Liam Dann 's Opinion

Liam Dann is the business editor of the NZ Herald

Liam Dann: Cunliffe's Labour smart to play dumb

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David Cunliffe. Photo / APN
David Cunliffe. Photo / APN

The Labour Party under David Cunliffe already looks sharper than the David Shearer version when it comes to picking up on business and economic issues and turning them into ammunition for political attack.

A lot of these issues are complex and Labour seems happy to grab headlines with half-baked ideas that don't bear serious scrutiny.

But that doesn't really matter in the rough and tumble world of political point-scoring. Shearer's more considered and generally more intelligent approach was getting the party nowhere. It is a shame that one of Shearer's biggest flaws was his tendency to think before he spoke.

Why waste time thinking - all that ever did was give the Greens a chance to get in first with a snappy soundbite? Cunliffe's Labour Party certainly doesn't.

While the strategy has seen them fall into line with the Bankers' Association, the real estate industry and assorted fund managers, it does seem to be boosting their poll ratings.

So fair play to them - in modern politics it is smarter to play dumb.

Let's face it, the bulk of the public don't have a clue about the actual mechanics of the Reserve Bank's new lending restrictions or how a listed company share buy-back works. Labour has managed to get traction on both these issues in the past couple of weeks.

Last week we saw Clayton Cosgrove taking a blunt stick to the Mighty River Power board over the timing of the now-listed company's share buy-back.

Cosgrove was quite explicit in his accusation that the Mighty River board of directors had made the move to pump the share price so the upcoming Meridian float would go better for the Government.

There is no evidence for this and the suggestion that a highly respected director like Mighty River chairperson Joan Withers would breach the Companies Act and put the interests of a political party ahead of the best interests of shareholders seems quite defamatory. Not to mention stupid. The share buy-back does highlight the poor performance of the Mighty River shares but it doesn't - nor is it expected to - get the share price back to the IPO price. So why would the Government be pleased with the timing? John Key has gone on record to say he had no knowledge that it was happening.

Never mind. It looked bad for half a news cycle and Labour successfully reinforced a perception that the Government is desperate and will try anything to flog state assets off.

A week or so earlier Cunliffe got good mileage by attacking the Government and the Reserve Bank over the new lending restrictions regime.

The restrictions are designed to prevent banks lending too much money on too little equity. They are primarily about preventing property market bubbles, ensuring the safety of the economy in the event of another financial crisis like - I don't know - a US debt default or something.

That's something even the Greens have been supportive of.

Cunliffe's stance on loan to value ratio (LVR ) restrictions puts him in bed with the Bankers' Association, all the big Aussie banks and most of the property and real estate industry. These are not exactly mates he'll be shouting about at the next CTU rally. And clearly there is no long-term potential for this alliance.

If Labour holds its ground on the policy to introduce a capital gains tax then it will feel the full force of the property industry lobbyists in the run-up to the election.

The fuss we've heard about LVRs will pale in comparison to the highly organised and well funded opponents of a Capital Gains tax that Labour will run up against.

If Cunliffe is smart he'll look again for allies amongst the brokers and fund managers who are open to a capital gains tax as a way to boost investment in equity markets instead of property.

Courting the investment sector might not play well at grassroots Labour Party meetings either but the idea that our tax structure is inefficiently weighted to favour non-productive property investment offers Labour some common ground with a high-level business grouping.

But the fact that allies on LVRs are likely to make enemies on capital gains tax suggests that some of Labour's positions are contradictory.

It takes a special kind of leader to maintain credibility in the face of such ideologically inconsistent policy positions.

John Key has been a master of selling this kind pragmatism over the five years. Now it seems he has a rival.

Of course, neither the property sector nor the market investment sector are going to like Labour messing around with the Reserve Bank Act.

Monetary policy has been almost sacrosanct in New Zealand politics for more than 20 years.

Cunliffe and his deputy, David Parker, seem prepared to overhaul the act. Personally, I find that worrying as it appears to be one of the few things about the economy that doesn't need fixing.

But the business community is a broad church and Cunliffe will have allies on this front too - most obviously with the likes of John Walley and the Exporters and Manufacturers Association.

So, with a bit of ducking and diving, a good sidestep and the occasional dummy pass, Labour may be able to build some support - or at least some tolerance - from the business community.

David Shearer never seemed to want to engage with business, which is odd as that was clearly something Helen Clark and Michael Cullen tried to do.

The bottom line is that David Cunliffe is a much smarter political player than David Shearer. He's already made enough impact in the polls to suggest he has a chance of winning the election. Unlike Shearer, he has managed to actually get in the game. Now National will have to lift theirs.

Twitter: @liamdann

- NZ Herald

Liam Dann

Liam Dann is the business editor of the NZ Herald

Liam Dann is the Business editor of the New Zealand Herald, overseeing all our business content in print and online. He has been a journalist for 20 years, covering business for the last 14 of them. He has also worked in the banking sector in London and travelled extensively. His passion is for Markets and Economics, because they are the engine of the New Zealand economy.

Read more by Liam Dann

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