Brian Rudman: Don't swallow Brash's medicine

A few weeks ago, former National Party leader Don Brash admitted being wrong to foment anti-Maori hysteria in the summer of 2004 over customary rights to the seabed and foreshore. He said if Maori had been allowed to test their claims in court, "we might have avoided a great deal of subsequent history".

However, we wait in vain for he and his monetarist mates to beg forgiveness for the ruinous economic experimentation they inflicted on Maori and Pakeha alike from 1984 to the turn of this century.

Far from it. On Monday, bold as brass, he was back on his soapbox telling us to hold our noses and drink more of his discredited economic snake oil and all will be well.

If much of the Brash-led 2025 Taskforce's list of economic policy recommendations sounds like a rehash of Act Party and Rogernomics propaganda, this is hardly surprising. The creation of this taskforce at a cost to taxpayers of $477,000, was one of the conditions demanded by Act in last year's coalition agreement with National.

The purported intention of the taskforce is to come up with policies that will close the income gap between Australia and New Zealand over the next 16 years. But the recommendations are just popular tunes from the Act hymn book.

It's unclear how congestion charging for central Auckland followed by full road-user charging nationwide, is going to help close the income gap, but there it is among the 35 key ingredients. So is a demand to remove "Zespri's monopoly on the export of kiwifruit to markets outside Australia".

The Brash taskforce also say "mining developments on or under sensitive Crown land should generally be permitted provided they pass a full cost-benefit analysis", that Labour law "governing dismissal of workers" should be "streamlined" and the probation period for new workers be extended from 90 days to 12 months.

Employees earning more than $100,000 a year would lose coverage under the Employment Relations Act. For good measure, Brash's team is demanding that all state and local government-owned businesses operating in competitive markets that weren't hocked off in the 1980s fire sales, be sold.

In their brave new world, there'll be means testing of doctor subsidies and prescription drugs and interest-free student loans abolished. Not to forget, of course, a flat tax of 20 per cent.

Have faith in this medicine, says Dr Brash, and the gap will close. Trying to explain why these drugs didn't work the first time round, the taskforce claims "the reforms of the 1980s and early 1990s represented a very significant step forward" but "the pattern of policymaking over the last decade defies the well-established international evidence about what works. So it is no real surprise that New Zealand is not doing better."

But a comparative study of economic policy and outcomes in Australia and New Zealand since 1984, published in the June 2006 Australian Journal of Political Science suggests just the opposite. Auckland University Professor of Economics Tim Hazledine and Queensland University fellow in economics and political science John Quiggin say the medicine served up by task force member David Caygill as Labour Finance Minister in the late 1980s, and by his predecessor Roger Douglas, and successor, Ruth Richardson, is the cause of the wage gap, now standing at 35 per cent.

The academics noted that "for most of the 20th century, incomes per person in New Zealand grew in parallel with Australia". Despite New Zealand's less diversified economy suffering more from the collapse of world wool prices in 1967-68 and the subsequent move of Britain into the European Union, "in 1983, on the eve of New Zealand's policy revolution, the gap in GDP per capita between the countries was only 5 per cent in Australia's favour".

After that, Australia "followed a path of gradualism and consensus while New Zealand policymakers elected to crash through or crash", adopting "a radical, rapid, purist platform".

For New Zealand, "the next 17 years were a period of almost unremitting deterioration in the output gap between the two countries, which by the turn of the century had reached 33 per cent, a huge difference to have opened up in such a short period".

They mockingly record "it seems that New Zealand had the 'best' set of economic policies and possibly the worst set of economic outcomes in the OECD over the past 20 years".

Since the "experiment" ended a decade ago, New Zealand's growth path "has almost matched Australia", but "it has not been anywhere near sufficient to close the huge output gap opened up in the aftermath of the reforms". Yet these are the reforms that Dr Brash and his taskforce want to revive.

In a strange parody of his academic critics, Dr Brash declared on Monday that "New Zealand's relative decline is one of the most stark in modern history".

His explanation is that "New Zealand simply has not consistently done what is required. Reversing a sharp decades-long decline requires making choices which governments have only rarely been willing to make consistently".

Yet he, as Labour-appointed Reserve Bank Governor for 14 years from 1988, and Mr Caygill, as one of the political instigators of the Rogernomics reforms, presided over the reforms that caused this starkest decline of modern history. And they want us to follow their advice for a second time.

This trip down memory lane for Dr Brash and Mr Caygill has cost taxpayers $150,000. The deal between National and Act is that the taskforce stay alive until June 2012 and cost taxpayers another $327,000.

Prime Minister John Key has publicly tossed the report in the bin. He'd be well advised to throw the taskforce into it as well and spend the $327,000 on something useful.