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  • rmacculloch

The NZ Herald Gets its Economics Wrong Again. The New Coalition is not doing Austerity - it is seeking to boost growth using supply-side economics.

We've all enough of Big Media lecturing us on how to make NZ a better place. We've found out the hard way that it rarely has a clue what its talking about and when it does, its pushing its own ideological agenda. Now in its latest effort to discredit the New Coalition, the NZ Herald's Business Editor argues National, ACT & NZ First don't know how economics works. In doing so, the Herald reveals it doesn't know how economics works. Its' Editor writes:

"Tax cuts are stimulatory which means, in terms of fiscal impulse, the Government will be pushing back against its own austerity measures. Arguments from the PM & Finance Minister that cuts to government spending will offset stimulus are circular. They're an admission that tax cuts will water down the disinflationary benefits of the spending cuts".

Can the Herald get it into its head that this government is not doing "austerity"? It was not voted in to do "austerity". Austerity is tax increases or spending cuts, or both, to reduce the deficit. Instead the National-led coalition was voted in to kick-start growth by doing "supply side" economics which is about tax cuts & spending cuts to reduce the size of government and decrease the deficit over time to pay down public debt. This argument is not "circular". One of the world's great authorities on such matters, the late US-Italian economist, Alberto Alesina, argued that in times like NZ is suffering, the government should signal our future course is one of lower taxes, otherwise no-one will want to invest here & the economy will go down the tubes. Furthermore, the Coalition is promising another strand of classic supply side economics - cutting regulations, which ACT's David Seymour is in charge of.

After years of mismanagement by NZ's Worst Finance Minister & Reserve Bank Governor Ever, whereby tax rose, spending rose, inflation rose, unemployment is rising & regulation skyrocketed, without falls in inequality & better public services, it's not unreasonable for Kiwis to have kicked out Labour & supported National-ACT-NZ First's platform of smaller government. The public did not vote for austerity whereby taxes would be further increased, or even held at current levels, together with spending cuts. Why doesn't our Big Media not respect the will of the people?

The Herald should wake up to one of the few agreed-upon facts in economics, "In the long-run, it is a country's capacity to produce goods and services that determines the standard of living of its citizens", where capacity depends on labor, capital & technology. The new Coalition is improving incentives to produce by letting private individuals hang onto more of our money due to lower taxes and by cutting red-tape. That is what center-right wing parties have done for centuries. Its time our Big Media stopped arguing against supply-side policies just because the biased journo in question didn't vote for them. This government is not an austerity government, OK?



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