Fran O'Sullivan: Labour hopes money policy will deflect focus from Jones

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Shane Jones. Photo / Paul Taylor
Shane Jones. Photo / Paul Taylor

There's a lot riding on Labour Finance spokesman David Parker's interview on TV3's The Nation this morning.

Parker will inevitably have been given a strong nudge by leader David Cunliffe to get the media focus away from Shane Jones' defection to a sweetheart Government job, and, back onto Labour and the policies it will implement if it gets to lead a new government after the September 20 election.

This is a difficult ask given that Jones will be on the same show alongside his heir apparent Kelvin Davis and the host will inevitably quiz Parker about the decision by Labour's No 5-ranked player to resign.

But it is important for Labour's electoral chances that the focus does shift - and fast.

The pre-show spiel promotes Parker as gearing up to say how he wants to change the Reserve Bank and "the effect that would have on the high New Zealand dollar, house prices and interest rates".

Labour's Finance spokesman won't go too far into the detail. He is saving that for Tuesday's official policy launch. And for those that might suspect the dark hand of Cunliffe's chief of staff Matt McCarten in the timing - the interview was arranged before Jones' resignation from Labour's parliamentary wing was announced.

It's fair to say that Parker does face a hurdle in trying to get broad acceptance for Labour's new policy which is the most significant departure from the Reserve Bank's monetary policy settings since the central bank was given an independent charter in 1988.

He would not be so foolish as to risk the Holy Grail of the inflation objective. But it's also true that while New Zealand was a path-breaker in granting central banks independence to run monetary policy; there are many variants on the theme.

What is clear is that New Zealand interest rates are high by international standards. This excites the attention of "hot money" which flows in and pushes up the NZ exchange rate.

New Zealand - despite having good terms of trade - hasn't posted a current account surplus for several decades.

The commodity cycle may also have peaked. There is a great deal of hard-thinking needed to ensure New Zealand has the optimum policy settings to underpin sustainable economic and business growth outside of the current Government's objective of posting fiscal surpluses (something which Parker and Cunliffe also say they would adopt).

New Zealand has been through a lot since 1988: Banking crises, economic recession, the Global Financial Crisis and the Canterbury Earthquakes.

The world has changed: China is now nudging the US for super power status; populations are surging; Western nations - like New Zealand - are getting older with resultant fiscal pressures.

There is now a global elite, backed in many cases with far cheaper money than our citizens have, which can (and does) buy housing in desirable locations like New Zealand, adding to residential price pressures.

It is not unrealistic to take a look at the inflexion points. How does New Zealand balance our national interest within the changing global world we live in? Are our policy settings correct?

New thinking also requires courage.

Much has been made of the invitation that Foreign Minister Murray McCully made to Jones to be New Zealand's first Economic Ambassador to the Pacific. The Labour MP certainly has the skill set to look at how best to balance New Zealand's interests with that of the Pacific nations to better leverage resources such as fisheries either alongside or preferably with the involvement of other players like China and the United States.

The role is probably as big or small as he wants to make it.

But Labour will miss his courage and deeply grounded sense of reality. Who else will strongly make the case for a Labour-led Government to hold its ground and get openly behind the extractive industries and the jobs they bring? Who else will call time on the "BS" which holds Maoridom back from fulfilling its economic destiny and ensuring young people "get off their As" to work and take part in NZ society? (Hard to do as a Pakeha).

Beer baron Sir Douglas Myers - with whom Jones is well acquainted - used to talk about how corporate life is a bit like a "sack of spuds". New owners would shake the sack and bring up hidden talent. Those who fell might get to rise up again in the next shakeup.

Politics in the Labour Party is not like that. Under the old regime, Jones may have stood a chance of rising to be Labour's leader if the caucus called the shots.

They don't. It's not even clear if he would have got into Cabinet under a 'coalition-style' government. So, he's walked.

The water will close after him as he leaves. Labour's future belongs to those who stay - like Parker.

- NZ Herald

Fran O'Sullivan

A columnist for the NZ Herald

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.

Read more by Fran O'Sullivan

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