KEY POINTS:
John Key and Bill English now have a compelling opportunity to boldly face the international financial crisis head-on, jettison their wimpy me-too policies and announce an economic circuit-breaker if they dare.
They have re-cast National's tax-cuts package to bring forward a significant chunk to go into effect on April 1 and given the Reserve Bank an assurance an incoming National Government would be ready to work with the central bank to ensure financial stability.
Few details were available yesterday on the briefing Key was given by the Reserve Bank on Sunday.
But his coded statements suggest Key would not be averse to putting the significant weight of the Government's balance sheet at the central bank's disposal to avert liquidity drying up.
There are many mechanisms that could be deployed: directing the NZ Superannuation Fund to make long-term loans to NZ-domiciled banks (even those which are branches of Australian banks) if external funding dries up.
This method has already been used at Australian parent bank level where the Future Fund, which holds the savings of Australian politicians, public servants and defence workers, has committed long-term funding to three banks.
There is even an outside possibility that the New Zealand Government could acquire the Bank of New Zealand back from the National Australia Bank in a deal approved by both Governments to lessen the direct stress on the Australian banking system.
This has been floated behind the scenes on both sides of the Tasman. But little has emerged publicly.
Then there is the potential to make a political statement in the mode followed by Angela Merkel's Germany by issuing a Government guarantee of bank deposits held by private savers, thus ensuring New Zealanders retain the confidence that the savings they commit here will be safe.
That's the least that most business people would expect from a former merchant-banker turned aspiring Prime Minister and a former Treasury official who is aspiring to occupy the Finance Minister's seat for a second time.
There is little detail on the table yet.
But it has taken the impact of a global financial meltdown and a bloodbath hitting the Government's accounts to inject a much-needed sense of purpose.
A barely coded statement released late yesterday afternoon, indicated National has also recast its personal tax-cuts programme in response to the massive deterioration in the Government's accounts which was unveiled on Monday.
This is smart politics as it will lessen the ability of Prime Minister Helen Clark and Finance Minister Michael Cullen to paint the pair as reckless fools prepared to push New Zealand over a financial precipice, and, get the debate focused on what really counts: Which set of economic managers: Clark/Cullen or Key/English is best-suited to lead New Zealand through what will be a relatively tumultuous three years.
It is also smart economics. With Government debt forecast to blow out from 17 per cent of GDP to 24 per cent of GDP in the next four years, an incoming Government, whether of Labour or National hue, will be confronted with hard choices. Particularly as the Treasury forecasts are already three months out of date.
The details of National's tax cuts will not be unveiled until noon, when its top duo releases their economic management package at Auckland's North Harbour stadium.
Personal tax-cuts are still on the table. But the biggest chunk will be brought forward to April 1 next year to stimulate the economy. Someone on the average wage will still get a tax cut similar to the figures National has previously signalled (ultimately $50 a week).
There will be further personal tax reductions on April 1, 2010 and April 1, 2011. But expectations for major across-the-board cuts have fallen.
Even if an incoming National Government wanted to adopt a Keynesian approach by priming the economy with extra spending through the months of economic recession that lie ahead, it would still have to reprioritise existing spending to get the best bang for the taxpayers buck.
That is why expensive baubles like the $600 million that Winston Peters secured for the Ministry of Foreign Affairs and Trade will be pruned. Likewise the $700 million Fast Forward Fund and a raft of ill-thought-out programmes that soak up taxpayers' dollars.
Key and English should not shirk from this.
Major programmes like KiwiSaver, which is responsible for part of the blowout in the Government accounts, could more usefully be trimmed back in line with National's earlier philosophical stances. The programme provides considerable tax benefits to employed people which are not available (in full) to self-employed.
In the past the two politicians have taken a lily-livered approach to tackling Government spending. They have said the bureaucracy will be capped through attrition.
But at a time when most businesses - even the Auckland City Council - are reassessing forecast revenue and expenditures on a line-by-line basis, it is just not credible for Key and English to shirk a similar challenge at central Government level.
Key suggested yesterday that National would bring a real discipline to Government spending.
Frankly, Key and English need to go a lot further.
Around the business community yesterday, there were real concerns that the Treasury has undershot on the numbers included in its forecast decade of deficits.
The banks for instance, which in some cases have seen activity more than halved this year, will not provide major tax flows to the NZ exchequer in the short-term. There are big issues surrounding our major exports: dairy and tourism, which will affect profitability of the underlying farmers and tourist operators.
One major problem is the SME sector.
NZX chief executive Mark Weldon, who is exasperated at the lack of political leadership, suggests that provisional tax requirements should be suspended so that businesses still have access to capital (their own) to pay staff and suppliers while bank credit lines are restrained.
The SMEs would still face terminal tax but would gain some needed flexibility in the meantime. Weldon's type of creative thinking is exactly what National should be inviting.
Key and English are likely to push for more public-private partnerships to take the stress off the Crown balance sheet.
All the above won't entirely stop media pin-pricking today on whether National's revised tax-cuts plan is still affordable" .
But if the debate can be moved on to what really counts - Key and English should be applauded, not attacked for "flip flops" (as Clark and Cullen will no doubt do).
