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Robson-on-Politics September 20 2006

Economic outlook points to tough '08 election

Last Thursday's Reserve Bank forecasts on employment and interest rates over the next two years point to quite a tough economic environment in which to campaign for an historic 4th term centre-left government.

While the underlying picture of rising labour productivity and a shift in the focus of economic activity toward exporting is positive, it will be a difficult message to get across to an electorate that is experiencing the less-than-ideal personal effects of an economy in transition.

Annual average growth in total employment is forecast at drop from 1.5% in the year to March 2007 to zero in the following year, and then recover only to a paltry 0.4% in the year to March 2009. The unemployment rate is forecast to steadily rise.

If unemployment is indeed rising toward 5% during the election campaign in two years' time then that is quite reasonably going to be a focus of the campaign: People won't be impressed, and nor should they be impressed, if the Lab-Progressive government points out that things are better than they were under the last National-led government in 1999 when unemployment was above 6%.


The target for unemployment: zero

Progressive-minded people consider the current unemployment rate, which is the world's lowest at 3.6%, too high. Working people are empowered the further the unemployment rate falls, it is the key social indicator that we should be measuring our success against and one reason why the Lab-Progressive government should take some dramatic measures to bolster the morale of investors and potential investors immediately. The challenge is to take steps now to ensure the Reserve Bank's forecasts don't come to pass.

Labour opposed Progressive's 2005 campaign call to cut the job-creating corporate tax rate on April 1, 2006, but Labour should surrender sooner rather than later on its doomed position, just as it came round on paid parental leave, four weeks' annual leave and Kiwibank: This is a pro-employment, pro-workers policy.


Extentions to holidays, paid parental leave aided by high employment

There is no question that Progressive was assisted in its campaign to win four weeks annual leave legislation against initial bitter opposition from senior Labour people, by the high employment environment. The same goes for the introduction, and later extention, of paid parental leave provisions.

The only future worth having in Aotearoa is as a high-productivity economy, a society with much more generous provision and flexibility for working parents, a society with much higher household savings and an economy in which much more of its production is earning significantly more foreign exchange in overseas sales.

There is no harmonious future in trying to compete on cheap labour costs with the developing world to produce less-elaborately transformed products and services. That strategy, which was what we were dished up in the last few decades of the 20th century, delivered a steady, relative decline in our average living standards, rising inequality, increasing indebtedness to offshore lenders and erosion in the quality of our public education and health services compared with societies that adopted policies to more fully embrace economic success and social advancement.


What is at stake

The Lab-Progressive government has an obligation to New Zealanders to win a 4th term because all that New Zealanders have gained since 1999 is at stake.

A majority don't want a return to the high unemployment strategy of the Right. Kiwis don't want the gains in annual holidays and parental leave entitlements reversed. Most of us don't want a return to the sale of strategic public assets to foreign ownership. New Zealanders, even if they don't use Kiwibank themselves, benefit from the competition to deliver lower bank fees and higher bank deposit rates that Kiwibank has brough into our largely foreign owned banking system. Most New Zealanders like the idea that the government is working side-by-side with industry sectors and regional economies to leverage more out of our competitive advantage on world markets.

But by the time of the next election in two years' time, Kiwis would have had nine years of the centre-left coalition government. There will be parts of the electorate that voted centre-left in the past three elections that will have forgotten what a National-United or National-NZ First government is actually like. First, second and third time voters will, of course, have no memory of what Nat-United-NZ First government actually means.

Left needs to connect with working families' concerns

Raising the alcohol purchasing age to twenty isn't liberal, but it would be a progressive response to the overwhelming view among modest and lower income families that are battling with the negative social effects of the misuse of the alcohol drug among too many very young teenagers. It is the position of the majority of public health experts.

The Lab-Progressive government is deeply in need of getting in tune with the electorate on issues which might not be "liberal," but most certainly would be progressive. It was the last National-led government that caved into the liquor lobby industry on the alcohol purchasing age and it should be this Lab-Progressive government that fixes the problem, and does it very publicly.

With the support of the Maori and NZ First's 11 seats, there is nothing stopping the 51-seat Lab-Progressive government delivering to the people on this public health issue - nothing stopping us other than the so-called liberals in Labour who have got themselves confused on this matter because they somehow think it is an issue primarily about individual choice and liberty when it is actually overwhelmingly about protecting the very young, that is 14 and 15 years olds, from harm's way.

Right's trend vote 42.3%, 45.1%, 49% ...

In 1999, the Nat-NZ First-United-ACT or Right bloc won 42.3% of the vote. In 2002, it won 45.1% and in 2005, it won 49% of votes cast. In contrast, the Lab-Progressive-Green or LPG bloc won 51.6% in 1999, 50% in '02, and just 47.6% in '05.

Two things saved the minority Lab-Progressive government's hold on ministerial office this time last year: (1) The Maori Party won four electorate seats and (2) National's leader did not have the skills to put together a minority National-led coalition, although this second point is of course very closely tied to the wider National Party's complete denial of the Treaty of Waitangi, of the country's history and its future and in particular of its preference to sit in opposition issuing angry press statements than ascend to power and responsibility if that means sharing power and responsibility with other parties, particularly the Maori Party.

The reason LPG wants Don Brash to remain National's leader is because we know that in 2005 the Left lost 47.6% to 49% but, thanks to National's leadership, we still managed to put together a Lab-Progressive government and at least safeguard the progressive legislative reforms put in place in 1999.

But the LPG isn't stuck on Dr Brash. The LPG will support any leader of National who can do the same trick for the Left again in 2008. The very last thing we want is a John Key-Katherine Rich combination, particularly a Key-Rich leadership that says progressive, intelligent things like it might support boosting low income households' savings, that it might support intelligent welfare for sole parents or that it is proud of Aotearoa's dynamic future and its history.

But LPG has to plan for the worst and assume there is a change in National's leadership, perhaps in the New Year. Then we really will have to be smart and responsive to New Zealanders,. We'll need to strongly reach out to the Maori Party and cement relations there and start planning very carefully a strategy to deliver a 4th consecutive election victory by the centre-left for the benefit of all New Zealanders - something we've not seen since 1946.


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