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  • Robert MacCulloch

The Unloved National Party

I wrote an article for the National Business Review yesterday which is presently their most commented news article. It is called "Where National Went Wrong: An Economist's Perspective" and reads as follows:


"People often look to the National Party, more than Labour, for a sound pair of hands on the economy. So why did so many people lose faith in National when it came to vote in 2020? From my experience engaging with both parties, there are ten reasons that explain a large chunk of it.


First, two major concerns on people’s minds the past six months have been their health and their job. By trying to eliminate the virus in NZ and implementing the wage subsidy scheme, Labour tried to cover both bases. National faced endorsing these policies, or proposing better ones, which they did not. Labour’s position was “let’s make a sacrifice in terms of locking down and closing borders and even to the extent it hurts the economy, it’s a price worth paying”. National reacted by arguing that the restrictions were too tough. In doing so, it started looking like a Party wanting to put GDP ahead of saving lives.


Second, the original reason NZ went into lock-down was the belief that our already over-stretched health-care system would be unable to cope with rising numbers of virus cases. National should have proposed a reform as part of their campaign that ensured people, especially the elderly, would not need to worry that quality medical care maybe denied them because of overcrowding. Instead, in the face of the greatest health crisis in 100 years, it is remarkable that not a single politician has been able to offer anything in terms of a serious reform of our health-care system, other than throwing money at the problem. It was Labour’s biggest vulnerability, yet National never provided a solution.


Third, the temporary tax cut which the National Party offered was probably a strategic mistake. A trump card it had previously held was its potential to get on top of the country’s exploding public debt. Labour’s ability to do so was in doubt. However the tax cut opened up fundamental questions as to whether National’s primary focus was indeed on debt reduction and restoring the country to financial balance, or more on short term election-year bribes.


Fourth, National thought they had a platform to build on, in terms of the previous Key-led government. However, that government left no legacy. A couple of us proposed one to them six years ago, namely massive infrastructure projects to transform the nation. They were not interested. It was an open secret we shared back then that NZ was experiencing low quality growth on weak foundations. Improvements in productivity were running at close to zero. Yet immigration and the property boom were doing the trick for National in terms of growing GDP and making people feel wealthy. Tourists were pouring in. National’s polling numbers were high. As a result, their leaders had zero time for those of us pushing for bold plans to help solve long-term problems.


Fifth, and on that note, the public still blame the previous National administration for ratcheting up immigration without building the infrastructure to cope with the greater numbers, nor increasing the housing stock to ensure locals could still afford to buy. The population of NZ has risen by around a million people the past 17 years. Although National tried blaming Labour for failing on infrastructure and housing, the public knows these were problems created by the Key government.


Sixth, National made no serious attempt during the election campaign to abolish corporate welfare and privilege, namely transfers of public money to corporations and wealthy individuals. To the contrary, it even came out in favour of extending the wage subsidy scheme to big business, although for many such firms it was a taxpayer-subsidized windfall. National also supported schemes like the winter energy payments, part of which go to the highest earning households. Appearing to be a Party beholden to special interest groups is not a good look.


Seventh, beyond health-care, National should have proposed reforms to our welfare systems for unemployment and retirement. Security is on top of people’s minds in these uncertain times. Every serious economist emphasizes the importance of building savings to provide a financial buffer. Yet National welcomed the undermining of the Kiwi-Saver scheme during their campaign by allowing withdrawals for things like starting a business. Rather than weakening that scheme, it should be strengthened and mandatory for all.


Eighth, National never took Labour’s “living standards framework” seriously, instead preferring their own “social investment approach”. However, Labour’s framework has serious backing. It has an influential group of supporters who rank among the most respected in global economics. Moreover, Kiwis identify with the ideals of the “living standards framework”, namely that quality of life and well-being are better aims than GDP growth built on congestion, unaffordable housing, a deteriorating environment and unpleasant varieties of capitalism.


Ninth, the National Party has managed to accumulate a group of terrible advisors. Maybe they are good at “networking”, but they have turned out to know very little about how to solve productivity problems and build a fair economy with opportunity for all to accumulate wealth. Being anti-intellectual has not served the National Party well. By contrast, Labour has sought advice from world heavy weight thinkers, including Nobel Laureates, the attempts of National to portray them as shallow on this front notwithstanding.


Tenth, National is lacking clear objectives for our economy and country, a set of principles and a framework to help get there. There are only small differences between their plans and Labour’s. Their guiding philosophy still seems to be some version of a conservative “steady as she goes” mantra, just like the one rolled out under the previous National government. In the presence of the greatest health and economic crisis in a century, that line now sounds faintly ridiculous".


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