The National Party has promised to spend billions upon billions of dollars to stimulate the economy. Photo / Michael Craig
COMMENT:
Once there was a time – way back at the beginning of this year – when economists told us there were two ways to deal with an economic crisis: stimulus, and austerity. Government spending or Government cuts.
It's not like that now. Austerity is discredited. The impacts of the Covid crisis have been so deep, we've all quickly understood the importance of Government spending to keep us safe and to help us rebuild. Nobody in their right mind seriously suggests we slash Government spending.
National, indeed, has embarked on a "rolling maul" of new spending promises: billions upon billions of dollars' worth, mainly for roads, promoted by leader Judith Collins with the enthusiasm of a Springbok front rower whose only happy place is in a wrestling, heaving, crushed mass of bodies, all plodding their way to the tryline. Hey, rolling mauls work: South Africa won the World Cup.
Spend, spend, grunt, push, shove, spend some more.
But the promises of all those grunty roads and tunnels are not quite what they seem. National also assures us it will not raise taxes, will not cut spending on health or education and will reduce the country's debt level to 30 per cent of GDP by 2030.
That's way less than Labour's 53.6 per cent peak which it says we'll hit in 2023 before declining to 46.2 per cent by 2030.
National's plan doesn't seem to add up. Some say the maths is so bad, there's a debt hole of $80 billion. Finance spokesman Paul Goldsmith denies it, but very few economists have jumped to his defence. The fact is, even at the best of times, a steep decline in debt, without raising income from other sources, is not possible without cuts to spending.
To suggest otherwise is, to borrow from Winston Peters, to sprinkle pixie dust. To be clear, that's not the Greens doing the sprinkling, as Peters wants us to think, but Collins and Goldsmith.
We know all this already, courtesy of Bill English: his controls on Government spending were not savage but they were severe, and that's how he got the debt down in the years to 2017. Austerity.
It meant welfare hardship, rundown hospitals and public health services, grossly inadequate teacher salaries, budgets devoted less to future planning than to patching over problems that could no longer be ignored.
If National doesn't intend to reach for the pixie dust, the alternative explanation is that it has embraced stimulus for the election campaign but the real plan is austerity.
But does that make Labour the party of stimulus? It's still very hard to know.
Labour has promised no cuts to spending in areas like welfare, housing, health and education, and its debt management programme takes a much longer-term view than National's. But is that enough?
The lockdown revealed in so many ways how great the gap between the well-off and the poor is in this country, but the massive spending programme triggered by Covid does surprisingly little to address that injustice. Much greater spending than is planned for affordable housing, public health and welfare would be a good start.
Finance Minister Grant Robertson continues to reassure us his 53.6 per cent debt peak is not even as big as the pre-Covid debt of many of our trading partners, and that's true. What's also true is that it means he could borrow more. Stimulate more.
He and the PM have not ruled out raising taxes, but they have rejected every proposal to do so. The Greens want a wealth tax and new tax brackets for the highest income earners, but Labour says no. What possible harm could there be in asking the wealthy to pay a bit more?
If stimulus is the watchword, other questions arise. Are we spending enough to help tourism adjust to its new reality? Should the wage subsidy be extended again? Are central city retailers, whose value almost everyone agrees on, getting the help they need?
And why doesn't the Government work out how to allow foreign students back?
It's a far harder problem than many proponents seem to think. But if the students come from low-risk countries, the risks are also low. Set workable numbers, make them pay, have the universities organise it and subject them to strict security controls. Is it really not possible?
The consequence of inaction on this has barely been whispered: without massive new funding, universities and schools will have to cut staff, courses and other activities. Whole programmes could be closed down. It's called austerity, pure and simple.
The PM also says there will be almost no policy announcements and asks us to judge her party on its record. But that's hard to do. The record belongs to the whole Government, not just Labour. NZ First has completely sabotaged many plans; others have been compromised simply by the demands of coalition.
It's far from clear what policies Labour really wants to pursue in so many areas, including corrections reform, regional development, energy, railways, urban transport, welfare reform, the Auckland port, China, and the two issues roiling over everything: tax and climate change.
Is climate change still an issue that divides the major parties? This week the minister, James Shaw, released our first National Risk Assessment, a report prepared by the Ministry for the Environment. It identified 43 risks that could have "major or extreme" consequences for New Zealand, 10 of which require "urgent action" in the next six years.
Top of the list: coastal erosion, due to weather events and a sea level that could rise by 70cm this century. Second: threats from invasive species. That's everything from crop wipeouts to the arrival of mosquitoes carrying malaria and dengue fever.
Third was the breakdown of social cohesion. Not just crime, driven by poverty, but also a boilover of anger from new generations who will suffer the consequences of the inaction of the old.
Shaw seemed calm when he released the report. He said, "We think we're equal to the challenge in front of us."
Why was that? He explained he was pleased the report "defines the problem with a scientific rigour we haven't had before".
Then, asked if he thought we were moving fast enough to deal with the crisis, he laughed and said, "I do not think incremental change will be enough."
The Government is required by law to respond within two years with a National Adaptation Plan. Neither Labour nor National has yet said anything about how it sees that happening.
Transport is Auckland's special flashpoint. National's plans include tunnels under the harbour for road traffic as well as rail, more roads and a sneering dismissal of light rail.
Collins frames all transport issues entirely in terms of congestion. But more roads will increase traffic: that's more emissions, without solving congestion. It's almost as if no one has told her about the climate crisis.
And yet in January, Labour released a road-building programme National would have been proud of. The governing party has not yet pivoted towards mass transit, and we don't know if it's because they don't want to, or because NZ First has not let them.
It's true for climate change just as it is for tax and the question of austerity v stimulus: sometime before September 19, it would be great to know what those two parties really want to do.
After all, the others - especially the Greens and Act - are making their policies very clear.
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