.

Another way is to press governments to overspend again on exaggerated problems. This year's Budget was prepared under pressure on two fronts: infrastructure and health.

Infrastructure, supposedly, is cracking under the pressure of immigration in cities and tourism in the countryside. I don't know about the countryside but I travel in Auckland's traffic every day. Congestion is a sure-fire topic of conversation in this city but, just quietly, it's not so bad. It moves. Gridlock is rare. We have had a great deal of motorway construction in recent years and we're doing fine.

As for the health services, I've seen something of them in the past six months. They appeared well staffed, well equipped and provided everything my dying father needed. State services are always "underfunded" in the sense they could do more with more money but we started to hear about health's rations only this year, about the time the Treasury reported the Budget surplus was running a billion dollars above its forecast.

Steven Joyce should have withstood both these demands on his Budget. Instead, he has splashed more money on infrastructure than he knows what to do with.

On top of tax reductions, increased benefits for low paid families and housing rental subsidies, the extra capital expenditure will lift net government debt for another two years.

But thanks to the Treasury's forecasts of continuing growth, the debt will fall as a proportion of GDP. Growth forecasts are a magical thing for economic statistics, until the unexpected happens. Then all the figures turn suddenly dire.

The previous Government loosened its purse strings in its ninth year of office, the year that brought the global financial crisis. Fortunately, it had run substantial surpluses and had the net debt down to $10 billion by 2008. Now it is around $62 billion and rising.

It is largely thanks to Labour's budgets that we came through the financial crisis more comfortably than most countries and have been in better condition than almost all others in recent years.

National has contributed by lowering the top tax rate, increasing GST, selling some assets and focusing social welfare on getting people into jobs. Just as important, it has welcomed immigration and set about trying to accommodate a rapid increasing population rather than closing the door.

It failed to discourage multiple house buying and for that we might need Labour now.

But whatever we do, we cannot take this attractive economy for granted. We could easily poison it.