Gareth Morgan, Director of Gareth Morgan Investments
There is little doubt that there are two types of politicians: Most, who will commit to whatever policy will get them re-elected, and a minority who have a vision of what's needed and pursue that whether it leads to re-election or not. Sir Roger Douglas was obviously of the latter school. If we accept the norm of the conventional politician only being interested in getting re-elected then the logic of Jim Bolger's oscillations in commitment to economic reform over his career, becomes understandable. Certainly there is no economic grounds for them.
As measured by tenure Mr Bolger is demonstrably a successful politician and this success traverses a number of contradictory stances on economic policy. His passionate defence of the highly centrist policies of the Muldoon cabinet evolved into a belated, leadership-saving commitment to the economic reforms of the Douglas / Richardson creed, and then in order to stay in power, seceded to the populist, reactionary style of Muldoon protégé, Winston Peters. Now, staring down the barrel of an economic slump and with the personal peculiarity of Winston Peters rapidly eroding the popularity of NZ First, Mr Bolger is faced yet again with having to change horses in order to maintain political charge. It will be a tribute to his political skill that he yet again manages to.
What is successful politics however is not always successful economics insofar as national economic welfare is concerned. There can be little doubt that the damage rendered international investor confidence by the Peters / Bolger political pragmatism in braking the economic reform momentum, is substantial. The country is toying with economic recession, the currency is poised to destabilise, there are substantial risks to general confidence posed by threats of tax increases if compulsory superannuation isn't voted for, the government has stopped freeing up resources for more efficient private sector deployment in line with the centrist preference of Peters politics, and immigration as a source of capital funding and economic momentum has been curbed. Labeling the Treasurer a "loose cannon" seems an eminently reasonable description against this litany of blunders.
The Peters / Bolger retort that without households making compulsory super contributions, government debt reduction becomes such a high priority as to make tax cuts a no-goer, is a red herring. It's as much a figment of their imaginations as the cataclysmic oil shortages which spawned Think Big were. Nobody is arguing that NZ Superannuation in its current form could threaten an onerous public sector burden by the decade beginning 2030. But only should some special economic conditions prevail by then. Their Superannuation Armageddon is a possibility not a certainty and very dependent on economic growth performance up until that point. A good economic growth performance means there will be no problem – as the Todd Taskforce's last report attested.
The policy priority should be twofold: To foster as fast a rate of economic growth as is possible and removing the impediments posed to that by an inefficient government sector which still represents over 30% of the economy and which influences the other 70% via its regulatory umbrella. Secondly it should be to simply reinforce the message to those entering retirement by 2030 that the current system is at high risk of not delivering the rate of superannuation payment as is currently being enjoyed. Political leadership in this regard would be to introduce a phasing down of New Zealand Superannuation payment rates and leave it at that. This, more or less is what the Todd Taskforce recommended under their voluntary scheme.
But instead on superannuation we have seen surcharges battled over, an asinine compulsory scheme proposed that imposes so many economic distortions that any benefits pale into insignificance, and most peculiarly a number of politicians signing on to support what no economist would have a bar of. It begs the question of why compulsory superannuation has any attraction at all – there certainly are no economic reasons.
It comes down to the politics of paternalism which presents a fatal attraction to politicians who's egos desperately seek an affection with the population at large. For Messrs. Peters and Bolger it appears to be the "grand scheme" which solves a perceived problem – harking back to the spirit of Muldoonism which neither can shake off. For ACT it is a means to get state superannuation off the government expenditure agenda so that they can then get on with their priority of delivering benefits of reduced taxation for efficiency gains made within the public sector. So long as a state-funded superannuation monster threatens to swallow any hard won gains made elsewhere in the public sector, ACT cannot see a way clear to selling its policies of government sector efficiency, and has been reduced to the level of "perk-busting".
Whatever, the critical point is that the proponents are seeing compulsory superannuation as a means to an end, rather than providing any analysis as to why it is a preferable method of addressing the superannuation issue per se. Such is the opportunism which steers political careers, that politicians who consistently commit to economic policies which deliver higher living standards and which value economic equity, are rare animals indeed.
We should therefore not be surprised at the charge of "loose cannon" which Australian policy advisers have leveled at Winston Peters. It equally applies to any politician who is prepared to trade off policy consistency for opportunities of personal political gain – and that is easily most of them.