Fran O'Sullivan on business
Business analysis and comment from Herald columnist Fran O'Sullivan

Fran O'Sullivan: Labour's mixed messages can't contain National's advantage

In 2008, neither Helen Clark nor John Key pulled back from their wildly optimistic election bribes before the votes were counted. Photo / Greg Bowker
In 2008, neither Helen Clark nor John Key pulled back from their wildly optimistic election bribes before the votes were counted. Photo / Greg Bowker

After two weeks of full-on election campaigning, John Key has clearly regained the upper hand against Phil Goff.

Key has accused Labour of using a "Greek calculator", and of "embarrassing economic management" to undermine just how his opponents will fund their election policies.

The Prime Minister is indulging in cheap sloganeering. His team knows the sound-bites will feature high up the television bulletins and in news stories. And with Europe in the midst of a financial crisis that may yet spill over into global recession, Key's words will resonate with voters.

It wasn't smart for Goff to reveal yesterday that he planned to chalk up another $4 billion of overseas borrowing at a time when the world has "gone dog" on debt. Sure, it was much less than the $14 billion to $17 billion figures the PM has been spraying about. But voters know now that debt is toxic.

They've spent enough time in the past three years getting their own household finances in order. They don't want the next Government to keep on running up the national debt tally.

The smarter strategy would have been for Goff to say all bets are off. The international situation is now so concerning that "I am inviting the Prime Minister to form a consensus on how we unravel the fiscal stimulus that has kept New Zealanders in jobs over the past three years so that we can clean the slate and move forward".

"We've all made mistakes. Either promising tax cuts New Zealand can't now afford or dishing out election gifts like Working for Families and interest-free student loans that are just not bankable while the credit rating agencies have our escalating debt in their sights."

But reality rarely sets in before voting day.

Labour's problem is that it is sending too many mixed messages.

Last Saturday, Goff chalked up the plaudits for Labour having "the balls" to go where Key does not dare by raising the age of entitlement for superannuation. It didn't seem to matter to Labour that its proposal would not be implemented until most of the baby boomers are in their 80s thus rendering it completely useless.

Goff was at least registering this particular sacred cow does need to be slaughtered. It made Key look vacuous and Goff look responsible. But in reality it was cosmetic.

Trouble is Goff surrendered his principled position when he went head to head with Key at Wednesday's debate and couldn't produce the figures to underpin his promises.

The Prime Minister filled the vacuum by challenging Goff to "Show us the Money" to fund the additional $17 billion figure that National's strategists have conjured up as their cost-estimate for Labour's policies.

Labour's finance spokesman David Cunliffe made some good points when he unveiled the figures yesterday. But they were lost in the resultant argy-bargy over which side had appropriately accounted for the partial privatisations of several state assets.

The "Own our own Future" documents were in some respects maddeningly opaque. But what we do know is this:

The plan to make the first $5000 personal income tax-free will be phased in: the $3000 tax-free zone kicks in on April 1, 2013, it rises to $5000 from April 1, 2014.

But while Labour plans to slap a new top tax rate on those earning over $150,000, it doesn't spell out directly what the rate is and when it will come in. Ironically, the party must have revised its view of just how many New Zealanders are rich.

This proposal hits just the top 2 per cent of income earners; the Clark Government's 39 cents rate was initially targeted at the top 5 per cent.

Nor does Labour directly spell out that it plans to bust the family trusts racket which has enabled far too many New Zealanders to avoid paying their "fair share".

Plans to ring-fence tax losses from rental properties are clear. But Labour has yet to clarify the details of the capital gains tax regime it plans to introduce. This is disappointing.

The 2008 election campaign was fought in an environment where the Global Financial Crisis was wreaking enormous havoc and damage worldwide. Neither Key nor Helen Clark pulled back from their wildly optimistic election bribes before the votes were counted. Yet it was obvious this country would soon be facing very tough times.

Three years on, the world is again in the middle of a major financial crisis.

The US has urged Europe to use "overwhelming force" to combat the sovereign debt crisis and avert global recession. It is truly scary stuff.

But despite New Zealand being walloped by two credit rating downgrades, Goff does not address these short-term realities.

I would have liked to hear a lot more about how Labour believes it is possible to unwind the fiscal stimulus (aka all the borrowing to fund Government programmes) which has kept New Zealanders in jobs during the past three years without hacking into some major expenditure items.

And if the eurozone financial crisis spills over into our part of the world, would Labour put getting back into surplus ahead of retaining jobs.

- NZ Herald

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