AT ONE level, John Key and Bill English said very reassuring things to the nation last weekend when they spoke at their party conference.
Who wouldn't want slightly lower taxes, a bit more discipline in government spending, only a tad more government debt, a touch more private sector infrastructure and a little less regulation?
At a deeper level, though, their 24 pages of speeches were troubling. Crucially, the men who are potentially the next prime minister and deputy made scant reference to the fast-changing world and New Zealand's role in it.
That's not a narrow, though important, question of foreign policy. Rather, it's the fundamental one of New Zealand's engagement with the world economy in two respects: the impact on us of the biggest global financial crisis since the Great Depression; and the opportunities for us to earn a much bigger living in global markets.
The first issue should be very much on their minds. To a large extent it will determine their scope to cut taxes and spending, and increase borrowing. They did acknowledge that the deepening recession was reducing government revenues and they did pledge fiscal prudence. But they still left voters with the impression they had plenty of room for manoeuvre.
Yet, English, of all finance ministers-in-waiting, should have a vivid memory of the previous two recessions, National's response to them, and the economic and political consequences. The two neatly bracketed National's previous nine years in office.
The first was the recession of the early 1990s. Early in National's first term, the economy was slipping into recession and business confidence was plunging. The new government sharply cut spending, thereby exacerbating the collapse of consumer and business confidence. The reduction in government and private sector spending made the recession deeper than it might otherwise have been.
There is, though, one difference between then and now. National faced a mountain of government debt equal to 60% of GDP. English delighted this past week in pointing out the debt was the legacy of a Labour government.
But he missed the point. The problem was not the government's political label but its fiscal policy. He's running the risk of falling into the same trap: of branding his fiscal policy virtuously National while in reality it could turn out less conservative than the one Labour's running now.
The second recession shared characteristics with the first: rocky financial markets and economies abroad and weakening demand and confidence at home. And National made the same mistake again of reducing spending and thus the government's stimulus to the economy. And once again, National's fiscal strategy was blown off course. In particular, government debt rose sharply rather than falling as promised.
These dynamics of the New Zealand economy are well known. They stem from the tiny size of the economy, its exposure to global commodity and financial markets and the government's relatively large share of activity.
When we head into a recession, government revenues fall and spending on the likes of unemployment benefits rise. The reverse happens when we head into boom times but this positive impact is relatively smaller than the negative impact during recessions.
Overall, our government finances are more sensitive to these contra-cyclical stabilisers than the average for OECD countries and our economic cycles are more volatile, according to Treasury research.
During the early 1990s' recession these cyclical factors cut our GDP by 3.2%, double the impact they had on the concurrent UK recession. Conversely, during the mid-1990s' boom the stabilisers contributed only a positive 0.5% to our GDP but 0.7% to the UK's.
We don't know yet how deep or long our current recession will be. On one hand, global financial markets are in far greater turmoil than during the previous two recessions. Moreover here at home, business confidence and household finances are in far worse shape. But on the other hand, commodity markets are more buoyant and many of our businesses have developed greater resilience since the last recession.
And we don't know yet how deep National's cuts in taxes and spending will be. By the time we find out in the first week of the election campaign, we should have a better handle on the global economy by which to judge the soundness of National's fiscal policy.
Meanwhile, National is revealing very little about the rest of its economic strategy. Key delivered his "Blueprint for Progress" to the party conference, but only five of its 10 points connected to the economy: taxes, spending, bureaucracy, private sector provision of infrastructure and services and Resource Management Act (RMA) reform. English made the same economic points in his own speech the previous day. Like his leader, he offered very little detail.
On infrastructure, National plans to increase investment by borrowing more and by opening some major projects to public-private partnerships. In principle, those are good ideas. But they need to be set in perspective.
An extra $500 million a year of spending will be only a small improvement on the already very large increase the current government has made in infrastructure investment; and National is promising to spend $1.5 billion on fibre optic cable, which could be wasteful or crowd out private sector investment, according to some telecommunications players.
And private construction of roads and other public assets has merits, such as offering an alternative to financing by government debt or revenues.
But this approach means more of our assets will be owned overseas. In some cases, the private consortia will eventually hand the assets over to the government once they have made a return on their investment. But in others, they will remain permanently in private hands. National might run into some voter resistance to that.
To facilitate these and other infrastructure projects National will reform the RMA so consents are granted within nine months for priority projects.
Yet National is also promising full consultation with communities and full regard to environmental impacts.
But delivering on all three promises seems an impossible task, particularly for the large, complex infrastructure projects it will prioritise.
So, that is pretty much all we know so far about National economic policies. It's a rerun of the party's 1990 mantras about less tax, spending and regulation. That's no surprise at one level. English, National's chief policy developer and economic manager, learnt them from the master of budget micro-management, Bill Birch.
"I make no apologies for the simplicity of National's plan," English said in his conference speech last weekend. He ridiculed the current government for spending so much time and effort working with key industries on strategies, taskforces and other efforts to deal with the great complexities of the global economy and New Zealand's search for greater engagement and greater wealth.
She'll be right, he reckons. We'll sell more food to Indians and Chinese at higher prices. That was the only vision of New Zealand's economic future he offered delegates.
Indeed, it would be nice if life were so simple. But, as his own farming constituents would tell him, it's not. At home, they face distinct physical limits to expanding volumes and financial limits from rising land, fertiliser and other costs. Abroad, they face growing competition from foreign farmers.
The primary sector has a great future, as do many other sectors. But rerunning their 1990s' strategies won't deliver that future. The world has already changed hugely since National was last in power and is changing even more radically before our very eyes.
Key told this columnist in an interview in March that National was working on a "stunning" set of economic policies. But judging by what it has delivered so far, National has spent the past nine years in opposition ignoring a changing world.
- Sunday Star Times