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On Labour’s Fear Of Commitment

For 20 years or more, the case for a meaningful capital tax gains has been mulled over and analysed to death, including by the tax working group chaired by Sir Michael Cullen. More than once, the International Monetary Fund has said a CGT would be a good idea for New Zealand. Regardless, it seems that Chris Hipkins and his Labour Party team will need two more years of careful scrutiny before they might possibly, could perhaps, might conceivably be willing to adopt a CGT as official Labour policy, by around the time that Election 2026 rolls around. We can hardly wait.

As for implementing a wealth tax, or a land tax, or a windfall tax on bank profits.... Even though Labour is allegedly a centre left party that regularly bangs on about its commitment to traditional Labour values… It will want a lot more time to think those things through before embracing any radical options, don’t you know. Can you imagine the ACT Party asking for two years grace to think through its stance on a tax policy?

This reluctance to put a stake in the ground extends beyond taxation. Eons ago, it was the Labour Party that made the anti-nuclear policy part of our national identity. So in 2024.... Does Labour think it would be a good idea or a bad idea for New Zealand to join the nuclear armed and nuclear powered AUKUS military pact, should we be invited to do so? Here again, Labour is only willing to say that it would like there to be a debate. Does Labour think we should also spend a few more billions on the military, in order to re-equip our Navy and bring our defence spending up to say, 1.5% of GDP? Who knows. If you don’t ask, it won’t tell.

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Of course, there is a tactical argument that says Labour should not risk becoming the story, not while the coalition government is doing such a great job of discrediting itself. But that kind of strategizing and second guessing is a big part of why Labour lost last year’s election. Meaning: The Hipkins administration kept treating any policy initiative as a hand grenade that’s likely to blow up in its face, and it now seems to be carrying that same skittish approach over into Opposition. Arguably, it would be preferable for Labour to declare its support for a CGT right now and ride out the usual Big Taxing accusations from the ACT Party in 2024, rather than hide its hand until 2026.

Meanwhile and to date, Labour-in-Opposition has been all but invisible. ( Dr Ayesha Verrall has been one of the few exceptions.) Many voters – and not all of them are on the centre-left - are feeling alarmed about the backwards direction in which the coalition government is taking New Zealand. Yet only the Greens and Te Pāti Maori seem willing to forthrightly propose alternatives. It seems that the Labour Party won’t put forward any policy pitch that hasn’t been carefully Auto-tuned beforehand, in order to ensure that it hits all the right notes.

Footnote: Chris Hipkins’ “explanation” for his newly found openness to debate on taxation (“That was then, this is now”) is depressing, and hardly an inspirational call to arms. The public is sick of politicians who treat their values in this way, as being transactional. Core values are supposed to be eternal.

Recession, at last!

Last August, Reserve Bank governor Adrian Orr was telling US interviewers that New Zealand needed a recession, and in November 2023 he admitted that the Reserve Bank has been doing its best to engineer a recession. Well, mission accomplished. Last week, this country was finally and officially declared to be in recession - having endured two consecutive quarters of negative growth.

What is weird about this situation is the lack of democratic accountability. People worry about things being rushed through Parliament under urgency, and what that means for democracy. Well, that’s the least of it. Our economy has been deliberately depressed by the Reserve Bank, interest rates have been hiked, productive investment has been stifled, mortgage costs have been increased, household spending has been demonised, and thousands of New Zealanders are being tossed out of work. All without the public having any ability to hold those responsible to account – either by approving of these policies, or by voicing their disapproval.

Instead, the worsening economic conditions have been blamed on the previous government – even though the negative outcomes continue to be largely the result of how the monetary policy settings have been managed by the Reserve Bank. Our central bank (a) overshot on its monetary stimulus package during the pandemic and has now (b) overshot in its tightening in the opposite direction – in both cases, without the public having any ability to sanction the panel of un-elected officials responsible for decisions that continue to impact on the quality of life. That’s kind of weird, right?

