Dann on Labour’s monetary madness

March 4th, 2014 at 10:00 am by David Farrar

NZ Herald business editor writes:

Cunliffe and his quietly spoken deputy David Parker seem determined to turn away a large and valuable chunk of the electorate – the business community.

Positioning yourself so far to the left that you don’t think business is worth fighting for is not a strategy that has worked for since Norman Kirk. The Lange government took business with them, the Clark government at least convinced business that it represented a tolerable and temporarily necessary change.

A begrudging acceptance of change from the business community, even if most won’t change their vote, is something that reassures the nervous middle classes who do swing their votes.

Helen Clark talked knowledge-wave and delivered a free trade deal with China that has ultimately been our lifeline through the global financial crisis.

What is David Cunliffe offering? A dramatic experiment with a winning formula? A worrying fix for something that isn’t broken?

Labour’s embrace of Green Party policy to reform the Reserve Bank Act is a big stumbling block for the party if it wants mainstream acceptance from the business community.

In almost every policy area, Labour is moving to the left and embracing Green party policies. They’ve done it on tax, on welfare, on monetary policy, on electricity, on housing and almost on mining.

Helen Clark ran a pretty left wing Government. She was replaced as leader by Phil Goff, a former Rogernome. He came out with policies to the left of Clark, such as paying beneficiaries the in work tax credit.

Goff was replaced as leader by David Shearer, a man who once wrote approvingly about the role the private sector could play in defence and security. he went even more left than Clark and the new Goff and proposed effective nationalisation of the electricity generation sector and setting up a massive Government building programme.

Shearer was replaced as leader by David Cunliffe, who was often seen as one of the most centrist or right leaning members of Clark’s cabinet. Just like Goff and Shearer he abandoned his previous beliefs and tried to go further left than Clark, Goff and Shearer by proposing extending welfare payment to families earning up to $150,000 a year.

Each Labour party leader is trying to be more left wing than the one before. That’s great for National, but not great for New Zealand if they ever finally get elected and start implementing policies which nine years ago they decried as lunatic Green Party policy.

Dann focuses again on monetary policy:

The monetary policy reformists are full of ideas about the magic a broader definition of the Reserve Bank Act might achieve. But they ignore the extent to which having one target – inflation – has worked. And just how fundamental controlling inflation is to creating a stable economy on which growth can be built.

Why, when the act has just seen us through such an enormous global downturn so efficiently, would you change it. In the hope it might bring the dollar down?

Well, if you damage the economy the dollar will certainly fall. But it seems a brutal path to take.

And why, if you were going to make changes, would you loosen the shackles during the growth phase of the economic cycle – just when inflation starts to become a serious risk.

We should be grateful we don’t have to make radical changes to our economy. We’ve come through the downturn well, and while National can take some credit for steering the ship, so too can the last Labour Government for the healthy growth it oversaw.

Radical change is for those nations that have run out of options. Let’s leave it to the Greeks.

Some will sneer that Labour should not worry at all about business opinion, as most business people will not vote Labour, and they are not a large proportion of the population. This is true. But Helen Clark found out the hard way in 2000 what happens when you treat the sector that generates pretty much 100% of the tax take as mortal enemies. They plunged in the polls.

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18 Responses to “Dann on Labour’s monetary madness”

  1. MT_Tinman (3,099 comments) says:

    Dann is incorrect.

    Clark did not run a left-wing govt., Clark ran an almost apolitical social engineering government bent solely on power for the sake of power.

    The only real focus of the Clark government was to tell people how they should run their lives (in minute detail).

    This, of course, was English’s problem and then Brash’s problem – fighting basically nonexistent policies.

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  2. Yoza (1,777 comments) says:

    It would be an ideal scenario for a Labour/Green government, once elected, to take the axe to undemocratic forms of economic extremism like ‘The Reserve Bank Act’, the reality is big business will not allow such flippant expressions of democracy. That Labour front bench has been bred to defer to corporate rule, they are not capable of offering anything resembling independent acts of disobedience.

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  3. Harriet (4,793 comments) says:

    Finance types always look at the pattern to help get a clearer picture of things.

    And Labour is going left with the Reserve Bank Act ? – and everything else in general!

    Well ‘left’ is not in any finance type’s list of indicators.

    The NZ dollar ? – ‘junk’ .

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  4. Monique Angel (272 comments) says:

    You’ve got the odd “big business”, in New Zealand Yoza. Nothing like other areas of the world. New Zealand is a tiny economy performing extremely well.

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  5. Nostalgia-NZ (5,097 comments) says:

    At the moment it doesn’t look as though he’ll get elected whether or not he supports business, but the question remains will he be able draw in enough of the middle vote and ‘did not votes’ by being further ‘left’ to improve his chances this election, or even in the following election as he said recently. All said and done supporting business should be without question Labour policy, because we haven’t seen that yet – doesn’t mean it wont happen. This throws further doubt on his statement about the Rena wreckage, saying that he would do all within his power to make the owners remove the wreck can simply later go into the column of can’t be done, because there is no law allowing it but that however new laws will be drafted in the future. So far a lot of the comment has been superficial, the plan isn’t clear however the guess work is – will Cunliffe ultimately abandon the middle or is he looking to gather them in? Is Cunliffe going to be anti business or does he have a plan to unfold? Curia poll predictions look to be remaining accurate.

    DPF has been talking Jones up for the work he has been doing as though it’s in isolation to the Labour party and Cunliffe – I bloody doubt that.

