The government had its hand firmly on the economic tiller this week, tacking strongly through the waves of crisis and public opinion. Then Bill English gave a speech and stumbled

National hasn't won many fans this past week, what with the waka and the move to prop up insurance company AMI. But it actually deserves a round of applause, not least for acknowledging that we live in a mixed economy that requires governments to get their hands dirty now and then.

Another bailout - even a mere potential one that at this stage has not cost taxpayers a cent and actually earned us $15 million - is the last thing New Zealanders want to read about. The government is in part victim of its own rhetoric - talking up our debt and the need for austerity, only to find that circumstances in the real economy demand a more generous approach. But let's be clear - it did the right thing with AMI, just as it did the right thing with South Canterbury Finance, just as Labour did the right thing with Air New Zealand, and so on.

Indeed, what the AMI deal shows is that governments have learnt to man up when dealing with the private sector. When the fourth Labour government started doing deals under Roger Douglas, we were ripped off and played for chumps by Michael Fay and his partners in economic crime. But the AMI deal is tough and should be a model for future bailouts. The insurance company has had to put nothing less than ownership on the table to win a government guarantee, and cash up front, as well.

As Bill English said on Q+A this morning, taxpayers are willing to pay out in "unique circumstances". Such a bailout is the "least worst option".

The political problem is that this isn't "unique"; ie a one off. It keeps happening. And as Hone Harawira pointed out on Friday, it's the rest of us that save the big companies when they fail to meet their obligations. But when you, me or the beneficiary down the road fails, we're on our own. For good measure we might get a good kicking as a "bludger" and have our rights or state support removed.

It's not fair, and it is starting to grate with voters. Again, let me say the government was right. But somethings can be unfair and still right, as in this case.

As for the tupperwaka, well, if we can spend millions on an inflatable rugby ball, then why not a blow-up waka doing the same job for Maori business and culture?

Like the RWC 2011 ball, the waka can go round the world, host functions, take a little bit of the tangata whenua to other whenua, and hopefully grow the immense potential we have in more cultural tourism. It's an investment, and a small one at that. While it's at odds with National's austerity message, it's actually consistent with its talk of investment in growth.

So Bill English can feel good about his difficult week; until his speech at the New Zealand-Australia Leadership Forum, that is. It's worthy of a separate post, but talking about our low wages as a "good thing" that can help growth really is a no-win argument.

Again, old pragmatist Bill says he's just fronting with the economic realities. Our wages suck, so let's turn them to our advantage.

But politically he might as well stab himself in the heart. This is a government that ran election ads about the stadium full of New Zealanders heading offshore for better pay; which introduced (and then ignored) a 2025 Taskforce to offer solutions; and which, more than else, won the confidence of voters by promising to be "Ambitious for New Zealand".

Two years on and the Finance Minister is left trying to tell us that one great way for us to to grow our wages is to have really low wages. It doesn't make sense. It's reactionary. And at some stage, even if you're doing the right thing in response to all the urgent crises, voters' patience will begin to wear thin.

Comments (11)

by stuart munro on April 11, 2011
stuart munro

- it did the right thing with AMI, just as it did the right thing with South Canterbury Finance.

It remains to be seen. Neither guaranteeing foreign investors' interest, nor the $300 million overrun were appropriate, if indeed the SCF intervention was at all - and there was a great of general impropriety in the handling of it, and in the releases of information to discredit Hubbard.

I haven't seen the due diligence on the AMI bailout yet - but although you may be right that an intervention of some kind is in the national interest, there is something dodgy about problems that come in at a cool half billion, and double in the space of a week. If you're ever looking for fraud, unusually round numbers are a pretty safe indication of invention, not reality.

But it would take a significantly more active government to rate  " its hand firmly on the economic tiller"  - which would indicate that this ship of fools had some vague idea where it's going. Would that it had - but by failing to produce economic growth,  the 'rising tide' that even Stiglitz doesn't believe is going to lift all boats any more, we've been run on to the rocks. Which is why feckless John and gormless Bill are having to bail out another sinking ship.

by william blake on April 11, 2011
william blake

ARRR... of piracy on the accountant-sea.

by Jeremy on April 11, 2011
Jeremy

Two years on and the Finance Minister is left trying to tell us that one great way for us to to grow our wages is to have really low wages. It doesn't make sense. It's reactionary.

I struggle to see what's 'reactionary' about Bill's comments. To me, he seemed to do no more than state a fairly uncontroversial economic theory-ie low wages in a country (in a relative sense) encourage capital investment into that country. Over time, as capital increases (relative to other countries), wages also increase.

Nowhere have I heard Bill English say that NZ's relatively low wages are a 'good' thing in an absolute sense. However given that they are low, why would NZ not attempt to use this as a means of attracting investment in the short-medium term?

If anything is 'reactionary' it is surely the media's characterisation of the statements as advocating low wages. In reality all they do is give a suggestion of how they can be increased.

by stuart munro on April 11, 2011
stuart munro
“There is a tide in the affairs of men, Which taken at the flood, leads on to fortune. Omitted, all the voyage of their life is bound in shallows and in miseries.”

 

Shallow and miserable being a fair characterisation of this government, to preserve the maritime metaphor, there's no-one at the helm. We are adrift.

 

Things will not improve until we have an actual leader. And the first thing a leader needs is the faintest idea of where he ought to be going.

 

You'd think even a pair of morons like Bill and John could follow Australia's tail lights. But no, they're much too clever for that, they're going to out-compete them. Actually not, but that's the sop they're going to throw the public. If they only end up getting lynched, they'll be lucky.

by Matthew Percival on April 11, 2011
Matthew Percival

A great opportunity for Labour to score some points with English' comment but his comment is going to be overshadowed by another own goal.

What was Damien O'Connor thinking publicly criticising his own parties list?

[See further Danyl's Dim-Post, here -- Ed.]

by Bruce Thorpe on April 11, 2011
Bruce Thorpe

Go Damien. This is definitely the time for bloodletting. Dropping Shearer and Twyford so low is not accepptable, and casn only  be part of internal manouvres  to take power after failing at the election. They must be outed.

I agree Stuart, this is a rudderless government but who has the balls to call a spade a spade. (Perhaps Hekia ?)

 

by william blake on April 11, 2011
william blake

...and a really big unemployment pool to keep those low paid workers in line, and people have to work when they are told; no holidays or weekends if we say so. We will phase out those benefits too to make the buggers stay on despite crap conditions and if they dont behave just sack them after 90 days and get another.

we are redistributing wealth the right way, giving it back to the wealth creators and taking it off those greedy families with hungry children, getting money out of hospitals and schools and as a treat you can buy our assets as well.

oh and do you want to buy the rights to some coal or some oil?

by DeepRed on April 11, 2011
DeepRed

The fundamental problem isn't with the bailouts of SCF and AMI. The problem is that the Govt wants to have it both ways, and foster the old boys' network while they're at it.

by stuart munro on April 12, 2011
stuart munro

Whatever this government does, its rationalisation is always economic. And that means that they must produce economic growth to be anything other than spectacularly unsuccessful narcisscists.

National's record over the last few decades is not one of sound economic growth. Were it not for the equally spectacular failures of their opponents, the party would probably have lost enough credibility to permanently dissolve.

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