Dann on Labour’s monetary madness

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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