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Home / Business / Companies

Liam Dann: Economy where Key wants it

Liam Dann
By Liam Dann
Business Editor at Large·NZ Herald·
14 Sep, 2014 05:00 PM5 mins to read

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Liam Dann
Opinion by Liam Dann
Liam Dann, Business Editor at Large for New Zealand’s Herald, works as a writer, columnist, radio commentator and as a presenter and producer of videos and podcasts.
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Voters should take heart that one of the central debating points of this campaign has been fiscal responsibility.

This week a nation heads to the polls for one of the most important votes in its history.

Meanwhile in New Zealand we'll be deciding which of the minor parties John Key has to call first this Sunday.

Cynical? Me?

Well, there's no doubt the stakes around the Scottish independence vote on Thursday are historic in scale. Here in New Zealand you could make the case - and plenty on the left do - that this election also represents a chance for historic change. You could make that case but, with just days to go, the polls suggest a large chunk of the public just aren't with you.

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Even after the revelations of the Dirty Politics saga and the late departure of a senior government minister, it does not feel as if there is great momentum for historic political change right now.

Despite the scandals which ignited the early part of the campaign, things seem to have settled back to a quieter, more concerted debate.

Last week it seemed as if there was a bigger buzz about the Apple smartwatch and a South African murder trial than there was about tax policy or even personality politics.

Perhaps there was some political fatigue and interest will pick up again this week with new revelations due today from Kim Dotcom. After what we've seen in the past few weeks it will need to be a monumental reveal to have any major impact.

Polls can be wrong and the vagaries of MMP mean nothing is certain. A bigger-than-expected turnout on Saturday might change the dynamic. But I'd be surprised.

It's the economy. It always is. And that remains benign.

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The macroeconomic cracks that are starting to appear as dairy prices fall are a long way from translating to the ordinary voter's pocket.

In fact, in the short term, a slower growth track means interest rates are staying lower for longer.

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The dollar has started falling - not so much that imports are markedly more expensive but enough to provide a ray of hope for small exporters.

In many ways economic conditions are right where John Key and Bill English want them in the run-up to Saturday's vote.

That makes life extremely tough for the Opposition. There is a case for National doing more to transform the economy away from a reliance on commodities, just as there was a case for it to take a look at some of the less palatable ways some of its members were doing politics.

But John Key continues to prove highly adaptable and unafraid to take the party in directions that head off opponents - even if that has the hard right calling socialism.

It's hard to make the case for New Zealand still being an international poster child for neo-liberal doctrine when both our major parties are in agreement on the need to subsidise wages - well into middle income brackets - and both are now prepared to subsidise first-home buyers.

Meanwhile tax debate, on the rare occasions it has managed to grab any headlines, hasn't gone Labour's way.

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The capital gains tax was always going to be a hard sell. The policy doesn't actually go down too badly with senior tax partners and stockbrokers. David Parker put it well at the Mood of the Boardroom debate when he told the audience of business leaders that the policy would create a neutral tax environment which encouraged more capital to flow to the productive business sector.

The problem for Labour is that the audience is not switching sides this time. Meanwhile, buying a second house and doing it up for the capital gain has become the most obvious path to financial security for many middle and working-class New Zealanders who would have traditionally come from Labour-voting backgrounds.

National's talk of tax cuts in 2017 is cynical. It looks a lot as if they were hoping not to deploy them in this campaign and panicked at the height of the dirty politics furore. It certainly seemed to catch Bill English off guard and his attempts to justify it from a fiscally responsible point of view came across as half-hearted when he was put on the spot at the Mood of the Boardroom.

But the policy is all about providing a stark contrast with Labour, further highlighting the Opposition's higher tax policy by talking about lower taxes.

Whatever happens on Saturday, whichever brand of government New Zealand chooses, we should take heart that one of the central debating points of this campaign has been fiscal responsibility.

Labour and the Greens haven't been shy on this issue.

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As Business New Zealand's Phil O'Reilly has pointed out, a scenario where the major parties are all accusing each other of being fiscally irresponsible at least indicates an understanding of how important this issue is.

Which version of the books you buy is your choice.

But keeping them balanced is crucial to maintaining the kind of economic stability New Zealand needs to create wealth and address its problems in whatever manner we democratically choose.

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