Gareth Morgan, Director of Gareth Morgan Investments
The release of the National Party’s Industry Policy last week was like a return visit to the chamber of horrors, and in itself should leave no doubt in the financial market’s mind bow cosmetic Jim Bolger’s appreciation is of the economic reform process New Zealand has been pursuing. The National Party has already begun down the slippery slope toward re-legitimising inflation; has released welfare reforms that shift rather than reduce expenditure, and even expanded National’s only remaining Think Big yet to be sunk- National Superannuation. This mush that is labelled “industry policy confirms they will indeed be a regime that deserves high bond rates."
Another shaky election plank Encouraging Kiwis to “Buy New Zealand." Research in Australia showed that loyalty to the ‘Buy Australia” campaign was highest in the lowest socio-economic groups. Only members of this group were inclined to obey the exhortation to nationalism and buy Australian even if there were foreign goods on the shelf that were cheaper and better. A strong inverse correlation between both education and personal career success, and loyalty to “Buy Australia’ was measured. So much for Bolger’s target audience.
In a fit of reactionary pique to Federated Farmers condemnation of his populist, industry strategy, our prospective PM retorted with an incisive two-pronged expansion of his rationale:
First, National would endeavour to keep tariffs down on farm inputs such as gumboots and fencing wire. The picayune nature of the Bolger theory of free trade, misses the whole point of diminishing tariff protection. Inefficient industry must not be nurtured. Otherwise their demands on domestic capital and labour will at best, bid up the prices of these inputs to industries that can be internationally competitive, and at worse deny those industries from getting established. Bolger seems singularly unable to recognise that people’s economic literacy has improved since Muldoon was dumped.
Bolger’s second sally was that a loss of 40,000 manufacturing jobs should have satisfied even Federated Farmers. This one-dimensional analysis of industry rationalisation is blinding. The reduction of protection is all about deliberately ensuring those industries run by managers insufficiently skilled to attain international competitiveness, perish. Government’s policy framework must be to support the evolution of competitive advantage in sufficient industries to propel New Zealand out of this debt bath. Only if we achieve that will there ever be sustained employment. With the debt ratios this country has managed to chalk up, the retreat back to policies which divert entrepreneurs into foreign exchange-wasting endeavours such as protected manufacturing, will deepen the external debt crisis.
With the severity of our economic problems, economic literacy really needs to be a minimum prerequisite for prospective New Zealand Prime Ministers. Without that basic grounding, why should foreign creditors take the risk of another Muldoon ? The Federated Farmers’ rejection of National’s invitation to resume pork barrelling politics was an island of reason in the wet tide of mediocrity which some, would once more swamp NZ with.