John Roughan

John Roughan is a Weekend Herald columnist

John Roughan: Austerity gets a big tick here

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Our European correspondent Catherine Field is very good. She doesn't simply file the expected story, the "narrative" as it is coming to be called by those who believe the news can be nothing more.

The narrative out of Europe right now is that people everywhere are rebelling against something called "austerity". It started in Greece but the story really took flight at the result of the French presidential election last month. It infected budget discussion in this country this week, though not the Budget fortunately.

I heard a brief interview with Catherine Field on radio the morning after the French election. When it was put to her that austerity was the reason for Nicolas Sarkozy's demise she said it wasn't just that. It had as much to do with Sarkozy personally. The country didn't like him.

Maybe that is why the interview was brief. Elections are nearly always about the candidates, as they should be. Voters are essentially choosing a chief executive and, as every company knows, the man matters more than the plan.

But it is hard to discuss personalities at any length, particularly in a foreign election, so we prefer an issue, preferably an economic one.

Economics can imply mass hardship on the basis of figures that cannot be denied, even when they conflict with the evidence of your own eyes. I was in France last year and didn't see any austerity. Conditions may have deteriorated since but I doubt it.

Last month I was in nearby eurozone countries, Holland and Belgium, and again didn't see any sign of austerity. The shops seemed busy, people on the streets and the trains and in the cafes looked as prosperous as ever. You notice more discount sales and vacant shops in Auckland than in Brussels or Amsterdam.

In everything I have read the only specific hardship the French faced from Sarkozy was a raising of the retirement age, to 62.

The man was a disappointment. He came to power promising some overdue economic reform but it was quickly evident he lacked the stomach. To believe he was defeated by austerity, you'd need to believe he was elected five years ago because his promised reforms were popular, which I'd like to believe but don't.

I'd like to believe John Key was re-elected here last year for asset sales too. It's the man, not the plan.

Sarkozy was, I guess, a refreshing change from Jacques Chirac but not for long. He wasn't presidential, he looked and acted like a popinjay. His successor at least looks the part.

Francois Hollande was lionised by leaders of the G8 last weekend.

Their host, President Barack Obama, who faces his own voters in less than six months, declared an "emerging consensus" for less austerity and more "growth" (he means public spending, especially for Greece). Even Britain's David Cameron, whose government is running a tight Budget and who has been telling Europeans, "you can't borrow your way out of a debt crisis", joined the chorus at Camp David.

By all accounts they isolated Germany's Angela Merkel in her insistence that reducing budget deficits - "austerity", in other words - is better for sustainable growth. She deserves a Thatcher award.

The arrival of Hollande is probably the reason Greece survived last weekend. Austerity will be visible in Greece where unemployment is above 20 per cent, and may be apparent in other parts of Europe where real wage cuts are the expected consequence of a currency that cannot depreciate.

But in normal economies there is no revolt against austerity, quite the reverse. Surveys by newspapers in this country during the week, and households interviewed after the Budget, suggested most people see sense in reducing the deficit as quickly as the Government is doing.

The Labour Party's endorsement of the 2015 target for balancing the books suggests it has read the mood the same way.

In fact, New Zealand would probably tolerate more austerity than it would be wise to impose in a year when the economy has been fearfully flat. We should be paying $20 for prescriptions, KiwiSaver doesn't need any subsidy.

National is managing to look more austere than it really is. The surplus it projects in 2015 is now marginal. Tellingly, it does not plan to resume payments into the baby boom super fund until a year or two later, which might be its last year in power.

If anyone resents the need for austerity it is probably Key. This time next year he will be exactly half way through the nine years we normally give a government.

He had an ambition to gear up the economy for greater wealth before recession, world financial crises and earthquakes intervened. It wasn't the reason he was elected but I hope the man still has the plan.

- NZ Herald

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