Kiwiblog

I have had a fairly benign to positive view of Kevin Rudd as Australian Labour under his leadership seem so much more moderate than NZ Labour. And he cut taxes in his first budget – unlike Helen who raised them, and didn’t cut them until budget No 9.

I was intrigued to listen to Andrew Bolt, talk at length on Kevin Rudd a few months ago, Bolt, was dismissed by a few people here as ill informed because he is a conservative commentator. But what I found interesting is that his criticisms were not that Rudd is left wing, but that Rudd is inclined to ill thought out populist ideas which annoy his colleagues and that he is ill disciplined.

I have to say the more time goes on, the more I regard Mr Bolt as having been very insightful with regards to Rudd. I’m not saying the Rudd Government is pursuing bad policies (overall quite good), and the Liberal Party leadership is near unelectable, so I still regard Rudd as the best choice (until Turnbull steps up anyway). But Rudd’s proposed EU style Asia-Pacific Union seems to be exactly what Bolt was speaking about.

There has been considerable comment in NZ that Rudd didn’t even consult New Zealand over his proposal, which is just plain stupid. Helen Clark has fairly astutely fired a subtle barb back without it coming directly from her lips, as Fran O’Sullivan notes.

Audrey Young also blogs on the issue, and quotes Greg Sheridan:

Sheridan has written an excoriating column this week against Kevin Rudd’s recent forays into foreign policy – after just six months in office. Rudd is just completing a visit to Japan.
It is a column with which Clark may have some sympathy.

”KEVIN Rudd is in danger of turning what should be his greatest strength into a serious weakness,” writes Sheridan.

”I refer to his weird and increasingly ratty habit of announcing foreign policy initiatives of soaring ambition and utterly amorphous content on the run, half baked, with no detail and no credible prospect of success.

”In the past week alone we’ve had Rudd threaten to “take the blowtorch” to the Organisation of the Petroleum Exporting Countries to produce more oil and lower prices, nominate [former diplomat] Dick Woolcott to reform Asian security and trade structures, and now appoint Gareth Evans to head a commission to end nuclear proliferation and secure nuclear disarmament.

”If you announce twice a week that you’re going to save the world and you manifestly lack the means to give the slightest effect to your pronouncements, the world soon loses interest. The chief casualty is your credibility.”

The test for Rudd will be how well he learns from his mistakes.

One of Rudd’s Ministers is Craig Emerson, whom I had the pleasure of meeting last year at CIS’s Consilium conference. He is now the Small Business Minister (a portfolio we could do with here).

He gave an excellent speech to the Sydney Institute two days ago. Some extracts:

… the role of policy makers is to allow the market to create prosperity and out of that prosperity to expand opportunity, not the welfare state. In the market democracy so fashioned, citizens enjoy freedom, self-fulfilment and sovereignty over the state, not subjugation to the state through financial and regulatory welfare.

This is the philosophy of like-minded people whom I call market democrats – the modern Labor champions of the traditional Labor values of prosperity, fairness and compassion. Market democrats harness the power of the market for the public good.

Not a bad term – market democrats.

But as a new recruit to the ALP I again began to ask: is there truly a conflict between self-interest and moral behaviour and is there a conflict between morality and markets? …

But self-interest is not synonymous with selfishness. An athlete is not selfish for wanting to win a tournament, but is self-interested. A singer is not selfish for wanting to win Australian Idol. An artist is not selfish for wanting to win the Archibald Prize, nor is an author for wanting to win the Booker Prize. A scientist is not selfish for wanting to achieve a breakthrough ahead of other scientists.

Athletes, singers, artists, dancers, authors and scientists are self-interested but this does not make them selfish. Some may be arrogant and rude, some selfish, others humble and altruistic, but all are self-interested. Without self-interest, economic and social progress is impossible.

A very useful differentiation between self-interest and selfishness.

Labor was making itself the party of competition and compassion. Out of the proceeds of growth, the Hawke government was lifting school completion rates, supporting the parents of poor children to keep them at school. My moral questions were being answered through the competitive yet compassionate philosophy of the Hawke and Keating Labor governments – a philosophy that sat easily with Adam Smith’s Theory of Moral Sentiments and the Wealth of Nations. There was, I concluded, no inherent conflict between markets and morality.

