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Beginners' Guide To Talking Down Economy


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The beginners guide to talking down the New Zealand economy

First published on Spectator.co.nz…

Opposition parties are supposed to oppose the government and offer an alternative to government. However that does not give opposition parties licence to talk down the economy.

Tragically that reality has been lost on many politicians, particularly those in Act and the few remaining National MPs. Since the Clark-led Labour government ascended to office in 1999, the opposition has taken it upon themselves to try and talk down the economy.

It’s treasonous really. Even if one never has a positive word to say about the incumbent government, one must be careful not to undermine confidence in the economy. Ultimately that only puts at risk the livelihood of working families who stand to gain from economic growth.

Those who talk down the economy do so without conviction. They don’t actually believe what they say or write. They don’t actually want people to be unemployed and without a regular wage or salary. The sole aim of the carping doom-merchants is to make the government unpopular in the forlorn hope that voters will vote for the opposition instead.

But often such criticism is inconsistent key economic indicators, which paint a very different story to that which the opposition attempts to spin. Take the example of Act MP Muriel Newman’s latest foray into the economic debate (which she patently knows nothing about).

Last week Statistics New Zealand released the results of the latest Household Labour Force Survey results, which show the unemployment rate in this country falling to just 5.1 percent. That is the best result in 14 years.

New Zealand’s unemployment rate is now below almost all our major trading partners, including Australia and the United States. At 5.1 percent New Zealand’s unemployment rate is far below the OECD average of 6.9 percent.

After nine consecutive quarters of employment growth, around 115,000 new jobs have been created. This has been a major achievement considering the extraordinary adverse economic conditions created by the terrorist attacks in the United States on 11 September 2001, and the near collapse of Air New Zealand.

Fortunately the worst effects of those two situations is behind us and the economy continues to grow. With unemployment likely to fall below 5 percent by the end of the year, New Zealand continues to perform extremely well.

Good on every single entrepreneur, industry leader, trade union official, and politician (either in central or local government) who has worked to create the conditions for economic growth in recent years.

But back to gawky Newman. Her critique of the economy comes less than a week after the release of the best set of employment figures in 14 years.

Her response? This is what she has to say about New Zealand’s economic prospects:

“… The reality is that many small businesses are afraid to employ people in case they get it wrong…” (Ed - 115,000 new jobs in just under two and a half years).

And how about this little gem, when discussing paying young people a slightly higher wage:

“…will increase the cost of on-the-job training for young workers. As a result, employers may be less likely to hire young, untrained staff…” (Ed - the government has greatly increased the number of young people in work-based training).

Of course Newman isn’t the only opposition MP trying to talk down New Zealand’s economic profile. Throughout the election campaign Bill English tried in vain to destroy New Zealand’s profile by making comparisons with other OECD countries.

It is a mark of English’s lack of credibility that he chose not to compare one of the most fundamental measures of economic performance - employment. Instead the game plan is to shift the debate to issues such as the Resource Management Act (which the previous National government passed into law in 1991).

The opposition can no longer drag out the old “left wing government spending beyond its means” mantra because Labour in government has actually reduced spending as a proportion of GDP. The opposition cannot chastise the government for failing to run a balanced Budget because the centrepiece of this year’s Budget is a $2.3 billion surplus.

As the opposition is pushed further away from the centre, it is left with precious few issues available to challenge the government. The same scenario applies with regard to the economy.

No longer can National and Act attack the government on macroeconomic issues. If they do then they lack credibility. While the opposition tries to talk about compliance costs, global commodity prices, and the exchange rate, the government can talk about the key indicators of economic growth:

1. 115,000 new jobs

2. The lowest rate of unemployment in 14 years

3. Stable economic growth

4. A $2.3 billion Budget surplus

The opposition’s greatest fear is now a reality. The centre left government is actually very credible on economic issues. It is English’s nightmare. It is also Richard Prebble’s nightmare.

The only option they are prepared to try is to talk the economy down, but at whose expense? Could they undermine the government’s credibility on the issue of the economy? Possibly - but not likely. Could they undermine business confidence in New Zealand? Probably.

If Members of Parliament are true patriots they won’t undermine New Zealand’s economic profile. Constructive debate is healthy. But a blatant attempt to talk down the economy is neither constructive nor patriotic.

Jim Anderton must have enjoyed pointing out that New Zealand’s low unemployment rate put this country back into the top half of the OECD. When is the opposition going to respond to that?

This year’s election served as a timely reminder to those parties who seek to be negative about New Zealand and its people. Voters do not like carping politicians. National, which ran a negative and septic campaign won less than 21 percent of the vote and lost nearly one third of its caucus. Act also ran a negative campaign and made no gains on its 1999 result. In contrast, Labour ran quite a positive campaign and became only the third governing party since the 1930s to increase its share of the popular vote.

Newman knows very little about economic policy. It appears that she doesn’t know much about politics either.

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