Fran OSullivan: If Labour thought 2021 was tough…


“There is a time where the job of the day for the Finance Minister is paying back debt.” That message was not from newly minted National finance spokesman Simon Bridges assailing Grant Robertson in Parliament. Nor from newly minted National leader Christopher Luxon for that matter.

It was from former leader and Prime Minister Sir John Key to the NZ Taxpayers’ Union, which put a GIF out through its social media channels inviting a debate via responses.

It was a clear signal that irrespective of the state of the nation’s books — which Finance Minister Robertson could have expected to bask in with a few plaudits this week —National will be much quicker off the mark in zeroing in on the weak spots of the Government’s defences.

Key’s acutely timed interventions have been a feature of New Zealand politics this year.

His critique of the performance of Jacinda Ardern and her Government with their Covid-19 response was cutting. But he also put forward a five-point plan for just what that response should be — beating former leader Judith Collins to the punch.

Key went on to dominate headlines where National couldn’t under Collins’ reign, illustrating just what an Opposition leader with more strategic insight married up with killer tactics can pull off.

It didn’t matter that some of Key’s rhetoric was off-base. He dominated the debate and forced Ardern to sharpen up.

He also put a giant short under Collins’ leadership; his move was mortifying for her.

Key has again hit on a developing nerve.

As The Economist recently noted, governments have spent US$17 trillion ($25t) on the pandemic, including loans and guarantees, for a combined total of 16 per cent of global GDP. On current forecasts, government spending will be greater as a share of GDP in 2026 than it was in 2006 in every major advanced economy. The United Statesis about to put US$1.8 trillion into expanding its welfare state; Europe is doling out a €750 billion ($850b) investment fund; and Japan is promising a “new capitalism”, with even more government largesse.

And so it goes on.

Robertson this week signalled more new spending in his 2022 Budget, with a $6b boost to new operating spending, mainly for the amalgamation of the district health boards and funding climate goals.

The Government continues to boast a massive Covid Response and Recovery fund. Figures produced this week showed that $57b had been “committed” from this fund to combat Covid-19.

But that fund is not lazy equity sloshing around in the Government’s accounts.
It is borrowed money — ie debt, nudging close to 70 per cent of New Zealand’s annual tax take.

There was more good news, with Treasury again predicting unemployment would continue to fall with the economy back in growth mode in 2023, and expectations that some $10b more than projected in the 2022 Budget would flow through in additional taxation next year.

Robertson can counter the Key argument by saying projections for net debt are nearly $50b lower by 2025 than forecast in his last Budget and that the Budget should return to surplus in 2024. The problem is, Robertson is also increasing the Government’s new spending to nudge record levels.

This is a weakness that National can be expected to probe in the New Year when the party’s newteam comes out from under Key’s cover and starts thinking for itself.

Clearing the decks

In last Saturday’s Weekend Herald I wrote that at Monday’s Cabinet meeting, ministers were set to make a call over which of three options for light rail in Aucklandwould be greenlighted.

The Auckland Rail Group, Auckland Transport and the Mayor’s office, together with other luminaries from the infrastructure sector, had all been primed to “hold the date” for a late-week announcement.

Both Finance MinisterRobertson, who also holds the infrastructure portfolio, and Transport Minister Michael Wood hadtold the Herald the call would be made at the December 13 Cabinet meeting.

On Wednesday, Wood told me Cabinet had deferred the announcement. It did not want to be seen to invite criticism that it was rushing out more controversial decisions before Christmas with little time for debate. The various options were discussed at Monday’s Cabinet meeting and it is understood an in-principle decision is close. But an emerging issue is just how the light rail project and the increasingly urgent proposal for a second harbour crossing will marry up.

National favours the latter project and has been strongly critical of the proposed light rail to the airport via Māngere on grounds of costs and politics (it will run through Labour’s Auckland electorates).

One way of mitigating that criticism would be to present the package as a whole. Not only the CBD to Auckland Airport via Māngere line, but also the second harbour crossing through which light rail traffic would be routed out to a line in the North Shore and beyond through National-held electorates.

Could the Cabinet be that cunning?

The full story won’t emerge until the New Year.

But deferring the finalisation of this decision and the resultant announcement until 2022 is yet another signal that the Labour Government has recognised it can’t just use itsparliamentary majority to ram through multibillion-dollar decisions. There is a changing mood within New Zealand aboutwhether the Government is on the right track.

Already the finalisation of the Three Waters legislation, which strips 67 local authorities of their individual ownership, has been delayed. There is growing discontent about the advancement of a co-governance model with Māori.

Abolishing locally elected district health boards in favour of centralisation by central Government does not sit well with democracy.

“Crash or crash through” may have worked for Sir Roger Douglas and the free-marketeers of the mid-1980s. But if the Ardern administration wants to use similar strategies to play in the “big government” space it has to get the politics right and make the argument for this approach.

These issues will dominate the early part of 2022. But that’s then.

Finally, I wish all my readers and the many businesspeople andpoliticians I have engaged with during 2021 a very fine and safe Christmas and New Year break.

• This column returns on Saturday, January 22.

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