John Bishop's Communications Line October 2008

John Bishop's Communications Line October 2008

As the financial and credit crisis worsens and widens it is starting to affect the outcome of the New Zealand election. It’s happening in three ways. One is the increase in uncertainty among investors and voters, although it is not clear how this will translate into voting behaviour.

Secondly there’s the response from the main political parties or rather the lack of response. None have put forward any measures to maintain confidence or reverse the recession or to make credit more available, although other governments have done some or all of these things. Thirdly it creates an opportunity for Labour to frame the economic debate in a way that makes it easier to defend their position as reasonable and responsible and National’s as irresponsible and risky.

The election’s started

For me the election proper started yesterday with the release of the Treasury forecasts and the first real battle will start tomorrow when National spells out its tax policies.

National says its proposed cuts are affordable, but the justification has shifted. It’s no longer the return of a falsely withheld surplus to overtaxed and hardworking New Zealanders. Bill English now uses Keynesian language of “keeping the economy moving, and that the tax cuts will be “growth enhancing”. Michael Cullen sounds like a fiscal conservative attacking “borrow and spend” policies when “savings and investment are preferable.”

Westpac in their commentary on the PREFU said ”For the incoming government, the implications of the deterioration in the fiscal accounts are clear: big election promises, whether increased spending or additional tax cuts, will mean tough choices and tradeoffs ahead. In the very least, a re-prioritising of policy plans will be required. That said, the deterioration in the fiscal position needs to be kept in perspective. New Zealand's fiscal accounts remain the envy of many other OECD economies - debt levels (even in the Treasury's worst-case scenario) remain low by international standards.”

In other words both National and Labour can draw support for their lines of argument from the Treasury forecasts. On the one hand the position is worse than before; on the other hand we are still better off than others.

The forecasts are for a large cash deficit, the first in 14 years and with the deficits to continue (unless policies are changed) for the next ten years. That’s a long way from the healthy surpluses of recent years that enabled National to depict Cullen as a scrooge and a miser. Now he can depict National as reckless spenders who will borrow to finance spending, tax cuts and infrastructure investment (even though he is doing some of the same).

Messy and Bitter

It’s a recipe for a messy debate with lots of figures thrown around. Ultimately it goes to credibility. Who will the public believe? A debate on those terms will suit Labour because the issues of trust and credibility are at the heart of their strategy to destroy John Key and derail National. With National an average of 15 points ahead in the polls last month they ought not to lose from here. And in ordinary times they wouldn’t, but these are not ordinary times. It will be brutal and vicious in a way that I don’t think we have seen since 1975 when Rob Muldoon so successfully rubbished the then Labour Prime Minister Bill Rowling and bribed the country with his superannuation policy. (80% of the ordinary time wage for people over 60 years of age, he promised. The scheme now provides 66% of the average wage at 65 years.

Two deficits

Opening the books yesterday shows New Zealand now has two deficits – in the government accounts and in the balance of payments.

What happened? Did we overspend twice, to paraphrase and misquote Basil Fawlty on discovering he had two doctors in the house? Well yes. Economists are already disagreeing about whether the fiscal deficit and the long standing current account deficit are a problem or not, particularly for the international credit rating agencies. Stephen Toplis at the BNZ says yes, but Cameron Bagrie at the ANZ says no. Whatever’s the right answer, uncertainty increases and that spooks markets and confuses voters.

There are niggling and unsettling signs. Contact puts up its power prices on the day the tax cuts take effect removing much of the benefit. Transfield was going to cut jobs, and although it’s now backed off, AgResearch is still looking to reduce its budget deficit. Jobs may go. There’s a stream of unsettling news from overseas. Talkback discusses whether bank deposits should be insured or guaranteed. So far New Zealand’s not been much affected by the international meltdown of banks and credit. But every day brings the events and the impacts closer. The NZX is down, but business confidence in the NZIER survey out today is up (although the data was collected a couple of weeks ago). A couple of deals in property and the meat industry haven’t gone ahead, but for the ordinary bloke, it still seems very much life as usual. It’ll be a different story if jobs are threatened, if interest rates or petrol prices get hiked, but right now it still (just ) possible to believe that the crisis is something happening to other people in another part of the world.

