The Dom Post editorial:
John Key’s Government came into office in the midst of the global financial crisis. Nobody was expecting things to improve quickly. Most people expected them rather to get worse. Mr Key made no promises of instant gains.
On the other hand, his Government’s management of the economy was a moderate one and did not go for a hard dose of austerity. It reduced the deficit over two terms rather than bringing it back to nothing with a bump. The result was that our economic pain was relatively mild, at least compared with Britain and the United States.
The Key Government’s response to inheriting a structural deficit wasn’t to slash and burn with a frenzy of spending cuts. It was very moderate and middle of the road. Initially some infrastructure spending was accelerated to help soften the recession, and then new spending was slowed down. The extreme response came from Labour who went on the record opposing every single measure of fiscal restraint. They said a cap on public sector employees would be a disaster. They opposed saving money through efficiencies in back office functions. I can’t think of a single act of fiscal restraint that they haven’t opposed.
Now the Government is signalling a less stringent approach to the budget, with increased spending in areas like paid parental leave. It recognises that the voters feel they have done their penance and a modest pay-off is in order.
As we head back into surplus, we gain choices again. Deficits do not give you much choice. There are broadly three things you can “spend” a surplus on – debt reduction, extra spending and tax cuts.
A moderate balanced party will propose all three. I expect parties may disagree with each other about the exact proportions, but the extremists will only push those that fit with their ideology. Will Labour go against the 70% who don’t support tax increases and go into the election only promising tax increases, and not offering any tax cuts?
Labour leader David Cunliffe has not produced a big turnaround in the party’s fortunes, and time is running out.
National’s slogan this year will be some version of “Don’t put it all at risk”, and at present the signs are that it will work. There is not yet a deep-rooted feeling of economic dissatisfaction. There is not yet a widespread dislike of the Government. So the basic competing slogan – “it’s time for a change” – is not decisive.
Labour are promising to expand welfare payments to families earning up to $150,000 a year. Policies like that are what will put it at risk.