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Richard Prebbles Letter from Wellington


THE ECONOMY

Out of the gloom of Tranz Rail’s annual report is the very significant statement that freight volumes are up - a good indication that the economy is growing strongly. Feedback from business is that prices and wages are both heading upwards.

The immediate threat to the economy is a prolonged military strike against Iraq. Petrol at US $50 a barrel will devastate NZ which has very low reserves. A cold winter in Europe and an Iraqi standoff could produce considerable economic shocks. But a post-Saddam Hussein Iraq providing oil to full capacity could see oil prices fall to US $10 a barrel – great for NZ.

BATTEN DOWN FOR HIGHER PRICES
Government accounts released last week show Treasury is picking higher inflation after Dr Cullen raised the mid point of the inflation band from 1.5 to 2 percent. The government's superannuation fund liability has blown out by $804 million because of "changes in the CPI assessment". This has had a flow-on effect to the salary growth assumption (up from 2% to 3%).

Skill shortages are widespread. The impact of the 9 percent plus teachers’ wage settlement will be extensive. Hospitals are expecting to have to pay above inflation increases to nurses. The strikes at Otago University also show an expectation of above inflation salary increases.

FIRST ROUND - LABOUR AHEAD ON POINTS
Parliament has finished its first four-week session and the government is relieved. Helen Clark was knocked when her gamble to be a majority government failed and Labour received only 41 percent of the vote.

But Clark now feels things have turned out well. Labour's leadership is still incredulous that Peter Dunne has guaranteed confidence, supply, and support on procedural measures. If Dunne delivers, Labour can push through a more ambitious legislative programme for the next three years.

Another coup for Labour is not having to bargain with Winston Peters whose over-the-top criticism of Asian New Zealanders has made him politically unacceptable. Labour Ministers had been courting Peters as standby if the Greens proved impossible and thanks to Dunne he is not needed. Labour feared a Green coalition would’ve proved too demanding. The Greens, who were eyeing up their Ministerial offices before the election, had intended to show Jim Anderton how to dictate to Labour. Dunne's votes mean Labour can dictate terms to the Greens.

MORE REASONS FOR LABOUR'S ARROGANCE
The new government has been treating Parliament, the media and voters with arrogance. Labour has changed the Reserve Bank's targets with no rational argument and hasn't felt the need to explain its policy on Iraq.

Helen Clark is taking one of the strongest anti-American stances in the free world, and one that will have long-term implications. Labour's had an easy ride so far. National, NZ First and United's policies on Iraq are unclear or non-existent. The Greens are anti-America. But ACT, in contrast, says now is the time to be most staunch in our support of the US, UK and Australia. When America is looking for friends, is the time to be noticed.

LABOUR'S DILEMMA
In the first four weeks, Parliament didn't see any of Labour's 'new' agenda but Clark and Cullen can't hold it off the order papers much longer.

The programme includes:
· New powers for trade unions
· Extending ACC cover
· New local government powers
· Resource Management Act extensions
· Cutting back on private tertiary education
· OSH amendments

There are three groups in Labour’s caucus pressing for a more radical agenda - the trade union MPs, who want laws against contracting out work; the women's lobby who want lifestyle laws permitting same sex marriages, etc; and the Maori caucus who are still angry at the dropping of 'closing the gaps'. Maori issues cover the whole policy range. This is where Labour feels vulnerable. Winston Peters is pointing out NZ First was second in every Maori seat and predicting he will win them all next election. But if Labour implements a radical Maori programme it will lose mainstream NZ.

RUPERT MURDOCH SAYS THANKS
Air New Zealand's annual report (page 32, note 3, unusual items) records the "deferred settlement liability of $NZ47.85 million" that represents "the outstanding obligation to News Corporation Ltd for final settlement in relation to the acquisition of shares in Ansett Holdings Ltd".

Murdoch made a profit of $A240m when he sold 50 percent of Ansett to Air New Zealand in 2000. But incredibly, thanks to Labour’s bailout of Air New Zealand, he is now owed an additional $A40m.
That's new Labour for you. No money for hospitals but plenty to bail out a multi-billionaire. No wonder Qantas wants to get into the trough.

A WICKED PLAN
The government has sought PR points for adding National's Nick Smith to the junkets of Ministers, officials and NGOs who went to Johannesburg. The invitation to Nick Smith blunted any National criticism of the expensive circus but they were staggered to learn the government not only didn't meet Smith’s expenses but also suggested the Speaker change the rules so Bill English could pay for the trip from his 'leader's fund'.
The Minister of Defence has invited National's Richard Worth to accompany him to commemorations at Gallipoli on the same basis. It's a clever ploy. Ministers can invite National MPs to accompany them on overseas trips to give them protection from probing questions.

The Opposition is silenced, and best of all, National pays from its own research vote.

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