Editorial: Smiles won't see us through

PHIL REID/The Dominion Post

ALL SMILES: The Dominion Post examines John Key's first 11 months as prime minister.

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Today The Dominion Post examines John Key's first 11 months as prime minister in its Insight section.

It is a period that has been dominated by the worst economic conditions internationally since the Great Depression. National's pre-election proposals to regear the economy have been swamped by a need to keep it afloat.

It is a period that has also been marked by the sunny disposition of the prime minister. No matter the problem, Mr Key remains cheerfully upbeat. It is a disposition voters like. The latest TV3 poll put Mr Key's personal rating at 56 per cent, almost 12 times that of his Labour opposite, Phil Goff.

But, with the worst of the economic crisis behind us, it is time for the Government to focus on honouring pre-election pledges to stem the outflow of young Kiwis to Australia and to close the economic gap between the two nations.

The economic crisis has done the first. Statistics New Zealand figures show a significant drop in the number of Kiwis departing on a long-term basis this year. But the trend is temporary. Not even National has dared to claim the credit. It is a product of the international economic downturn. Overseas job opportunities have dried up. Meanwhile, the Australian economy has continued to grow apace. The gap between the two countries is not narrowing. It is widening.

For this Mr Key cannot be blamed, any more than he can take the credit for the slowing departure rate.

He and Finance Minister Bill English have shepherded New Zealand through the economic crisis as well as could be hoped for. Thanks to the reforms of the late 1980s and early 90s, New Zealand is emerging from recession with higher levels of employment and lower levels of debt than most other developed nations.

But there is a pressing need for reform. In the next four years the Government is going to borrow the equivalent of $250 million a week to maintain services that cannot be funded from falling tax revenue. Debt servicing will be borne for at least a generation.

That is not a process that should be sustained a day longer than necessary. Mr Key's Government has tidied up the Resource Management Act, tinkered with Labour's emissions trading scheme, capped future spending increases and established expert teams to review tax law and suggest ways of increasing productivity.

But there has been little indication to date that it is prepared to take the tough decisions required to shift New Zealand on to a faster growth track. In fact there is considerable evidence to suggest it may shy away from those decisions. Mr Key shows every sign of liking being liked.

Pension reform and changes to the middle-class welfare Working for Families scheme have been ruled out and he has shown little enthusiasm for tackling the biggest structural problem with the economy – the tax-free gains available to housing investors that provoke periodic bouts of inflation and discourage investment in productive activity.

Mr Key should be aware, however, that his long-term popularity will be determined by the state of the economy. Voters will not thank him if he burdens the country with crippling debt because he put poll ratings ahead of the country's long-term interests.

- © Fairfax NZ News