Getting the message on a growth plan

Last updated 12:13 05/07/2012

Austerity drives are so 2011. A drive for growth is much more 2012. And there are strong signs the Government is getting the message.

John Key would have heard the new tune being played in Europe during his recent visit, and his senior ministers can hear the strains here, too.

Unless their political instincts have deserted them, they will be alive to the potential dangers closer to home,  to the economy and their futures in the Beehive, from the expected long low-growth grind ahead. 

Without light in sight, confidence can quickly evaporate. Recent surveys have not been encouraging in that regard. And where confidence goes, votes quickly follow.

Of course, recognising the mood change is a million miles from throwing open the chequebook to stimulate the economy. But it does suggest the Government is waking up to the need to shift away from its belt-tightening refrain and start humming confidently about promoting growth.

That has become the new norm in Europe, since the election of President Francois Hollande in France, and the mood shift that started in Mediterranean countries is filtering further north, even into Germany.

Closer to home, Labour - and in fact the wider Opposition - has been stepping up attacks on the Government's growth programme - or absence of one.

While Labour's recipe is far from populist, and is only making incremental inroads in its polling, it can rightly claim an agenda that is big-picture and far-reaching. By anyone's measure you could never describe a capital gains tax, significant changes to monetary policy, a big push on savings, more for research and development and a long-term plan to lift the state pension age as mere tinkering.

In contrast the Government's regime, led by Finance Minister Bill English with Steven Joyce riding shotgun on the MoBIE ministry, has been incrementalist.

Mr English would deny he never oversaw austerity here - or at least he would argue it was austerity-lite, NZ-style. But ask any minister what steps have been taken to promote economic growth, and you will probably get a list of small ''r'' reforms led by the 90-day probation period for new employees.

That softly-slowly approach is unlikely to change, but expect the Government to package up the next round of largely microeconomic changes and sell them hard.

Over the next four or five months there will be a series of public discussion documents and proposals looking at measures with ''an unashamed emphasis on growth''.

It is a phrase road-tested by John Key, but it echoes the words of UK Conservative Chancellor George Osborne in successive budgets. New planning rules in the UK are also being sold as ''unashamedly pro-growth'', raising the hackles of environmental lobby groups.

There are clear parallels in New Zealand, especially around the impact of planning laws on the availability and of affordable of housing. Opponents may see them as shortcuts, but the Government is watching closely  and learning - from the lessons of the Christchurch rebuild.

At its core the issue is about how far ''a presumption in favour of sustainable development'' becomes a bias toward growth and development at the expense of the environment.

Alongside planning rules, expect the Government to scope a raft of other changes too. So look for potential changes to the Resource Management Act and local government practices, regulations controlling water use and quality, greater promotion of financial markets (not just through asset sales but also a review of the unlisted market rules), a stronger push to ensure the right infrastructure is in place - especially roads and broadband - and moves to address the cost and availability of housing.

There are other pressures in play too.

As the books move toward a Budget surplus from next year, the Government may face calls for help from middle class households squeezed by rising costs and potentially higher mortgage interest rates.

With all forecasts pointing to a long period of what Mr English calls ''grumpy growth'' that will dictate a ''slow grind'' - another of his favourite phrases - the next two years will be no time for the Government to be caught short of a growth plan.

The polls are suggesting Mr Key is already in a tight race, so he cannot risk being typecast as the guy whose only ideas were cutting and managing, with no fresh ideas to win the promised ''brighter future''.

Because in the end, getting elected is so 2014.

Follow Vernon Small on Twitter.

- (Live Matches)

Post a comment
Field Marshall   #1   01:26 pm Jul 05 2012

Mining. Mining. Mining. Dams. Dams. Dams. Houses. Houses. Houses.

And when the Labour lead left, the Greens, and the Mana Marxists go out and have their public temper tantrums marching and screaming for the tv - John Key will announce that he will overturn the Anti-smacking legislation.

Remember that here's still huge votes in the smacking vote!

B   #2   01:34 pm Jul 05 2012

The word 'growth' needs to be used with more care. As the utopia of economists steeped in theory that is decades out of date, it means an increase in GDP, itself a worthless measure of progress or wellbeing. Even using GDP per capita would be an improvement, but really we need new measures of wealth, health, and well-being that recognise the finite limits of our lonely planet. 'Growth' is so 1960s, pre-Ehrlich. Growth in GDP is now as positive as growth in your waistline, or in your overdraft, or a growth on your liver. It is economic cancer.

There is another kind of growth that is the basis of New Zealand's wealth, and indeed the wealth of humanity for all but the last few hundred years. It is based on solar-powered cycling of carbon, hydrogen and oxygen through living systems. It is seasonal and cyclical, not monotonic, and it is balanced by senescence and decay. With modern technology we can add a wide range to the forms and benefits of such growth, but only by maintaining the same principles.