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  6. ChardonnayGuy (1,197 comments) says:

    Sorry, but there’s a powder blue elephant lurking in the room undetected.The Con Party wants an endless stream of binding referenda on its pet obsessions. Referenda cost nine to twelve million dollars to mount. Which raises the question of how fiscally responsible they really are. Or centre right, for that matter.

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  7. cctrfred (42 comments) says:

    There is the possibility that Labour has already decided this election is lost and is focusing on absorbing the Green vote by adopting their policies.

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  8. Nigel Kearney (971 comments) says:

    Clark did not run a left-wing govt., Clark ran an almost apolitical social engineering government bent solely on power for the sake of power.

    Not true. They created a state owned bank and nationalized the rail system, they made plenty of progress towards state control of primary health care, implemented WFF to put a ton of working people on welfare who weren’t previously, made tax payments invisible to most taxpayers etc.

    These are all still in place under National and set to be added to and expanded next time Labour get in. Elections now are basically heads we lose, tails we break even.

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  9. kiwi in america (2,428 comments) says:

    Yoza
    How’s that economic independence (aka socialism) you champion working out in Venezuela?

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  10. Yoza (1,777 comments) says:

    kiwi in america (2,276 comments) says:
    March 4th, 2014 at 11:49 am

    Yoza
    How’s that economic independence (aka socialism) you champion working out in Venezuela?

    Brilliantly, if you were part of the indigenous population terrorized by CIA style death-squads that were a characteristic of the previous US backed regime. I imagine the Venezuelan economy will appreciate the Ukrainian crisis as the price of oil starts to skyrocket.

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  11. MT_Tinman (3,099 comments) says:

    Nigel Kearney you are wrong on several points.

    Kiwibank for instance was set up as a new entity to compete with established banks – a socialist action would have been to nationalise an (or all) existing banks.

    The Labour led government purchased the rail system – genuine socialists would have nationalised it.

    WWF is designed to make working families obligated to the government of the day – a power grab at best.

    I agree with the rest of your comments, making it even more important that ACT has a place in the next government simply to reign the socialists tendencies of the current lot in.

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  12. Nick R (505 comments) says:

    You could pose this question another way: what does Labour get out of trying to court the NZ business sector? They won’t get votes from their own support base. Nor will they get votes from the business sector. As you point out, (a) “business” doesn’t vote, people vote, and (b) people in business overwhelmingly vote National. And no matter what Labour does, the business sector will go into a big sulk if/when Labour wins a general election. That happened last time and it will happen next time. Ultimately the big sulk will pass because the business of business is business. But in general and with few exceptions the business sector doesn’t and won’t support Labour.

    So this leaves centrist voters who might currently favour National but could be persuaded to vote Labour. I suppose it could be argued that such voters might be more likely to vote for a business-friendly version of Labour. But Labour appears to have decided either that those voters don’t exist, or that they are indifferent to the needs or wishes of the business sector. I guess time will tell if they are right about that.

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  13. Cato (1,095 comments) says:

    Sorry, but there’s a powder blue elephant lurking in the room undetected.The Con Party wants an endless stream of binding referenda on its pet obsessions. Referenda cost nine to twelve million dollars to mount. Which raises the question of how fiscally responsible they really are. Or centre right, for that matter.

    This is such a good point. Any column focussing on the leftward drift should always deal Colin Craigs enthusiasm for referendums. Any such column about the Labour Party that doesn’t focus on Colin Craig is either ignoring or missing the central issue.

    I don’t much like Colin Craig and, because his party polls poorly, I don’t tend him much miind. It seems that the only people obsessed with him are the people who oppose him. It’s almost like they NEED Colin Craig.

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  14. SPC (5,563 comments) says:

    Labour fell in the polls in 2000 because of a relentless opposition to it, in the Herald and Dominion, over reform of the ECA.

    Reform of the ECA was in the Labour manifesto they were elected to enact.

    Labour made the reform anyway and were then re-elected in 2002 as a government that kept its word – despite the media campaign in 2000 on the side of business to force them not to.

    Monetary policy reform has already been made without any inflationary impact – proposing further change to the policy of the RB is not that significant of itself. The idea that legislation has to be the way it is for business to have confidence in the monetary policy is an extremist argument, a bit like the ones made in 2000 were. And history has proven how nonsensical claims made then were.

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  15. wreck1080 (3,857 comments) says:

    i’m thinking about throwing in my job in 1 year from now — so, maybe it is a good thing if labour gets in as I will get more money from them.

    Purely from a selfish point of view, but isn’t that the typical lefty?

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  16. SPC (5,563 comments) says:

    How wreck? They will not be increasing the benefit or the AS, so it would make no difference to a person on a benefit who was in government.

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  17. OneTrack (2,981 comments) says:

    spc – “They will not be increasing the benefit or the AS…”

    Are you sure about that? We hear a lot about the Living Wage campaign. Don’t the same arguments apply to those on benefits? That would be “fair”.

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  18. SPC (5,563 comments) says:

    One Track, yep. The benefits are at the same rate adjusted for CPI that they were after Richardson cut them back in the early 1990’s. Labour did not touch them for the 9 years they were in government and Labour in 2008 and 2011 did not campaign on increasing benefits.

    Labour has focused on low wage workers via raising the MW, WFF and now support for good employers paying a LW higher than the MW voluntarily if they can afford to.

    There was the 2011 policy, now discarded, to pass on the WFF tax credit to beneficiaries with children. Now there is only the $60 a week payment paid on a means tested basis to children of a working parent with a child under 3 (and only applying to children yet to be born).

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