Close your eyes and, if you are old enough to remember, it could be 1974 again. We have a Labour government led by a charismatic Prime Minister and suddenly, less than two years after a landslide election, it finds itself staring inflation in the face.
The level reported thisweek, 7.3 per cent, hasn't been seen for 32 years but it is nearly 50 years since we were last at this point in an inflationary surge.
Watching Grant Robertson respond with reductions in petrol tax and bus fares, you can almost see Bill Rowling, finance minister until the death of Norman Kirk and prime minister after him. Robertson looked as helpless as his predecessor when he suddenly held a press conference last Sunday, knowing Monday would bring an inflation figure worse than expected.
All he had to offer was an extension of the tax and fare concessions, which he knows is just tinkering with symptoms of the problem with stimulants that will make it worse. Unlike finance ministers of the seventies, Robertson knows we now have an effective antidote to inflation. He's just reluctant to play his part in the cure.
Flashbacks of 1974 are not confined to the governing side of Parliament. Across the aisle, National has a new leader, a short bald man who has already lifted the party ahead of Labour in the polls. Chris Luxon might not be Rob Muldoon, for which we should be profoundly grateful, but he is being given similar grounds to campaign on economic management next year.
Economics always favour National at elections, not always deservedly as we learned under Muldoon. Luxon's promised tax cuts could be as damaging as Labour's loose spending if inflation has not been contained by the time we come to vote.
We do learn from history, though. I'm currently reading the memoirs of Alan Greenspan, chairman of the United States Federal Reserve Board from 1987 to 2006. It is a reminder of how far we have come since our first brush with the monster.
Recalling the mid-1970s, Greenspan writes, "My old mentor Arthur Burns and his successor Bill Miller (Fed chairmen) kept trying to find a middle ground on monetary policy. They didn't want to make credit so easy as to fuel further inflation, but they didn't want to make it so tight as to choke the economy into another recession. From what I could see, that middle ground didn't exist.
"But I was in the minority. To most people, the peril to the economy wasn't clear. There was a widespread feeling in Washington that since you couldn't bring down inflation without causing more unemployment, it wasn't worth the cost.
Grant Robertson knows we now have an effective antidote to inflation. Photo / Mark Mitchell
"Some on the right and on the left even began to argue that inflation as high as, say, 6 per cent a year might be fine to live with – we could index wages to take it into account."
I don't recall that being said in New Zealand but it is true that inflation did not worry everyone here. Rising prices were not hard for business to recover in their protected markets at that time, and made it easy for trade unions to negotiate wage increases that impressed their members until they found their gains overtaken by prices again.
But we don't hear anyone relaxed about inflation today, which is somewhat surprising considering a generation has grown up that has never previously experienced it. Progress does happen.
Greenspan's 2007 book, 'The Age of Turbulence', contains a reminder that governments of the right were not always the angels of recent economic history. In the US it was a Democrat, Jimmy Carter, who made the crucial appointment of Fed Chairman Paul Volcker to "slay the inflationary dragon".
Greenspan, who followed Volcker, was a Republican disappointed by the fiscal performances of the President who appointed him, Ronald Reagan, and later, of George W Bush. Both cut taxes and left the US with problematic levels of debt. It was a Democrat, Bill Clinton, who balanced his budgets and left a surplus.
In this country, too, it was a Labour government that directed the Reserve Bank to concentrate on inflation and though the next National government trimmed the budget to help, it was quick to offer tax cuts as soon as a surplus appeared.
The fifth Labour Government ran big surpluses and left very low public debt that we have largely to thank for coming through the 21st-century crisis in good shape so far. But the sixth Labour Government appears to have forgotten the Reserve Bank cannot slay the dragon alone.
Facing the highest inflation we've seen for a generation it should stop wasting money on temporary supports and produce some savings. That would help.