How nice to have a reference to markets without a sneer, as one would get in NZ.

Competitive markets reward effort, risk-taking and entrepreneurship and they encourage innovation essential to the growth of a market economy. The forces of competition create pressure on businesses to be efficient and to come up with and apply new ideas for application in producing goods and services valued by consumers.

Yet markets are chaotic and wasteful. Predicting the prices produced by markets is always hazardous. Markets force businesses to close, wasting the building renovations and obliging employees to seek work elsewhere. But far more wasteful and chaotic are central planning and governments pretending to be good at running businesses in so-called mixed economies.

In other words markets are not perfect, but they are generally a lot better than the alternatives.

If poverty in Australia is no longer primarily a poverty of incomes but a poverty of opportunity, the goal of a fairer society is best pursued through a more equal distribution of opportunity than through a more equal distribution of income. A nation’s people are not better off if all live on equally low incomes. Of course it is unfair if the rich get richer while the poor get poorer. But why should governments seek to prevent the rich from getting richer if the poor also get richer as a consequence of the wealth creation process?

And he shoots bullets through the arguments of the poverty industry who use a definition which means poverty will never be solved.

Many Australians earning below-average incomes choose to forego higher pay in favour of spending more time with their families and friends or just relaxing or playing sport. By doing so they are making measured income inequality worse but, through free choice, they are making their own lives better.

Indeed. And incomes are also very tied to age and experience. Demanding that an unskilled 19 year old should be earning 60% of the average wage of 40 and 50 year olds with 20 – 30 years experience is madness. It is about opportunity.

The goal of market democrats is prosperity and fairness through opportunity for all in a market economy. Market democrats strive for a more equal distribution of opportunity. If opportunity is equally distributed, incomes in the future will be distributed more equally. Prosperity and fairness become partners not rivals.

I like how Emerson can say what I think, but state it so well.

But for those out of the workforce who have income-earning prospects, perpetual income support payments without any effort to remedy the causes of disadvantage are not the pathway to a prosperous, fair society; they are a perilous road to welfare dependency, low self-esteem and servitude to the state.

When was the last time a NZ Labour Minister spoke about welfare dependency?

Seeking to use industrial muscle to gain pay rises in excess of productivity growth is inflationary and ultimately self-defeating. Modern unionism can involve offering a bundle of services that are attractive to members. These services can extend beyond representation in workplace bargaining to support for lifelong learning, financial, tax and legal advice and advice on superannuation, private health insurance and even personal counselling services.

A wonderfully clear statement that The Standard will hate. Pay rises without productivity growth lead nowhere.

In a market democracy governments should serve the people instead of seeking to subjugate the people to the will of government through high taxes and heavy regulation. By allowing markets to reward hard work, risk-taking and entrepreneurship without unnecessary interference, market democrats advance
freedom and self-fulfilment.

Serve not subjugate.

Market democrats think of markets first and, only where necessary, strengthen or complement markets with efficient regulation. In a market democracy, regulation is justifiable in strengthening markets and remedying market failure.

Exactly, regulation is basically a last resort. Which is why I supported it in telecommunications. There was massive and clear market failure after 15 years of waiting. But it should always remain the last tool, not the first tool, that Governments reach for.

But the previous conservative government thought of regulation first, presiding over what the Business Council of Australia describes as the creeping re-regulation of business. This is why, in a process initiated by Kevin Rudd, Lindsay Tanner and I are so vigorously working with the States and Territories in cutting back overbearing, inconsistent and overlapping Commonwealth and State business regulation.

While in NZ we get review after review of the need to reduce regulations ignored by the Government

Now not everyone in Australian Labor shares his viewpoint. But my God wouldn’t it be nice to even have a single NZ Labour MP who gave speeches like that.

Michael Cullen has ruled out making the first few thousand of income tax free. This is a pity because I think there is a strong case that there should be no tax on your income until you are earning more than the minimum amount you need to live on. The welfare system then tops people up to that minimum standard, but it is significantly wasteful to tax people just to then give them that money back as welfare.

