As we approach the October 14 election at a time when the world is riddled with uncertainty, the major parties are pitching themselves as the safe choice.
They recognise that people don’t have the bandwidth for risky, revolutionary ideas. Rather, they want stability; the basics done well.
The problem is, neither Labour nor National are making convincing arguments.
Labour has left the books in shabby shape, campaigning on a flawed policy to remove GST from fruit and vegetables. Meanwhile, National is relying on people simply trusting it would be better.
To begin with Labour: it set itself up for failure by giving people the impression it could solve the cost of living crisis.
Sure, it could help by ensuring markets operate competitively, there is good infrastructure to support strained supply chains, and migration settings are fit for purpose.
But pumping more money into an economy grappling with inflation, to soothe the pain of inflation, has been counterproductive.
The Reserve Bank is responsible for inflation. The best thing Labour could have done was to support the Bank’s efforts and be upfront, by saying, “We overstimulated the economy in response to Covid-19. In the face of enormous uncertainty, the alternative could have been worse: mass unemployment and deaths. We need to tighten up for a bit and take our medicine to rebalance the economy, then we’ll all be better off.”
Most people supported Finance Minister Grant Robertson when he spent up large in the 2020 and 2021 Budgets. At times, National MPs even called for more support for businesses.
But come Budgets 2022 and 2023, the magnitude of spending increases was questionable.
As for National, it is unclear that if it required the Reserve Bank to focus only on inflation, rather than inflation and employment, things would be vastly different.
Firstly, the experts are divided on whether the central bank should have a dual mandate.
Secondly, one can’t confidently argue that the Reserve Bank would have cut interest rates by less if it was tasked only with boosting inflation in 2020 and 2021.
At the time, it threw the kitchen sink at stimulating the economy and supporting financial markets because it feared the virus, and governments’ responses to the virus, could see the economy collapse.
Once the Reserve Bank started lifting interest rates, it did so with haste - openly acknowledging that its actions would engineer a recession and cause job losses.
National should try telling the “squeezed middle” with mortgages that the Reserve Bank isn’t taking its fight against inflation seriously.
As for Robertson telling the Reserve Bank to assess the impact of its policymaking on house prices – this is a red herring. It means the Reserve Bank has to comment on how interest rates affect house prices. It doesn’t need to factor house prices into its policymaking at all.
Whether the next government keeps or removes the reference to house prices from the Reserve Bank’s remit is immaterial and would not affect inflation.
Act leader David Seymour’s suggestion that removing the requirement for the Reserve Bank to meet its inflation target in the “medium term” is not credible.
Official cash rate changes take time to take effect. What’s more, telling the Reserve Bank it needs to lower inflation quickly might prompt it to hike interest rates even more quickly, creating the risk of overcooking its response.
Act and National need to be more specific about how making the Reserve Bank focus more on inflation would change its policymaking.
To the issue of government spending; National is yet to specify by how much it would increase operational expenditure in next year’s Budget.
Finance spokesperson, Nicola Willis, said she would spend less than Labour, but would not commit to increasing operational expenditure by $3.5 billion or less.
This is the figure given by Robertson. However, he has consistently increased spending by more than promised.
Treasury modelling suggests that if the operational allowance is increased by $4.5b - and then a bit more than planned in the following few years - the books would be in deficit for at least another 10 years.
There is still uncertainty around whether National would rein in spending as much as it says it would, while delivering on all its promises.
Serious questions remain over how much revenue would be generated by its proposal to tax foreign property buyers, for example.
While it is fair for National to point to all the borrowing that has occurred under Labour, it is worth noting that it, too, would have spent a lot in 2020 and 2021.
Like the Labour-led Government, it would also have to keep borrowing more to fund the unwinding of the Reserve Bank’s Large-Scale Asset Purchase programme, and refinance Covid-era debt.
Of the $129b of New Zealand Government Bonds the Treasury plans to issue over the next four years, $25b will need to be used to buy the bonds the Reserve Bank created money to buy in 2020 and 2021; meanwhile, $55b will be used to refinance debt.
So, yes, National could spend less than Labour, but its debt issuance programme would likely still be large, due to circumstances out of its control.
Looking ahead, National needs to do more to earn credibility on the economic front. “Better than Labour” isn’t good enough.
The numbers don’t tell a good story for Labour. While it can make a strong case for under-investment being bad, it needs to show voters what its spending has achieved.
Jenée Tibshraeny is the Herald’s Wellington Business Editor, based in the Parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.