Thursday, May 17, 2007

Budget Bites the Bullet

This was a bolder budget than anticipated by anyone, and bites the bullet on several important long-term issues for New Zealand.

Saving – Partial compulsion

My feeling for quite a long time has been that as good an idea as Kiwisaver was, it was simply too light. It was a purely optional scheme and offered a maximum $5000 subsidy for any participating individual. A useful scheme to make it easier and more attractive to save, but not really significant enough to tackle our low savings record head on.

Today’s budget testosterone injection means that Kiwisaver will sit alongside the Cullen Fund as a centerpiece of a national savings strategy, The Cullen Fund ensures that the state will be in a position to fund NZ Super over the long run, while Kiwisaver will provide the vast majority of New Zealanders with a genuine opportunity to supplement NZ Super with retirement savings of their own.

People contributing to the scheme will receive a matching government tax credit of up to $20 per week to supplement their own savings (around $1000 per year), while critically, employers are being required to contribute (1% next year rising to 4% by 2001/12), after twenty years of on the whole shunning their responsibilities in this area.

There will no doubt be much carping about this from business lobby groups, but it is fundamentally a question of whether business wants to consider itself a part of society or not. Faced with long-term economic imbalances in our economy, all sectors of society have a duty (and in fact a self-interest) in resolving the problem by building our national savings.

Cullen’s move in this area has been bold and impressive. Budgets are best when they plan for long-term prosperity and cohesion. By biting the bullet on savings, Cullen is acting to ensure that our economy is on a more stable footing for the next couple of generations.


The announcement of $500m in capital funding for rail electrification in Auckland and other major transport initiatives is also about our long term economic and social health. This spending is non-inflationary as it actually builds economic infrastructure that will raise productivity, and it targets money to exactly where it is needed – critical projects that will make Auckland in particular a more livable city.

There is of course a lot more, which I will write on soon.

Monday, May 07, 2007

Lessons for Labour

Elections in Scotland, Wales, and for local government in England over the weekend proved pretty inconclusive for anyone looking for decisive trends (Labour weak, but the Tories unable to forecefully take command), but confirmed the gut feelings of many observers that UK Labour does have some serious (if not insurmountable) challenges to overcome in order to win a fourth term of government. There are lessons in this for NZ Labour.

The Labour vote of has come in at what many consider to be the absolute base for the Party, while the Conservatives picked up 41% of the vote across England. So while New Labour is clearly unpopular, the Tories are simply performing credibly. They failed to significantly cut into Northern strongholds like Manchester and Birmingham, took fewer Councils of the Liberal Democrats than expected, and narrowly avoiding becoming the fourth party in Scotland.

All this to me is suggestive of a public that don't want a return to conservative rule, but are disallusioned by politics as practiced by New Labour. The rhetoric of choice that masks creeping privatisation of the health system, the banal infatuation with wealth and celebrity, increased costs in the tertiary education sector, and of course the utter folly of Iraq have all eroded support for a Party and an idea that most moderates and progressives in the UK still want to govern.

Fundamentally, New Labour has in its style and policies just departed to0 far from the core beliefs of the coalition that elected it to office so overwhelmingly in 1997.

NZ Labour must understand this if we are to win a fourth term, and I am convinced that in this regard, we are on the correct side of the ledger. On all of those core principles that have been backed by a solid 40% of the population for close to a decade, NZ Labour has largely steered a straight course. The privatisation agenda has been stopped in its tracks, the investment in core public services and capacity has been significant, the labour market has been actively intervened in to promote greater equality and fairness, and we have stayed true to our internationalist roots by wisely keeping out of the quagmire in Iraq.

Political management issues aside, this government has basically stayed faithful to the people that put it in place. So while also facing an invigorated Opposition, my feeling is very much that NZ Labour is in a far stronger position to hold on to a base of support large enough to make centre-left government possible in the medium to long run.

Thursday, May 03, 2007

One down!

Jacqui Dean's Easter Trading ammendment Bill has suffered a deserved defeat, going down 84 votes to 37. Media coverage of the issue and vote has been predictably limp, with this TV3 report all I could find. It's sort of as if we've now had our big parliamentary conscience vote show-down for the year, and reporting on the issues around another significant decision would just be too much of a stretch.

As the more hardline of the two Bills, it was reasonably likely that Dean's effort would go down in a ball of flames, leaving the door open for the more moderate Chadwick Bill to pick up wider support from MP's sensitive to the finely tuned whinging of some in the retail sector. So, the fight goes on.

With the Child Discipline Bill tidied up with such astonishing speed, the legislative agenda has actually started chugging along again, and I think that debate on the Chadwick Bill is imminent.

Nonetheless, it's never a bad time to sign a petition for a good cause, so anyone out there who wants to oppose the Bill just contact me for an e-mailed copy.