Friday, 1 April 2011


Towards the end of March I was in Dannevirke at a public meeting to talk about the cuts to Early Childhood Education. The meeting was organised by the New Zealand Education Institute. Together with a speaker for that sector the incumbent MP and myself had been invited.

The incumbent declined saying he was in parliament and as no parent in the electorate had approached him, he didn’t see it as an issue. I read his reply out to the audience. A woman stood up in the meeting and said she had gone to speak with him about the cuts but he refused to see her. Obviously if you don’t speak with people you will remain out of touch. The problem is even greater however than just a local MP being out of touch with ordinary people. The fact is the whole Government appears to inhabit a different world from the rest of us.

When National first sat its pin-striped pants on the Treasury benches in December 2008, the recession had just begun to hit. Bill English the Finance Minister said, “This is the rainy day that Government has been saving up for.” He was talking about the ability of New Zealand to handle the global financial crisis. “New Zealand starts from a reasonable position in dealing with the uncertainty of our economic outlook.” Clearly Bill English understood Labour left New Zealand in a strong economic position. In 2008 Government was in credit to the tune of 4.7 percent of GDP. New Zealand thanks to Labour had begun to develop a good savings record with KiwiSaver and the New Zealand Superannuation Fund. The NZ Super Fund (the “Cullen Fund”) was designed to help fund the spike in demand for super payments from “baby boomers” – arguably a stroke of genius from a government focused on the long term inheritance of future generations ahead of short term electoral gains. Labour‘s forward thinking legacy has now been squandered by this lackluster government.

So 2½ years on, while the rest of the world comes out of the crisis, New Zealand is heading back into recession. Even before the two Christchurch earthquakes, New Zealand’s economy had stalled. Currently we are borrowing $22 billion in 4 years to fund tax cuts – two-thirds of which go to 10 percent of the population. This money is money we could be spending in other parts of the economy to boost activity. Instead to fund these tax cuts average New Zealanders are losing jobs, having to borrow to pay bills and our debt is increasing at an alarming rate when we can least afford it.

As I move around the electorate people are telling me the same story. They are struggling just to make ends meet. It is something I am aware of personally. My Subaru costs me around $110-00 to fill the tank. Last year it cost only around $ 68-00. For a lot of people this is a struggle in itself. One woman told me that her grocery bill has now gone up by $ 60-00 more than it did before last years budget. Labour wants to help these families that’s why Labour undertakes to remove GST from fresh fruit and vegetables. Two weeks ago pensioner after pensioner told me the same thing. No matter how hard they try they cannot make ends meet.

National laughs at this – that is not surprising they are out of touch but who can blame them? The Prime Minister for example is a man of immense personal wealth. High earning people like him get the most from tax-cuts. The irony is that he obtained his wealth while working as a wheeler-dealer at Merrill Lynch, one of those business houses implicated in the global financial crisis. But he got out with $50 million before it hit the fan. At a time when a large number of Kiwis are struggling to put food on the table our leader thinks nothing of attending a $7,000 a head dinner with his wife prepared by British chef Heston Blumenthal. Worth noting is that a pensioner’s annual income is only $14529 to $19425 before tax. This only serves to underscore the real separation between National and real people. John Key smiles and waves for the cameras in Christchurch then jumps on a plane to Cape Kidnappers for an event that for two would cost the equivalent of a pensioner’s yearly income on one-off novelty dining with his wife – you can’t get more different than that.

National’s plans for asset sales are dangerous. The private sector got us into the global financial crisis and to flog off wealth creating assets to the private sector who will have to rely on borrowing to purchase the assets is folly. To talk about the size of total debt, then to advocate a policy of privatization which will involve the incurring of more debt is nuts. Further if the offer to buy is for New Zealand investors only, they will be sold at a discount as the prospective market of purchasers will be artificially reduced. As I have said previously we just can’t trust National that only 49 percent of each asset will be flogged off, after all National promised they would not raise GST in the first term.

It is seductively easy to overstate the scale and imminence of economic threats and then exaggerate “shock doctrine” arguments for instant radical change. That’s where Think Big, Rogernomics, Ruthenasia and the current reversal of the Welfare State come from. The essence of this approach is to laud the existence and inherent wisdom of the market economy. Yet in reality it was this same unrestrained market that created the global financial crisis in the first place.

The upshot of all this borrowing is now whenever our economy looks like recovering, the benefits of any growth are to be shipped offshore as profits and dividends from now foreign-owned assets, and as interest payments on the debt incurred over the last decade. Last year, New Zealand paid $15.5 billion in profits and interest payments to foreign investors and creditors. Only $3.3 billion was reinvested. That is the size of the drag on the New Zealand economy. National has no plan for growth, they are divorced from the every day reality of New Zealanders. Labour put New Zealand in a sound position to weather the financial crisis and only Labour will provide a way out of the mire that National has created.

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