Brian Easton (New Zealand Listener, 7 September 2002) has taken issue with my claim that the current Government has not reversed most of the big changes in economic policy introduced in the eighties and nineties. Having read his article carefully, I stick with my original contention.
In monetary policy, the Government has given no hint that it wants to change the 1989 Reserve Bank Act which requires monetary policy to be focused exclusively on maintaining price stability, and appears to be suggesting only minor changes to the agreement between the Minister and the Bank’s Governor defining how that is to be interpreted. That is hardly surprising, given that the international expert commissioned by the Government to review the way monetary policy was being conducted concluded that the Bank’s “current conduct of monetary policy is entirely consistent with the best international practice of flexible inflation targeting.”
In fiscal policy, the Government has given no hint that it wants to make any change to the Fiscal Responsibility Act, passed in 1994, and indeed Dr Cullen is prone to boast that the ratio of central government spending to GDP is, at 33 per cent, even lower than that achieved by Ruth Richardson.
In tariff policy, there has been a decision to defer further reductions in protection affecting a small number of industries, but no reversal in the large reductions achieved to date.
But what about privatisation? To be sure, the Government has created Kiwibank, but the size of this operation is utterly trivial compared with the Bank of New Zealand, Rural Bank, Post Office Savings Bank, and the DFC, all privatised in the eighties or nineties. To be sure, the Government has re-nationalised ACC, but I don’t see too many in the business community cheering that action. To be sure, the Government has largely re-nationalised Air New Zealand, but this was an action made necessary at least in part by the Government’s own tardiness in approving a request from Singapore Airlines to increase its shareholding in Air New Zealand.
Mr Easton argues that there would have been more re-nationalisation if only the Government had had more cash available to it. But cash is always a scarce commodity. The fact of the matter is that of the many billions of dollars available to the Government every year, it has chosen to spend very little on re-nationalisation.
Yes, the Government has embarked on some specific programmes to assist industry, and to set up an export credit scheme which, so far at least, nobody has chosen to use. But whatever the merits of these programmes, they make up a tiny fraction of 1 per cent of the total economy.
Yes, the Government has made some changes to the structure of the health system. But is Mr Easton bold enough to argue that the health system is working effectively now, with the total deficit of the public hospital system exceeding $200 million in the latest year and plenty of dissatisfaction at the waiting lists?
The reality is that most of the Government’s moves in the economic policy area over the last three years have merely tinkered with the big changes of the late eighties and nineties – and sadly most of that tinkering has been counter-productive rather than beneficial.
In December 2000, the Minister of Finance was quoted in a Japanese newspaper as saying “Fundamentally we will not change our open market policies. It is not necessary. The structural reforms produced great results.” Quite so.
Copyright © 2024 Don Brash.