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Brash-Report: Labour's Wasted Opportunity

An update from the National Party Leader
No. 35, 28 July 2004

Labour's Wasted Opportunity

In my view, the Government is interpreting the current strength of the economy as giving it latitude to implement legislation which, while clearly bad for growth and bad for workers' incomes, will be politically convenient in delivering gains for its friends and supporters in the unions.

We have recently enjoyed several years of solid economic growth in New Zealand. But it is crucially important that we understand why we have enjoyed that growth.

In part, the good growth has been the result of the economic reforms of the late eighties and early nineties, the policies which the Labour Government have been trying desperately to brand as "failed".

But every economic commentator worth his salt - and certainly the Government's own economic advisers in the Treasury, and the most recent report on the New Zealand economy by the OECD - recognises that it was those policies which have been the main reason for our improved growth performance over the last decade. When talking to overseas fund managers, Dr Cullen usually admits this himself.

In addition, the Government came to office at the end of 1999 at a time when the economy was growing at almost 5% per annum and when the exchange rate, which had started falling in 1997, was falling towards its lowest level in history in late 2000, providing a huge boost to provincial New Zealand - indeed to all export industries.

And then, just as the exchange rate was stabilising and beginning to appreciate, the world witnessed the tragic events of September 11, 2001. What had been a net outflow of long-term migrants from the country of some 10,000 people a year in the 12 months to both June 2000 and 2001 turned into a net inflow of 33,000 in the year to June 2002, and of 43,000 in the year to June 2003. And so a domestic building boom followed the strong growth in export industries.

And on top of this, central banks around the world dropped interest rates to levels never before seen, sparking a worldwide boom in property prices, with New Zealand included.

So none of the reasons for recent strong growth - the reforms of the eighties and early nineties, the falling exchange rate from 1997 to 2001, the huge swing from net emigration to net immigration, and the exceptionally low world interest rates - had anything to do with policies adopted by this Government.

Labour was fortunate to form a government when the economy was in good shape, and was fortunate to inherit solid fiscal surpluses. The favourable environment provided a huge surge in government revenues, allowing the fiscal surplus to grow in spite of strong growth in public spending.

Unfortunately, much of the benefit of this growth has been wasted. The Government has taken too much tax from hard-working New Zealanders; too much of government spending has been pointless, and some of it simply scandalous. You simply could not make up stories that would top what has actually happened - the hip-hop tours, the half million dollar portaloo art exhibit, the tremendous waste involved in second rate educational programmes, and so forth.

We could be doing very much better, and New Zealand households would be much better off if Government stopped wasting their money.

We could be a much safer community if we invested in better law enforcement. We are much too defeatist about crime. Crime is enormously costly to our communities. It can be substantially reduced.

We are too willing to accept the tragic educational failure of about a quarter of the children coming through our schools.

We have put up with outrageous race-related political correctness regarding the Treaty, and have sprinkled the undefined expression "the principles of the Treaty" throughout our legislation, and left it to the Courts to sort out what it all means - to our cost.

We allow the Resource Management Act to slow down development, and increase the cost of getting vital business investment in place, the sort of business investment that will lift all incomes in New Zealand.

We over-tax hard-working New Zealanders, making family life a struggle, while the punitive lift in the top personal tax rate in 2000 has accelerated the flow of talented high income people out of the country.

The Labour Government is, in short, keeping New Zealanders poorer than they should be.

But of course it could be worse.

We could start going backwards, we could start unwinding the reforms of the past fifteen years, the very reforms that have helped New Zealand prosper in recent times.

And unfortunately that is precisely what this Government is intending to do.

They tried just that in their first-term attempt at labour market re-regulation, but were to a large extent blocked. Now they are having another go.

Major changes to the Employment Relations Act are currently being pushed through Parliament by Labour. These changes are substantial. They will put the union movement, previously simply favoured by the 2000 Employment Relations Act, firmly in control of New Zealand's industrial relations landscape.

Make no mistake; this is Labour's big pay-off to the unions. All the other changes they have enacted, from the amendments to the Health and Safety in Employment Act to the Employment Relations Act itself, are trivial compared to the impact that this piece of legislation will have if passed in its present form. The Bill is designed solely to increase union membership and dominance in the workplace environment.

The effects of the amendments will be dire. The way employers and workers have dealt with each other for the past 13 years will change markedly.

The rights of workers will be undermined.

The rights of employers will be undermined.

The only winners will be Labour's funders and election foot soldiers, the unions.

National will be fighting this legislation all the way.

Last Friday I gave a major speech on this subject, the full text of which can be found here

Don Brash

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