The Big Political Question

As the sense of anxiety and even doom increases sooner or later Labour is going to ask; whose hand do you want on the tiller? Experienced and known vs inexperienced and risky (and then whisper ‘reckless currency trader’) The margin between the two main parties is large – 15 points on average in the September polls (it was 13% in August) But if you believe that the polls overstate National and understate Labour as The Press’s political editor Colin Espiner suggests, and if you recall how Labour mobilized its massive South Auckland constituency on election day in 2005, then a turnaround is not impossible.

I am with Yogi Berra, the legendary hitter of the New York Yankees baseball team. He famously said: “it ain’t over till it’s over” when his New York Mets team was 9 ½ games behind the leader in the Eastern League and went on to win the title. There is no way that National should gloat until the victory is secured because there is no way that Labour is going to surrender easily.

Attack lines on show

Some of the themes Labour and its allies will use over the next four and half weeks were on display in two debates in Wellington on Sunday and Monday. The first, staged by Radio New Zealand with seven party representatives (No NZF) was hardly exciting, being merely a ninety minute question and answer session with little interaction among the parties. The second staged by the Victoria University Debating Society as a proper debate between two teams of politicians was more informative and more entertaining.

Some observations:

The Labour and Green attack lines were grounded in the past – what National did under Richardson and Shipley – and in conspiracy – Brash, a secret agenda and the Exclusive Brethren

National isn’t pushing home its own attack lines about the nanny state, mass migration to Australia, and a tired government you can’t trust

No one is talking about prosperity – the knowledge economy, the third way, restoring living standards to the top half of the OECD (once upon a time a goal of the Labour led government) didn’t get a mention from any party

The word of the campaign is infrastructure – all the politicians agree we need more of it.

Just as an aside, it’s interesting to observe how the same idea uttered by different people gets a different reaction. In the Radio NZ debate ACT’s Heather Roy said families could and should decide for themselves what is best for them. She got boos, hisses, jeers and laughter. When the Maori Party’s Rahui Katene said Maori were seeking self reliance, neither laissez-faire nor state interference, but whanau and iwi control of their destinies, there was respectful silence. It’s the same sentiment isn’t it? Partisanship manifests itself as denigrating people rather than debunking their ideas.

Make the Americans pay

While some think it ironic that the American taxpayer is bailing out its (failed) capitalists under a Republican and supposedly pro market forces government, the fear of the alternative – some kind of global financial meltdown – has proved to be a powerful argument.

I think it is also putting the costs squarely where they belong – with the Americans. For far too long their economy has run huge deficits and they (like us) have financed their lifestyles on the willingness of the rest of the world to lend them money. A decade of easy credit there (and here) has encouraged bad decisions in an environment of lax supervision.

If the US economy had been more in balance, and if credit had been a bit harder to get, at least some of the rash speculative activity of the last decade would have been choked off – whatever one’s views about supervision of the banks and corporate behaviour generally. It therefore seems appropriate that the US, which has consistently refused to rectify its economic position, should now have to pick up a large bill for its reckless consumption over the last two or three decades. The worry is, of course, the consequences and fallout that the rest of the world will have to endure as a result. There has to be a reaction in America; just what that will be is not clear to me, and is – so far at least – not a topic which our media has discussed.

40 dead – what’s your response?

Marriott Hotel’s crisis plan has had three workouts in the last few weeks – two involved hurricanes in the Caribbean (Gustav and Ike) and on 20 September a terrorist bomb attack in Pakistan. The plan worked. The good news/bad news result is that everyone knew exactly what to do, VP of communications Roger Connor said.

Fast response, regular updates and an established crisis plan were the key. As part of the plan five teams gathered at Marriott International’s corporate office in Bethesda, Maryland, in 30 minutes of the explosion. Connor explains:

1. The research and writing team is responsible for being in touch with the incident location and or writing the initial statement within 15 minutes and then something more explanatory within the first hour.

2. The media team receives info from the research and writing team and uses it to communicate with the media.

3. The internal communication team gets information to employees.

4. The community relations team is responsible for communicating with the Red Cross or FEMA or other outlets associated with the given crisis.

5. The logistics team sets up the “war room,” making sure the team has laptops, BlackBerrys and all other necessary tools, technology and snacks,” a report in Ragan Daily Headlines says.

