The debate is simply over the balance between expenditure reductions and revenue enhancements and who is to implement them. If there have to be tax increases, swing voters might prefer it is a National-led Government that does them, hoping they might be more modest and the extra money spent more carefully.
Any new taxes can’t be fiscally neutral, either, the way Nicola Willis claimed her tax cuts were offset by spending cuts which needed to happen anyway, or like Grant Robertson and David Parker’s planned wealth tax that was to be balanced by giving everyone a $20-a-week tax cut.
The spending cuts and new taxes needed now must be banked, to reduce the fiscal deficit that is currently adding every year to our $10-billion debt-servicing bill, which is also being forced up by the ageing population and the rising costs of advanced pharmaceuticals and other health technologies.
Even then, an unsustainable fiscal gap is likely to remain without large improvements in productivity to improve GDP per capita.
The last 16 years’ approach, of record borrowing to gain re-election supported by record immigration to make headline GDP look acceptable, has reached the limits of fiscal and political sustainability.
Willis hopes her banking sector reforms will help, along with Chris Bishop’s resource-management reforms and infrastructure plan, although the latter risks massively increasing debt-financing costs still further. Simeon Brown’s energy and transport portfolios are also an essential part of the productivity story, and Erica Stanford’s education reforms in the longer term.
Among coalition partners, David Seymour thinks his new Ministry for Regulation in Wellington is the short-term answer and his charter schools the medium-term solution.
Shane Jones talks about leveraging the Government’s balance sheet to invest in new regional infrastructure and economic subsidies.
That would make sense if Jones means capital recycling but the fear is that public aversion to so-called asset sales just makes it code for more borrowing. Jones would then need a very long bow to argue that, say, borrowing $20 billion for a new expressway will so boost productivity that it will generate enough GDP growth to pay for itself.
Winston Peters’ $100b Future Fund and Bishop and Simon Court’s work on better public-private partnerships are better bets.
All such moves could help, but improving productivity is hard as much of the developed world is finding right now, although not to New Zealand’s extent.
Boosting productivity is all-the-more difficult in industries which are already the world’s most efficient and technologically advanced but which are resource-intensive and less-easily scalable, such as New Zealand agriculture.
Nevertheless, that’s no excuse for those who presume to be our leaders. Labour finance spokesperson Barbara Edmonds will need to outline some kind of productivity story if her party’s conference is not to be completely overshadowed by its delegates’ tax lust. It’s not enough for her to merely declare productivity a priority, the focus of a future Labour-led Government and a subject for working groups. At least some specifics are called for.
That brings us to the politicians calling for a four-year parliamentary term.
They argue that three years just isn’t enough for them to make a difference. The first year, they say, is spent working out what to do, the second on doing it, and the third on getting re-elected.
Give us one more year, they argue, and we’ll then have two years to put our plans in place.
In reality, a four-year term would just give them one more year to procrastinate. Since when has extending a deadline even made a job get done quicker?
Previous governments haven’t found the three-year term a problem to deliver. Julius Vogel built the railways, Michael Joseph Savage the welfare state, David Lange the open economy and anti-nuclear policy and Jim Bolger the competitive labour market and Treaty settlement process in under three years. Helen Clark put her signature Working for Families in place in a single Budget.
The difference is that the key figures in these Governments had spent as much time in Opposition working out what they would do when they won power as on politicking. The practice now is to win office and then decide what to do with the powers it brings, if anything.
Sir John Key’s Government had a few things lined up but still spent nine years working out how social investment might work, failing to put it in place before losing office.
Senior officials report the Ardern and Luxon Governments are similar in appearing to have done no thinking at all about what they wanted to do, and then expecting bureaucrats to do that thinking for them.
In the present case, that has led to almost every economic, fiscal and social projection getting worse – even if only as a hangover from the Ardern-Hipkins regime – while they start thinking about a pro-productivity programme.
Especially with no checks and balances from an upper house or constitutional court, the idea of giving our lacklustre political class another year to appoint working groups and await their reports should be out of the question.
Some argue that the US president holds a four-year term, but they might just as well point to its senators being elected for six and arguing for that.
No less sensible would be pointing to members of the US House of Representatives being elected for mere two-year terms. If they promise to improve law and order in their district to get elected, they better have done so within 24 months or they’ll be out. However imperfectly, they are highly incentivised to develop a specific plan, put it to voters and they have it executed, however minimal and crude it may appear.
If we have any interest in our politicians again taking their time in opposition seriously, we’d be asking for the two-year option to be on the referendum paper, along with three or four.
The Luxons, Willises, Hipkinses and Edmondses of the future would then have no excuse not to go into an election campaign saying precisely how they plan to go about addressing New Zealand’s multiple economic, fiscal and social crises rather than promising just to “do this”, “get back on track” or whatever slogan they use as a substitute for engaging their brains and doing some research.