The “independence” of the Reserve Bank has been deemed to be sacrosanct – so much so that only its outcomes can be criticised, usually with blame being laid at the door of politicians who are officially forbidden to challenge the RB decisions that made those outcomes inevitable. As a result, political debate tends to be narrowly focussed on fiscal policy, although for the past four years, the monetary policy settings - and the reluctance to regulate against the banks and supermarkets that are bleeding the public dry - have been far more significant determinants of our living standards.

Meanwhile, the cult of central banking endures. However, as the London School of Economics said in a paper published four years ago:

“While central bank] independence continues to be protected, its golden age ended with the GFC.... And it did not end gently… The reputation of “independent central bankers was severely damaged by the crisis, removing partially the implicit taboo involved in asking the unmentionable: perhaps central banks should not be, nor should aim at being, so independent after all?

Keep in mind that central banks had - if anything -cheered on the credit expansion that culminated in the GFC. Yet by a combination of luck and good management, the global financial system did not collapse in 2008-2009. The same makeshift collusion between central banks, government and regulators averted an even worse global crisis in 2020, after the pandemic hit. However, the seeds of doubt about the wisdom of central bank independence had been planted.

That doubt is well founded. Here and elsewhere, central banks have zigzagged over whether the inflation/cost of living crisis created by their own 2020 stimulus package would be (a) temporary and self-correcting, or (b) would require major hikes in interest rates to be kept in place for a relatively long period of time. At times, it has seemed that the central bankers didn’t really know what were the causes of the inflation they were treating. Certainly, there were a lot of entirely unfounded fears that a 1980s style wage/price spiral might be imminent, and that only harsh medicine could avert it.

The only evidence that the RB seems willing to accept that its nostrums are working is if there is a sizeable leap in unemployment, with the rest of the economy put under sedation in the ICU ward.

True, a few dissenting voices have been raised. Back in December, Kiwibank economist Jarrod Kerr was urging the Reserve Bank to back down on its threat of future interest rate hikes - and accept that its job was done, before it got to do any further unnecessary harm :

"So, you know, the RBNZ rate hikes are having a big impact on households and we've seen consumption coming off even though there's a lot more people in the economy."The consequences posed a problem for the new government, Kerr said.

"We're basically waiting for the Treasury's numbers next week to get a good handle. But it's going to be weaker than they thought, and it's going to be weaker than what was in the Budget earlier this year.”

In sum, the weakening economy – and the spending cuts that go with it – aren’t simply a problem the coalition government has inherited from Labour. It is the legacy it has inherited from the Reserve Bank.

Maybe Labour could host a “debate” on central bank independence, and do something to defend the workers that are being sacrificed on its altar.

Waxahatchee changing course

Kathie Crutchfield’s career as Waxahatchee started out in indie rock before heading off in an Americana pop direction that at times, has made her sound like a young Dolly Parton. In interviews promoting the new album Tigers Blood, she’s been signalling that may be ready to step back from the treadmill of constant writing/album releases that she’s been on for the past decade. At first hearing, Tigers Blood is not as strong a set as Saint Cloud, the album that earned her a far wider audience.

Here’s “Evil Spawn” from the new album, one of several tracks to feature backing from guitarist/vocalist M.J. Lenderman, of the group Wednesday:

One great idea that Crutchfield has been talking about is re-recording some of her earlier songs. Some personal suggestions: “Hollow Bedroom” from the Cerulean Salt album, “Under The Rock” and “Air” from the Ivy Tripp album, “Silver” and “8 Ball” from Out In the Storm....Here’s “Silver:”

And finally, for hardcore fans, here’s an excellent concert revisiting of the Saint Cloud album, kicking off with the terrific “Oxbow” track, and also featuring at 10.25 what sounds like the definitive version of “Lilacs...” But there’s hardly a weak track on the entire Saint Cloud album:

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