“We have what we call the first 10- to 15-minute response, and then we have the first-hour response—and we have a first-hour document,” VP of Communications Roger Connor says. “It’s not something real thick that would gather dust and be hard to get through, it’s a one-pager and it has about 10 or 12 action steps on it, and the people or teams that are responsible for doing each, all within the first hour.”

The responses were posted online beginning with an expression of regret from the chain’s owner Bob Marriott. Further responses were posted online. “And (that approach) seems to be well received by the media. By the time the media got to me, so I could provide a sound bite, most of them had already seen our response and Bill Marriott’s comment.”

Connor says a crisis plan “should be short, and should identify the key people who should come together right away, and who they should reach out to, with all those people’s phone numbers and e-mail addresses, and the action steps that all those people should be taking in the face of the crisis.

See http://www.ragan.com/ME2/Audiences/dirmod.asp?sid=&nm=&type=MultiPublishing&mod=PublishingTitles&mid=5AA50C55146B4C8C98F903986BC02C56&tier=4&id=91B34AD7F33643A2A1844267E47C30FF&AudID=3FF14703FD8C4AE98B9B4365B978201A

Are you a Purple?

US pollsters have rediscovered a group of voters who are neither red (Republicans) nor blue (Democrats). They are called “the purples”. They are political independents; active, interested and they are about 24% of the population and the new battleground in the McCain/Obama campaigns.

They don’t share the beliefs of either of the other two blocs. According to the Newsmax report of the study (by well known pollster John Zogby and the Annenberg School for Communication) “purples”:

worry about the economy and oppose the Iraq war. 80% think the country is on the wrong track and 70% think the war has been a waste of American lives

see politics as local – 58% prefer hometown papers over national dailies and they watch television (NBC in particular and they trust Tom Brokaw, the NBC newscaster)

watch SVU, CSI, 60 Minutes, House and Two and Half Men, and sports but not reality shows. Letterman and Leno are strong late night but 25% are asleep by then

believe rock and roll will never die – 30% listen regularly to Classic Hits stations

use Google (69% over Yahoo’s (51%), and they surf for news, but they aren’t swayed by celebrities (87% say celebrity endorsements are a turnoff) Oprah is an exception.

are happy – 87% are satisfied with their lives

don’t trust politicians, Washington or corporate America, but they are

compassionate, green tinged and support migrants and working mothers. They are also split evenly on guns, the role of religion in public life, and free trade

support security over liberty and freedom over equality.

They are paying more attention to national politics than four years ago. They want to be involved in decision making, but they find excessive partisanship a turnoff. This is a group which can be motivated to vote, provided they are approached in the right way with messages they like by people they find credible. I don’t know of any comparable study in New Zealand, but I am sure that there are people who will see themselves as local equivalents of the “purples”, people who want, work for, and hope for a better world, but without having any massive belief that any one person, party or policy will deliver it.

Use Hillary to beat Obama

A message from a Republican fundraising committee says McCain has to use Hillary Clinton’s tactics to beat Obama. The email solicits funds, but here’s the interesting bit;”

When Hillary exposed Obama publicly, her campaign saw a major turnaround. Hillary then won every major state primary in the nation with the sole exception of Obama’s home state of Illinois.

And even though Obama was “anointed” by the media and Democratic elites, Hillary went on to win eight of the last 10 Democratic primaries. How did Obama beat Hillary for the nomination? Well, using a loophole in Democratic rules, he was able to rack up large majorities in caucus states where he outspent and out organized her.

But in large, contested states she won almost every time. Why? Because when Democrats heard what Obama really stood for, they turned on him. Make no mistake about it: If we let Americans know the truth about Obama, John McCain can win this election!”

That’s partly what Plain’s attack on Obama’s radical mates is about, but it risks retaliation in kind. Obama has already replied with www.KeatingEconomics.com, a website on McCain’s involvement in an influence peddling scandal involving a McCain benefactor and a savings and loan company that collapsed owing over $2 billion.

Read about Wellington

For a take on matters on moment in Wellington read my weekly column at www.wotzon.com

A final thought

More parents are living with their kids. In the 1990s, your family came for dinner. Now they're moving in, according to a report in Levene Breaking News. “The number of parents, siblings and other relatives who live with adult heads of households grew 42% from 2000 to 2007, according to data from U.S. Census Bureau. Leading the way: parents, up 67%, to 3.6 million.

ENDS

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