Why Phil Goff's speech failed

Phil Goff meeting supporters earlier this year in Hamilton. Photo / Sarah Ivey

Floating an idea that you don't really believe in is never a good idea.

Goff has suggested this lame GST exemption idea, knowing it will be knocked back by any tax policy adviser worth his spreadsheet. It opens loopholes to drive trucks through and would destroy one the last great things left in New Zealand's tax system - a clean, broad and simple GST.

Can you imagine what would suddenly be classified as fresh fruit and vegetables? What about fruit in yoghurt? Or freshly tinned peaches? Or vegetables in a bun, with a slice of meat and some fresh and fruity mayonnaise?

How much would you count as fresh fruit and vegetables? The holes are endless. I can see a new profession: GST gaming expert.

I disagree with Goff's plan to reverse the income tax cuts and simply increase the thresholds. I think he is focusing too much of slicing up the pie than expanding the pie.

His apparent opposition to any capital gains or land tax is particularly disappointing. It betrays his lack of understanding of the festering sore at the heart of the New Zealand economy and the government's finances: the huge hole in the tax base through which rental property investors have been diving headlong through for a decade.

Goff's thinking on monetary policy is similarly tentative and woolly. The Reserve Bank is already using its supplementary tool (the core funding ratio), which it created itself and has carefully implemented to avoid a big shock to the system.

A vague collection of targets for monetary policy has been used successfully by some independent Reserve Banks. The Reserve Bank of Australia has done reasonably well, but the focus on inflation should never be relinquished.

Allowing politicians to dictate to central bankers that they should release the inflation lever to inflate away the debts they'd like to run up would be a big mistake in this day and age. Just ask the Americans and the Germans.

Goff's rhetoric is painfully conflicted. At one moment he is lamenting the government's various moves to increase taxes and inflation. In the next sentence he wants to relax the Reserve Bank's focus on controlling inflation and reverse income tax cuts.

Goff appears lost in voteless wilderness, throwing out policies and words that he thinks might be popular, but not really knowing what to believe or having any overarching strategy or new thinking.

Bernard Hickey