Jacinda Ardern's promise to lead a "transformational government" is looking fairly hollow at the moment. That's because it's insisting on running the same sort of economic regime as the previous government, while somehow expecting a different result.
Ardern's administration continues to commit itself to many core National Party fiscal policies – including running budget surpluses, keeping the size of the state small, and paying down debt in a hurry. This self-imposed commitment to broadly retain National's tax and spending policies will severely restrict the ability of the new Government to make big enough changes in areas of urgent concern such as housing, poverty, health, and education.
Increasingly, commentators are pointing out that in order to run budget surpluses, Labour is essentially running austerity economic policy. That means it will continue to underfund areas like health and education, as well as leaving major infrastructure problems in Auckland unfixed.
For example, Bernard Hickey says that "the 2018 Budget won't properly address the systematic under-spending on infrastructure that has led to this man-made crisis in Auckland that is spreading to the likes of Hamilton, Tauranga and Wellington" – see: The case to borrow and invest.
At the centre of Labour's fiscal conservatism is the Budget Responsibility Rules that it signed up to during the election campaign, along with the Green Party. I explain the conservative impact these rules are now having in my Newsroom column, Labour's budget rules are holding it back.
Labour's dogmatic adherence to these self-imposed rules is being challenged by commentators from across the political spectrum. That's because, "There is an increasing awareness that in obsessively seeking to create Budget surpluses, damage is inflicted elsewhere. That's the lesson in the Middlemore rotting building debacle – that cost-cutting in order to balance your budget can come at a great cost."
Ironically, this is exactly what the new Government is accusing the last government of at the moment. But this "blame game" is not washing with many commentators, with plenty of questions being asked about why Finance Minister Grant Robertson is running National-lite economic policy in the face of the need to urgently fix underfunded infrastructure and public services.
One of the hardest-hitting critiques comes from left-wing commentator Gordon Campbell, who has responded to Jacinda Ardern's claims of an almost-crisis like state in health and education, saying: "So….since there are expensive needs lurking in every nook and cranny, why is Labour sticking so steadfastly to the right wing ideological dogma enshrined in the Budget Responsibility Rules (BRR) that – for no good social reason – require Crown debt to be reduced to 20% of GDP in the next five years. Currently, the figure is sitting at a low by world standards figure of only 23%.)" – see: On Labour's timidity.
When this question was put to Grant Robertson, Campbell reports that "Robertson had no real answer, beyond saying that Labour has already signalled its readiness to accept a slightly longer debt repayment path than National".
This isn't good enough, according to Campbell, and he warns that the problem isn't going away for Labour: "This issue will remain a live one – because it goes to the heart of (a) just how radical the coalition government is prepared to be in dealing with the socio-economic problems it has inherited, and (b) the extent to which Robertson and Co remain beholden to the economic orthodoxy of the past few decades."
As to the idea that the Government has no choice, Campbell responds: "The coalition government is well placed to take on more debt affordably, to address these legacy problems. It is choosing not to"; and "Any attempts to reduce say, child poverty are likely only to be token if they don't address its structural causes".
Recently, the prime minister admitted the government "doesn't have any money for additional child poverty reduction measures outside of its Families Package" – see Nicola Russell's No more money available for child poverty reduction – Prime Minister.
Economists are also increasingly criticising Labour and its Finance Minister for their economic choices. Shamubeel Eaqub has been the most vocal. He was reported back in February as calling for Labour to be more ambitious in its reforms, spending, and borrowing – see Bernard Hickey's The case to throw off the fiscal straitjacket.
In this, Eaqub bemoans that KiwiBuild simply isn't bold enough to meet the scale of the housing crisis, adding "If I was the minister, (and I'm not), my ambition would be to build 500,000 houses, not 100,000".
On Sunday, Eaqub's column again took Labour to task, pointing to the contradiction of promising more without spending more: "There is no way to square the circle. If we, as a nation, want to truly invest in fixing the chronic under-investment in housing, infrastructure and social services of many decades, public spending and investment will need to increase a lot.
"Timid moves will not be enough, which is where we seem to be headed given this Government's commitment to keep spending and borrowing in check" – see:
