Fran O'Sullivan: Govt needs to bulk out its agenda for growth

A National Party fundraising audience rejoiced yesterday when Key tore strips off Phil Goff. Photo / Sarah Ivey
A National Party fundraising audience rejoiced yesterday when Key tore strips off Phil Goff. Photo / Sarah Ivey

John Key has already launched himself into the election campaign, spruiking in earnest National's election manifesto - aka Budget 2011 - to prime audiences.

A National Party fundraising audience early yesterday rejoiced while Key tore strips off Phil Goff, challenging his absent opponent to prove there was any credible alternative to the Government's programme to get the Budget back into surplus by 2015. Guests said it reminded them of how Key "lets rip" at Goff in Parliament - but on steroids.

Four hours later, the Prime Minister was across town strutting his stuff in front of an 800-strong top-drawer audience hosted by the influential Transtasman Business Circle. These power-brokers - who flew in from around New Zealand - are the ones who Key needs to ensure remain confident in the country's prospects.

The company chairmen, chief executives and investors and business people gave Key a good reception.

They generally believe his Government has done a good job given the rotten finances it inherited after the global financial crisis and the impact of the two Canterbury earthquakes.

But there was a sense - certainly among those I later canvassed - that they believe the Government would be very unwise indeed if it did not put up a much more comprehensive growth agenda by election time.

Key is clearly on his mettle as a political salesman. New Zealanders bought his warning that this country could not survive on a "diet of debt".

But the big test of Key's salesmanship will come as he draws down on his undoubted war chest of political capital to convince ordinary Kiwis - rather than elites - why it's in their interests to return a Government that plans to take more goodies off them during the next parliamentary term by trimming KiwiSaver, Working for Families, and student loans.

It is a most unusual field-marshall who declares the battle date six months ahead of the clash, let alone declares the landscape of the battle-field itself, and the armies and weapons at his disposal.

But Key is so supremely confident that New Zealand voters will back him again that he parked the implementation of the guts of Budget 2011 until after the election.

The major risk to Key's strategy is that even voters who are attracted by his warm empathy might come to see him as so overly confident he borders on arrogant.

If Labour resorts to election goodies, Key will accuse his opponent of placing New Zealand at risk of a credit ratings downgrade. Particularly if Labour opts for a more leisurely path to returning the Budget deficit to surplus.

This is the first election in recent times that National has not resorted to bribing voters with their own money.

In 2009, the incoming Key Government was forced to abandon the particularly generous round of personal tax cuts which it had cavalierly promoted during the global financial crisis.

Key will consign this fact to history.

But the brute reality is his Government is still borrowing to fund the generous personal tax cuts dealt to higher income earners in last October's tax switch.

Key emphasises the tax cuts are here to stay and delineates National's policies from Labour's by arguing "we're into the politics of aspiration - my opponents are into the politics of envy".

Labour's strategists know they have been handed a valuable wedge to exploit at the November election by arguing some of the Budget cuts may not have been necessary (at all) if the Key Government wasn't still borrowing so much to fund the tax cuts.

Labour will not be on to an easy vote winner if it tries to reinstate the 39c tax limit which used to cut in at $60,000.

Government projections forecast nearly 600,000 New Zealanders will be earning more than $60,000 next year.

Where Labour will score is on hot-button issues such as the need to raise the age of entitlement to New Zealand Superannuation.

Many New Zealanders - including some National voters - are concerned that Key's obdurate opposition to this proposal will result in a big impost on younger generations.

Early Budget reaction has already convinced Key he needs to paint a much more vivid picture of how the Christchurch earthquake has impacted on the Government's finances and bolster confidence in the growth forecasts.

The hard truth is that the earthquake will soon be forgotten in other parts of New Zealand.

The Rugby World Cup spectacle will lift spirits. But beyond the bread and circuses, Key's Government should show us how it plans to forge top-line growth by putting some ballast behind the exciting growth agenda it unveiled early last year to turn plans into reality.

Key may worry this would corrupt the overall election message of prudence.

But Goff - and Act's Don Brash - will quickly fill this vacuum if Key doesn't.

- NZ Herald

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Head of Business for NZME

Fran O'Sullivan has written a weekly column for the Business Herald since its inception in April 1997. In her early journalistic career she was a political journalist in Wellington and subsequently an investigative journalist who broke many major business stories including the first articles that led to the Winebox Inquiry in both NBR and the Sydney Morning Herald. She has specific expertise in relation to China where she has been a frequent visitor since the late 1990s. She is a former Editor of the National Business Review; has twice been awarded Qantas Journalist of the Year and is a multiple winner of the Westpac Financial Journalism Supreme Award.

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