Tuesday, July 19, 2005
Does National really want to win?
Colin James wrote a piece in the Herald this morning explaining National's predicaments should it be able to form a government. I am unable to link it so have summarised it below. It is definitely worth reading and pondering over, despite what Aaron Bhat's thinks. In essence the summary is as follows
1. No party ever wants to lose an election, but if it has to lose one, this might be just the one, judging by the economic forecasts.
2. Economic storms ahead could sink the ship post election.
3. National has a management problem post-election, should the numbers point to a Don Brash government that needs Peters alongside.
Some good economic reasons for not rushing to take office hold now:
* GDP growth is slowing.
* The rise in house prices is slowing. Householders will not be able to borrow much more on the paper value of their houses. So they will not spend so freely. If they start to worry about their debt, they may spend less.
* Oil prices are high. They might ease as world growth eases, but growth in China and India might push in the other direction, and in any case sub-$1 petrol is now only a memory. Other prices will rise, too, cutting retail sales volume.
* The exchange rate is falling which means higher inflation just as growth is slowing - the reverse of the boom spiral of the past few years. Higher inflation means interest rates can't fall.
* Australia is slowing and world commodity prices should ease as world growth slows. Exporters will be less profitable, which is bad news for Auckland in 2006.
* Real wages and salaries will go on rising for a bit, which might offset the forces driving a retail spending fall but will eat into already constrained profits. Investment will slow, which will slow productivity growth.
* Falling profits will cut into Government revenue in the 2006-07 year, just when John Key, if he is Treasurer, would be trying to fund at least one and maybe two tranches of election-winning income tax cuts.
4. Cullen, despite his spending, has kept a fat fiscal cushion.
5. Come 2008, a Brash government would be unlikely to have narrowed the Tasman incomes gap much, if at all (even though Australia is now deregulating its wages). It would need two or three terms.
6. And even that scenario would require a pretty free policy hand. What if he needed New Zealand First?
7. Peters last week told Brash his tax cuts are unaffordable. One reason is that Peters is not a small-Government conservative like Brash. He believes in active Government spending to help the little people - especially old little people - whom he sees himself as representing.
8. To the extent Peters might constrain Brash's tax cuts, household net incomes would be lower and spending lower and profits lower. Closing the gap with Australia would take even longer.
All of the above is enough reasons why National needs ACT (I wrote that, not Colin James!).
1. No party ever wants to lose an election, but if it has to lose one, this might be just the one, judging by the economic forecasts.
2. Economic storms ahead could sink the ship post election.
3. National has a management problem post-election, should the numbers point to a Don Brash government that needs Peters alongside.
Some good economic reasons for not rushing to take office hold now:
* GDP growth is slowing.
* The rise in house prices is slowing. Householders will not be able to borrow much more on the paper value of their houses. So they will not spend so freely. If they start to worry about their debt, they may spend less.
* Oil prices are high. They might ease as world growth eases, but growth in China and India might push in the other direction, and in any case sub-$1 petrol is now only a memory. Other prices will rise, too, cutting retail sales volume.
* The exchange rate is falling which means higher inflation just as growth is slowing - the reverse of the boom spiral of the past few years. Higher inflation means interest rates can't fall.
* Australia is slowing and world commodity prices should ease as world growth slows. Exporters will be less profitable, which is bad news for Auckland in 2006.
* Real wages and salaries will go on rising for a bit, which might offset the forces driving a retail spending fall but will eat into already constrained profits. Investment will slow, which will slow productivity growth.
* Falling profits will cut into Government revenue in the 2006-07 year, just when John Key, if he is Treasurer, would be trying to fund at least one and maybe two tranches of election-winning income tax cuts.
4. Cullen, despite his spending, has kept a fat fiscal cushion.
5. Come 2008, a Brash government would be unlikely to have narrowed the Tasman incomes gap much, if at all (even though Australia is now deregulating its wages). It would need two or three terms.
6. And even that scenario would require a pretty free policy hand. What if he needed New Zealand First?
7. Peters last week told Brash his tax cuts are unaffordable. One reason is that Peters is not a small-Government conservative like Brash. He believes in active Government spending to help the little people - especially old little people - whom he sees himself as representing.
8. To the extent Peters might constrain Brash's tax cuts, household net incomes would be lower and spending lower and profits lower. Closing the gap with Australia would take even longer.
All of the above is enough reasons why National needs ACT (I wrote that, not Colin James!).
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