Labour’s “Achievements”

The indicators: the good and the not so good

* Inflation: At 1.5 per cent in early 2000, inflation was running well within Reserve Bank parameters. Now at 2.5 per cent after hitting 4 per cent in June last year.

Of course, we mustn’t forget how the Labour appointed Governor has totally squandered the influence built up by the previous incumbent.

* Unemployment: Labour’s big success story. Unemployment was just under 7 per cent when Labour took office. That figure has since almost halved to 3.8 per cent.

I seem to recall National slashing unemployment far more during those evil 1990’s. Of course, it was thanks to the last Labour government that they had to take on that job.

* Economic growth: The economy was steaming ahead at a growth rate of 6.3 per cent in early 2000 - but that increase was off the back of recession. Growth slipped as low as 1.1 per cent last year before lifting slightly to 1.5 per cent.

Labour certainly has been redlining the economy after National so carefully coaxed it into life again. I guess we can expect the motor to blow up just after election day.

* Interest rates: Labour’s Achilles heel. The 90-day bank bill rate was 6 per cent when Labour took control of the Beehive. The rate now stands at 8.08 per cent. Likewise, variable first mortgage rates dropped from 8.1 per cent to a low of 6.7 per cent in 2002 but have been gradually rising since and are now close to 10 per cent.

Indeed, interest rates are not really subject to political control as they used to be - getting politicians’ figures out of that pie was a massive advance. Labour’s carelessness with the economy shows all the stronger with this one indicator they cannot control - and we should be extremely worried that they are looking to change things in this area.

 

* The Dollar: Was worth US49c in early 2000. Now heading north at an export-wounding US73.75c. The TWI - the trade weighted index that measures the effective value of the dollar - was 53.9 in 2000. It has risen to 71.48.

This is, of course, a direct effect of interest rate hikes. It’s also what is now killing the economy.

Cullen’s imprint: what his tenure will be remembered for

* The fiscally-responsible finance minister? Seven budgets; seven surpluses. A buoyant domestic economy has seen actual tax revenues make a nonsense of forecasts. The operating balance has gone from around $1 billion to as high as $11.5 billion last year.

Labour inherited a growing economy, and stuck the boot firmly on the accelerator. This generated some nice revenue, and they chose to continue running surpluses (if memory serves however, they did come close early on). Not a hard decision to make in the circumstances though.

* The tax-and-spend finance minister? Tax revenue has risen from $34 billion in 2000 to a forecast $51.5 billion this year. Government spending has similarly rocketed from $34 billion to $54 billion - an increase of nearly 60 per cent.

Oh yea. Don’t let the fact they’ve only increased taxes once fool you - if you have record surpluses year after year and you refuse to cut taxes, you are just (if not more) as extreme as someone who only cuts taxes and never spends the increase.

Labour introduced the new top tax rate of 39c on income earned over $60,000 in April 2000. It was initially supposed to not affect more than 5 per cent of taxpayers. That club has since expanded to 12 per cent. Dr Cullen’s decision to hold off tax cuts means more taxpayers are caught by “fiscal drag”.

…and breaks a promise. Oh, did we mention that those under $70,000 are also beneficiaries - as well as being rich bastards? Sheesh, one is a full time job!

* Tax cuts? no. tax relief? yes - for some The 2004 Budget detailed Labour’s flagship Working for Families package for low-to-modest income earners. A couple with three children and earning $52,000 a year before tax along with a mortgage of $385 a week are now better off by $246 per week all up. But how much of Labour’s pride and joy would survive National’s preference for across-the-board tax cuts?

Yea, low to modest who live in the “right” areas, have the “right” amount of expenses, the “right” amount of savings etc etc. Meanwhile, we’re all fooled into thinking that the children are benefiting.

* Repairing the social fabric: labour sticks to its knitting Spending on the public health system has risen from $6.8 billion to $10.7 billion - a 57 per cent increase. Spending on education is up from $ 6.3 billion to $9.6 billion - a 52 per cent increase.

And nothing to show for it.

* The Cullen legacy: part one The 2001 Budget saw the first injection of money into the national superannuation fund set up to pay for the extra retirement costs of an ageing population. It had assets totalling $12.5 billion by this April.

One good thing in all this…

* The Cullen legacy: part two New roads, hospitals, schools and military equipment. The Budgets have tackled the “infrastructure deficit” created by cutbacks in Government spending in the 1980s and 1990s.

Glad you mentioned the 1980’s - the 1990’s little brother everyone keeps locked under the stairs.

Of course, it would be a fallacy to suggest that any other government would not have also spent up large on infrastructure once the money started to flow in from years of careful rebuilding.

* The cullen legacy: part three The boom years wasted? Hundreds of millions of dollars “invested” in Labour’s growth-and-innovation strategy and subsequent economic transformation agenda. But New Zealand is still marooned in 22nd place out of 30 in OECD rankings in terms of gross domestic product per capita and income per capita.

Need we say more?

* The cullen legacy: part four Will Labour pay the ultimate price at next year’s election for his refusal to adjust income tax rates and thresholds beyond the meagre offering in the 2005 “chewing gum” Budget? In hindsight, minor but more frequent tweakings might have been the better option fiscally, economically and politically.

Indeed, people overtaxed by $1000/month get a little annoyed when offered $3 back.