John Armstrong 's Opinion

John Armstrong is the Herald's chief political commentator

John Armstrong: Backlash lurking in Govt austerity march

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Steven Joyce. Photo / APN
Steven Joyce. Photo / APN

Thanks largely to some adroit politics on its part, National has yet to cop any substantial public reaction to its various austerity measures.

Sure, it has incurred the wrath of Wellington-based state servants. But National has long declared open season and pointed both barrels at that particular species.

This week's reaction to the raising of prescription charges was the closest that things have come to a broader voter revolt.

But talk of the price rise rebounding on National evaporated within hours of the announcement. That left the doomsayers who were predicting people would die as a result of higher charges looking rather silly.

Nevertheless, it would be surprising if Cabinet ministers here have not felt the odd twinge of anxiety from the election of a socialist as the new president of France and the rout of the Conservatives in local body elections in Britain.

Those results spoke for themselves: European voters have had it up to here with the politics of austerity.

Sooner or later, New Zealand voters will likewise tire of the messages of restraint which, no doubt, will pepper the contents of this Thursday's Budget.

The turning point may be reached when rising consumer prices finally soak up the extra cash households have enjoyed from very low mortgage interest rates.

The focus will shift to the adequacy or otherwise of National's economic growth strategy. On that front, National has "action plans" coming out of its ears. But whatever "action" subsequently takes place seems to end up missing in action.

National may well be regretting not having embarked much earlier on its merger of Government agencies with economic development responsibilities.

That amalgamation, which has seen Steven "Minister of Everything" Joyce installed as the Cabinet's economic development supremo and the creation of his new "super" Ministry of Business, Innovation and Employment, is now very much on fast-forward.

Joyce will get some extra money in the Budget, particularly for the science and R&D part of his portfolios.

But he's unlikely to get enough to stifle talk in the business world of this Budget needing to be "defining" in terms of National showing real commitment to a pro-active growth strategy.

In merging four Government departments into one ministry, National is putting all its business innovation, training, skills, labour market and research and development eggs in one basket.

That should give the ministry real clout. Its sheer size and reach could see it offer a much-needed, alternative stream of economic advice to the sterile fodder the Treasury has served up for nearly three decades, with the miserable return of an average annual growth rate of just 2.3 per cent.

But the exercise is not without risk. The ministry's brief is to take a central role in ensuring enterprises have access to the skills, capital, ideas and contacts so they can succeed internationally.

Cabinet papers dealing with the merger stress the ministry will need strong leadership and a sense of urgency - something which seemed to be lacking in the soon-to-be-disestablished Ministry of Economic Development.

Even so, it's going to be some time before the restructuring bears substantial fruit.

So far, National has managed to carry voters with it. Much of this has been down to Bill English. He has made running the country's finances during a period of near recession look easy. Deceptively easy.

You would have to go back to Ruth Richardson and Sir Roger Douglas to find a finance minister with a fiscal challenge that gets even close to the horrendous numbers that continue to confront English.

The difference is that, compared to those two predecessors, English is more concerned with keeping voters on board.

He has done so by forging an informal pact with middle New Zealand. He has both warned people of the reasons why European countries got into trouble while simultaneously promising to insulate New Zealanders from the consequent fall-out

In return, voters have given him licence to cut spending. But not too much.

He has only cut around the fringes of major programmes like Working for Families and KiwiSaver.

What John Banks categorises as "middle-class welfare" - such as unfettered access to interest-free student loans - remains largely untouched, much to the Act leader's horror.

National has instead opted to speed up loan repayments, but not in any drastic fashion.

That decision was one of a number of pre-Budget announcements over the past two weeks which have been cleverly pitched.

Take the rise in prescription charges from $3 to $5 an item, for example.

The supposed trade-off of higher charges for more cancer treatment was a nonsense. Priorities are not determined in such fashion. But it is an example of how National is sugar-coating its "bad news" announcements to make them more palatable.

Health Minister Tony Ryall must be laughing all the way to the bank.

His line that this was the first such increase in prescription charges in 20 years was swallowed hook, line and sinker across the media. That statement makes it sound like prescription charges have been set at $3 for the past two decades. The rise, therefore, looks modest and justified given inflation.

That is not the full story. Ryall is correct. The charges have not been increased for two decades. But they were reduced during that period. They were cut from around $15 down to $3 as recently as 2004 by the previous Labour Government. Ryall did not hide this fact - it's mentioned in the media releases. But Ryall did not highlight it, either.

In essence, National is working on the theory that tough times allow governments to pick the pockets of most of the people a small number of times to a small extent without incurring political damage.

Even so, the pre-Budget announcements show National is having to find savings closer and closer to the front-line delivery of public services - something that it said would not happen.

The backlash accordingly edges closer. National can only pray economic growth gets there first. Steven Joyce, the time has surely arrived for you to step up to the plate.

- NZ Herald

John Armstrong

John Armstrong is the Herald's chief political commentator

Herald political correspondent John Armstrong has been covering politics at a national level for nearly 30 years. Based in the Press Gallery at Parliament in Wellington, John has worked for the Herald since 1987. John was named Best Columnist at the 2013 Canon Media Awards and was a previous winner of Qantas media awards as best political columnist. Prior to joining the Herald, John worked at Parliament for the New Zealand Press Association. A graduate of Canterbury University's journalism school, John began his career in journalism in 1981 on the Christchurch Star. John has a Masters of Arts degree in political science from Canterbury.

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