KEY POINTS:
Michael Cullen gave a remarkable impression of the blissfully imbecilic guy on the cover of Mad magazine this week with his "What? Me? Worry?" utterances on the crisis facing world financial markets and the prospects of New Zealand following them down the gurgler.
Seemingly oblivious to the fact
that New Zealand's economy is joined at the hip to financial and export markets in the United States, Europe and Asia, Cullen chuckled and made soothing noises to those who called for urgent action to maintain growth here. The New Zealand economy would do just fine, whatever happened abroad, he crooned.
Reserve Bank boss Alan Bollard was taking the same chill pills as Cullen and he's stubbornly sticking with maintaining some of the highest interest rates in the developed world.
In Australia, Prime Minister Kevin Rudd rushed in a package to help the economy stay afloat. In the US, the Federal Reserve went into emergency high gear, cutting its rates by a whopping 75 basis points, and the big banks were pressured into a US$15 billion bailout of struggling bond insurance companies. The markets bounced back, even if temporarily.
In Australia, the US and elsewhere, governments and central banks raced to try to save the situation. In New Zealand, Cullen and Bollard had a cup of tea and a lie-down.
Historians will look back in a couple of decades at the decline and fall of the Labour Government and lay much of the blame on Michael Cullen and his dead hand as Minister of Finance.
In his eight-year reign, the Government has amassed huge surpluses through over-taxation, putting pressure on the disposable incomes of already struggling households. His tolerance of high interest rates has strangled economic growth, his approval of record levels of Government spending has led to a huge growth in bureaucracy, waste and heavy compliance costs for business. His obstinate refusal to cut taxes will be seen as another long nail he inserted into the coffin of Helen Clark's three-term administration.
Yes, he deserves credit for being the first politician to finally bite the bullet and establish a relatively sustainable superannuation scheme - KiwiSaver was a stroke of genius. Well, except for the fact that the Government came up with KiwiSaver as a device to try to partially get rid of those embarrassing budget surpluses without causing some kind of catastrophic inflationary side-effect, while also grabbing electoral support from grateful voters.
The problem is the rollercoaster markets have nearly knackered any growth in KiwiSaver managed funds, and come the election many will look at their funds and ask, "Where the hell did it all go?"
They would have been hoping for a steadily growing pot of loot. Instead their balances will show their money has contracted nastily. Not a lot of gratitude to be earned there by Labour. At the same time, voters will see 3.5-4 per cent inflation gnawing away at their income and savings while the value of their biggest asset, property, shrinks.
While Clark desperately tries to stand on the Government's record in welfare assistance, early childhood education and other policies designed to help families, those same families are facing the reality of rising living costs, increasing debt and shrinking real incomes.
Clark needs to wake up to Bill Clinton's old election-winning slogan, "It's the economy, stupid".
National is able to play the card of prudent financial management. "Trust us, we know what we are doing" will be the message from John Key and Bill English and, with their backgrounds in finance, the pair do look like they know how to handle a dollar. With many voters, the suspicion remains that most politicians in the Labour Cabinet would be hard-pressed to read a balance sheet.
When Labour ministers talk about the economy they point to an eight-year period of economic growth, ignoring the fact that most of our trading partners have grown at much faster rates. Besides, we should be grateful the Government hasn't plunged us into total recession yet.
They also triumphantly point to low unemployment, ignoring the fact that business is starved of labour and the high rate of employment is because more than a million Kiwis have fled to greener pastures overseas.
Most of us vote with our wallets. You can appeal to our higher sensibilities on all manner of issues but, when it comes to the crunch, we cast our vote where we think our families will benefit most.
Labour quickly needs to figure out how to re-boot the economy and channel the loot into as many pockets as possible or, to use David Lange's words, be "dog tucker" by Christmas.