Gareth Morgan, Director of Gareth Morgan Investments
The massive landslide with which National won on Saturday confirms that their appeal is widely based. The relevant issue for the electorate’s medium term welfare will be whether National delivers a progression of the economic reform begun under Labour or whether they will be a government offering little progress beyond what has already been achieved It is doubtful that this National government would quickly mimic the excesses of policy regulation that was the trademark of the Muldoon regime. The reason ? – financial markets and electors will react adversely and quickly to the emergence of a Muldoon LI regime. This in itself should at least slow the appearance of such government.
But the difference between say a Holyoake-type economic policy and a Roger Douglas, or Ruth Richardson market-driven economy is vast, in terms of growth rates likely to be attained, inflation rates posted, employment levels, balance of payments and external debt trends. About the only common element between the two governments was that both presided over an expansion in the relative size of the government sector- as measured by the tax take as a proportion of GDP. Yet it is on reversing this trend that Richardson and Bolger have campaigned. But then they have also campaigned on 3% growth, reducing unemployment, extra police, tax breaks for savings, forest and other industry investment, and the increase in National Superannuation payout. National’s fiscal magic eludes most of us so far.
For any investor with exposure to $NZ risk, the only thing that is clear is that the pre-election propaganda from National offered something for everyone and no identifiable economic policy umbrella was laid down. Such an election strategy whether by design or something less deliberate, has served National absurdly well: Different electors have voted for them for completely different reasons- some because the deterioration in business conditions that Labour wrought is seen to be able to be reversed by National; others (probably fewer) who hope that only under National is there any chance that the economic reforms begun under Douglas, will be completed.
The irony is that the wishes of the two groups are mutually exclusive, at least over a three year period. If the reforms are to be completed then it is most unlikely that relief to business conditions faced by the bulk of those people who earn their living from supplying the domestic economy, will be forthcoming within the term of this government.
Such a paradox suggests that political reality will descend over this National government far more quickly than it did over Labour. The spectre of a political rout of the dimensions that Lange led Labour to, will keep National faithful to the self-cause of political survival. For this, it is difficult to see the policies of economic reform retaining anything like the priority that they did for the first three years under Labour. A little expansion of the budget deficit, and a little lift on inflation will not seem unreasonable political options to pursue before long.