Rod Oram:budget focus wrong
Normally Adam does not tend to agree with quite a lot of what Rod Oram writes. Not because he writes rubbish, which is not the case, but because on a number of issues he and Adam have different points of view. However, in this week’s article by Oram in the SST there are some, to Adam, sound comments.
Oram discusses the concerns he has that the Government may be paying too much attention to the debt rating agencies, especially S & P and using them as a fig-leaf for budget decisions rather than addressing issues.
Adam is minded to agree with these closing sentiments in Oram’s article:-
By hiding behind the skirts of S&P, the government is dodging the debate about what is good and bad spending.
The chances are very high it will make a lot more bad spending decisions in the budget.
Two very big dangers arise from the government’s focus on its debt rather than the private sector’s.
First, it will deliver an excessively conservative budget in order to make its books look good. That means it will save money it should be spending at times like this when private sector activity is so weak. This is the classic mistake National made in its budgets in 1991 and 1997, thereby worsening those two recessions.
Second, it will seriously under-invest in economic transformation, the very thing the private sector needs so companies and their employees can earn a bigger living in the world economy, and thereby pay down some of their towering debts.
Thus, the government is making the economy worse, not better, by conjuring up the spectre of an S&P downgrade.
Adam suspects that Oram is correct. Part of the problem is that there is considerable bad spending programmed into government spending such as interest free student loans, Families Commission, Working For Families, the level of expenditure on health. These were committed to, erroneously in Adam’s view, on a long term basis by Labour. They have attained the status of sacred cows when a number should be led to the slaughter and all programmes should have a blow torch of value and benefits applied to them.
Even more pertinently Oram identifies the need for economic transformation. John Key has talked frequently on this. Adam believes Key’s instincts are sound in this area, but he is not convinced that Bill English recognises the problem, oor if he does focuses sufficiently on this as a critical issue. Consequently Adam has not the confidence that this will be a budget setting the scene for transformation and providing for business to achieve growth.
Adam’s confidence on this score was futher undermined when he read of the appallingly lack lustre and mediocre outcome of the Entrepreneurs Summit, or whatever pretentious name it was called, in Auckland this week. On that score Adam thinks Bob Jones got it right on Radio NZ the other day.(fast forward to 14.50 as that is when the item starts)
Key to NZ’s future is the need for economic transformation. Putting billions into roads is not the answer. More needs to be done, much more to create the right climate for growth. Failure to do that will represent an even greater failure than the squandered opportunities of the last 9 years.
It would be heartening to think that this budget will reflect John Key’s business background and appreciation of how to take measured risk in order to profit the nation, rather than that of the Southland farmer from Dipton.
Comments are closed.
I’m with you Adam, Key seems sound enough, if a bit timid. I’m only guessing, but I’d say English has been in Wellington too long. One of my problems with career politicians is they pretty quickly lose sight of life at the sharp end of the economy.
And when they leave with their super entitlements they won’t need to bother themselves with how the rest of us fare under their control. English was always doomed to mediocrity but why should the rest of us be?
Well, I guess that’s why John Key is in office and you and Rod Oram are not.
Key AND English have to find the compromise between good economics and good politics which will keep them in office past three years, otherwise nobody will be any better off.
Adolf
Unlike Oram I would slaughter a number of sacred cows such as interest free student loans and the misbegotten WFF for example. I would scrap many of the useless quangos such as Families Commission.
I would move to float the SOEs on the stock market when practicable with the state to hold no more than say 20% at the end of 10 years.
That is quite different from Oram.
What I wrote was that Oram is right in that there should be focus on growing the economy, thus my remark about spending on roads. My remarks were encouraging Key to be bolder than might otherwise be the case.