“Bring it on,” the Prime Minister hollered at the conclusion of her speech to the Labour Party conference. Her sloganeering drew a spirited response. Not as electrifying as 2017; the comrades know the tide is running against them.
Although her speech had predictable references to economic storm clouds, she insisted that our cost of living woes are global in origin. With a grin and a wave, the faithful were told there was nothing to see here.
Actually, nothing could be further from the truth. Our inflation is essentially a homegrown condition and borrowers will suffer. The mortgage belt doesn’t want emojis, it wants to see politicians take responsibility.
It is obvious that Labour strategists have decided to give the public a rerun of Saint Jacinda. A modern iteration of the great Redeemer beckoning us to economic salvation. Given the widespread frustration with piddling delivery, political road rage could be around the corner.
Presumably, on this deliverance journey, Willie Jackson will have us listening to the new media Godzilla, the shotgun marriage between TVNZ and Radio NZ. A broadcasting remedy without a malady and an unaffordable preoccupation.
Inflation will not be tamed by kindness and compassion. As all business 101 students know, it is a function of excessive demand and constrained supply. Ministers have fed the former and ignored the latter. They do have the capacity to tamp down demand and unclog many of the supply arteries.
Take for example the paucity of workers. When labour is scarce, costs increase, services are not delivered and goods decrease. The solution is to boost supply, if only temporarily. The Napoleonic indifference from Michael Woods is alarming, he is a regulator and not a solution maker.
The Prime Minister’s fix is to increase childcare payments. A pre-budget announcement, confirming that the election year lottery has begun. However, for stressed employers with orders to fill and customers to serve, it’s a classic example of a day late and a dollar short.
It was galling to hear her intone that she keeps an eye on the horizon and is nimble as a lesson from Covid. Methinks she sees skylines dotted with UN and Nato skyscrapers. Global markets want our food but labour shortages threaten this dividend.
The Canadian government has announced it will target 1.5 million migrant workers and Australia is pitching for 200,000 over 12 months. A shortage of human capital is damaging our economy. We have 97,000 on the dole but they need more than chocolate box welfare to get them work-ready.
The cost of living crisis is made worse by energy expenses; a part of our economy overdue for reform. We will struggle to grow or evolve unless we recover our historic advantage of affordable energy. Such an outcome will not be delivered through the present system. Just maybe, the revamped RMA will facilitate this outcome.
Despite all the clean, green clamour for zero carbon, we still import loads of coal. However, when firms seek to extract more of our own resources, shrieks of climate Armageddon resound. Energy resilience and efficiency are keys to coping with inflation.
Our energy generator firms need to re-invest at a greater pace. A split from their retail arms is inevitable as occurred with Telecom decades ago. Transmission capacity is in dire need of improvement in many regions. Such expenditure should have been prioritised in the divvy up of the ETS tax revenue in the last budget.
These matters will not be addressed over the next 12 months. The economic priorities of the Government are not supply-side. It prefers to put salami on the political pizza, as will be seen next year.
Regulations facing the primary sector are cost-plus. They will definitely worsen mental health, crimp revenue and drive inflation. As the regulatory wall is bricked up, costs are mortared in. Shrinking our primary sector will only benefit our competitors.
Any plan to tackle the cost of living crisis will require both regulation-busting and a deep dive into spending priorities. There are rich pickings in both fields.
The latter however would require ministers to consolidate their work programmes and cease hiring for pipe dreams such as Three Waters. The disintegration of David Lange’s Labour government should remind current caucus members of the perils of politicians riding too many hobby horses.
Ordinarily, a government juggling excessive balls rationalises but not the Ardern Cabinet. Rather, her ministers are adding more balls. including Treaty co-governance in the local government review 2023 and embedding hate speech legislation. These are more political Death Stars hurtling towards the sunlight of election day and projects that epitomise how the Government squandered its political capital. Its priorities are no longer in sync with the public. In terms of economic reform measures to reduce inflation, it is running on empty.
The answers will not be found in the bureaucracy of the Thorndon triangle. That thicket is overdue for a major prune, in both senses of the word. Fighting inflation requires a major reset in the state sector; less working parties and more delivery.
Salami politics, a slice here or there, as evidenced by Jacinda’s bread and circus routine at the Labour conference, will not work. Whilst there are no quick fixes, people need to see a plan, starting with a sound base.
A recipe of reduced regulatory deadweight; rewards for risk; boosted labour access; and incentivised investment and exports is overdue. Bearing away from open-ended welfare and a proactive civil service culture tied to measurable results would be uplifting.
Most of all, we need an end to political deodorisation from the Prime Minister and her ministers. Our fiscal conditions cannot cope with any more dewy-eyed forays into identity politics, de-colonisation, and global posturing. We need a robust focus on economic essentials.
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