Stella   #3   01:45 pm Jul 05 2012

What most people largely don't understand is that growth is equivalent to DEBT!!

When someone invests $1000 in a bank, that bank is allowed to loan out a further $9,000 because of the 10% fractional reserve.

The bank has just grown the economy by loaning out $9,000 that it doesn't really have. That growth is equivalent to the debt now owed to the bank.

This is why we are getting into so many problems. The rate of "growth" or debt creation in relation to the amount of real money in circulation is not sustainable in the long run.

In short the banks are using a 10% reserve to create 90% of debt which is in return being paid back with real hard earnt money (plus interest).

We are all led to believe that growth is a good thing. The truth is it may be our downfall

Mike   #4   04:12 pm Jul 05 2012

Field Marshall #1 Key will flip plop on smacking? Well that wouldn't surprise he was for the anti smacking bill but hell when it comes to votes he stands for anything - I'm pleased we agree on that one after all it is fundamental to them being the no ideas no vision party - hey Kimbo field has seen the light open your eyes my friend. Cheers

Alan_Wilkinson   #5   04:38 pm Jul 05 2012

"you could never describe a capital gains tax, significant changes to monetary policy, a big push on savings, more for research and development and a long-term plan to lift the state pension age as mere tinkering."

Of course it is mere tinkering. All of it will merely increase our existing problems of excessive bureaucracy, inefficiency, stagnation and size of Government.

pd   #6   05:29 pm Jul 05 2012

The only way to have growth without debt is to encourage expansion.

Only way to achieve this is to give people reasons to succeed. Why tax people for being successful? Tax unrealised gains on shares yes but not dividends. Why tax interest which encourages savings? Why pay or incentivise people to have too many children which just creates poverty? WFTCs and DPB should go by lunch time. Why tax people for earning more and give to people who contribute less? Why pay for someone's sickness benefit when that sickness is substance abuse.

And yes we need to look at mining etc provided the environment is not raped.

Alan   #7   05:51 pm Jul 05 2012

A NZ Government needs to unwind all its existing spending programmes and have tax cuts from the bottom up. NZer's should make their own decisions rather then stinky Govt of any hue. A taxfree threshold of 20000. A reduction in gst back to 10% and the introduction of a capital gains tax would help. And raising incomes from the bottom up by 30%. The biggest problem in NZ is no one seems to understand the meaning of REAL PRODUCTIVITY. Education and wearing a suit will not increase PRODUCTIVITY. Listen up people daily living is a struggle if you have a real job and real productivity but no one seems to care about that anymore. The suits are in control. The rich have already inherited NZ and the battlers will never be listened to. If you are a vulnerable person you will never be considered under a government He leads. The wealthy will continue to take take take.... its all they know.   #8   07:13 pm Jul 05 2012

Vernon - "" The polls are suggesting Mr Key is already in a tight race, so he cannot risk being typecast as the guy whose only ideas were cutting and managing, with no fresh ideas to win the promised ''brighter future''. Because in the end, getting elected is so 2014.""

And he's lucky that paper boys can't vote . Now, the poor little blighters got the tax man swooping down on them as they peddle and deliver their way towards that ""Brighter Future"" .

Yes , this Gov is happy to crib and cut , getting folks annoyed , to save very little . Axing TV-7 , is the perfect save only 16 million p.a. ( a few hours of foreign borrowing ) . Will lose far more votes than they thought.

Nats have some good stuff - eg 90 day law - but too much tinkering and reluctance to be forthright /principled - except on Asset Selling. That is just wrong , unpopular , and would always cost them the 2014 election. A centre-left bloc lead by David Shearer will prevail.

Main thing wrong is their privatisation agenda.....much lined up to be sold off. And sweet deals for the upper set - eg megabanks and foreign corporates . And the police-state laws they've been passing. While Labour's ETS system is worse.

B #2 - well said , but Growth is supposed to be increase in GDP per Capita , in Real terms ( allowing for price inflation ). But often meaningless when folks can't afford to buy what the country produces - eg USA , which has about a 3 billion dollar $ buying gap in its money supply. And oil doesn' t make average Nigerians rich , just polluted.

Stella #3 - officially , growth is not debt , and the fractional lending system has changed. Banks could multiply money like that once.....not now for most.

Stella   #9   11:15 am Jul 06 2012 #8

I'd be interested in hearing how its changed.


Mike   #10   05:18 pm Jul 06 2012

I think it fair to say that the Labour lite approach of tinkering will ultimately be their downfall and Labour will then be in a position to introduce policies that are more than tinkering. Mr Smal is correct to point out that ' Labour - and in fact the wider Opposition - has been stepping up attacks on the Government's growth programme - or absence of one.'

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