In Australia the first $11,000 of income is tax free, and by 2012/13 the first $20,000 will be tax free.

So what does this mean for someone earning say $40,000. Well in NZ you $8,070 of tax which is an average 20.2% and this has not changed since 1999. Now in Australia it used to be $9,802 in 1999 which is an average of 24.5%.

But Peter Costello, and now Kevin Rudd, have shown what you can do if you reduce tax just a bit every year. In 2012/13 someone earning $40,000 in Australia will pay only $3,400 of tax – an average tax rate of 8.5%.

So because Michael Cullen has refused to reduce taxes until forced to at near gunpoint, the NZer on $40,000 who used to pay $1,800 less tax than an Aussie, now will be paying around $4,500 more by 2012/13 – less whatever he announces in the budget.  But it is hardly going to close the gap he has allowed to grow.

Kevin Rudd has confirmed he will deliver $31 billion of tax cuts, as promised before the last election.

He is also trimming $1.3 billion off the government bureaucracy.

He ruled out blowing other savings on quick-fixes and handouts, saying it was time Budgets looked beyond the next election. “I am determined that this Budget won’t be another one-year wonder,” he said.

It will be interesting to compare the two budgets this month.

The cost of running the Government has soared in recent years. The lack of basically any fiscal restraint has seen staff numbers in the bureaucracy explode, with subsequent flow on effects on property prices in Wellington – both commercial and residential. One property investor told me that thanks to Labour has had made $400 million since they came to office, as the demand for more office space has sent rents up up up.

Now Gerry Brownlee has done a release on a great example – the Electricity Commission. This was set up by Labour. We didn’t use to have one. We survived many decades without one. Policy was done in the Commerce and now Economic Development Ministry. But a standalone body was needed to help with better planning. Never mind that every second year we are having “one in sixty years” power shortages.

So how much is this small little quango costing? Well in the last financial year it now costs $80 million a year. Want to know why power prices keep going up? Part of it is to fund the Electricity Commission – around $50 a household.

Another great example is the Tertiary Education Commission. For many years we never had done. The universities were basically self managing, and the Ministry of Education had maybe a couple of dozen staff in the tertiary sector. Labour set up the TEC and its initial years can only be deemed a miserable failure. Rorts involving low quality near worthless courses cost the taxpayer close to a billion dollars – and all on TEC’s watch.

And what has TEC cost? In the year to 30 June 2007 it was around $60 million. So these two new bodies are costing $140 million a year. Now this is not to say there is no value in what they do. But what has been so woefully missing is a hard tough look at value for money. A new Government should take a zero based approach to some Government spending and make sure existing spending is necessary, before even considering additional spending.

And no that is not some mad far right slash and burn policy. It is exactly what Labor PM Kevin Rudd is doing in Australia. Sadly it has been sorely lacking here.

One of the pleasures of attending the NZBR Retreat was meeting Andrew Bolt, who gave a superb talk about Kevin Rudd. Andrew is a former Labor staffer (and still good friends with several Labor Ministers), and now a columnist and blogger. His last book was “Still Not Sorry” which gives a clue as to his current views.

Andrew gives me a small plug on his blog.

His talk on Rudd was fascinating, as it was flavoured with a lot of inside info from within Labor.  Also discussed the current Liberal Party which is looking very very dismal. I predict they will allow Nelson to lose the next election then Turnbull will roll him.

The funniest thing was when I first met Andrew.  He was furiously trying to calculate something on a large pad, and was down to around line 30.

Upon enquiry I found out he was trying to work out how big China’s economy will be in 100 years time if it keeps growing at 10%.  So he was calculating it manually line by line over 100 years.  The look of relief on his face was palpable when I said I had a laptop with excel on it – took around 30 seconds.  I think he had spent 20 minutes already on it! Still good to see someone who knows how to do maths the old fashioned way.

The suggestion of a common or harmonised carbon emissions trading scheme with both Australia and NZ is to my eyes a good one.

Australia is our largest trading partner, and having us implement such a scheme without Australia doing similar always risked increasing their relative advantage over us. If Clark and Rudd can give priority to have a harmonised scheme, this should be beneficial to both countries.