It's too soon to say whether Labour's onto a fiscal winner, but politically its given the party a circuit-breaker it desperately needed
On Saturday I wrote that this was a crucial week for Labour, one in which its leadership desperately needed to change the conversation and gain some traction in the media that was about New Zealand rather than itself. On that front, Labour's had its best few days in a long time.
My financial literacy isn't sufficient to pass judgment inside 24 hours on what is a genuinely new idea from the Labour ranks – giving the Reserve Bank the power to change the rate at which New Zealanders contribute to KiwiSaver. As I understand it, the simple idea is that if the Reserve Bank wants to take some heat – and money – out of the economy it can compel people to save more rather than put up the OCT, forcing them to pay more to their banks.
It came as a surprise to just about everyone. The most we knew prior – from The Nation this weekend – was that David Parker was set to announce "a new tool" for the Bank. He wanted the Bank to have a new target beyond pure inflation-wrangling, and so was prepared to give it a new tool with which to attack the wider problem. But none of the business or political journalists I spoke to in the past few days could figure out where he was heading.
It's rare that a policy is announced these days which observers haven't figured out in advance. Heck, some of us still haven't figured it out.
I get how that is another way to rein in inflation and allows for lower interest rates for longer, but I'm not as clear how that necessarily brings down a dollar that seems to trade above its weight regardless of our interest rates and macro settings.
But that's not the debate I'm interested in today. (If you are, try this guy). The policy is however politically important for three reasons I can guage.
First, it's a new idea. Not even one knicked from the Brits, BRICs or Brisbane. It's one out of the box from a party that has been pummelled recently for not being able to see beyond its own rivalries and sloppiness. It reminds voters that Labour is the natural party of reform and ideas and that by their very nature more conservative parties tend to more managers than visionaries.
While I don't think voters will start talking about the details of monetary policy, it will make them take notice of Labour in a way that makes them think interest rates – and therefore their mortgages – be lower and Kiwi business might be able to sell a bit more stuff to a few more people. That's the territory Labour needs to be in if it wants to shake off its pollular torpor. (Yeah, that's not really a thing, or even a word, but I like it).
Second, it's got National looking defensive and muddled. Bill English's response that this is "nothing new", yet was also a "confusing problem looking for a solution" and there was "no evidence it would actually work"... um, because it hasn't been tried before. Further, English was left to concede that it might work, but if it did that would be bad too because poorer people would have to save more. And it would drive up the cost of living because we'd be paying more for imports.
This from a man who took credit for increased household saving after the GFC hit and has talked about the lack of household savings as one of New Zealand's great economic weaknesses. What's more, it's from a man who has accepted that the high dollar is tough going for exporters – so is he now saying that the high dollar is a good thing because it's leeping the cost of living lower? Is he going into the election on platform that the dollar is at a good level or, on the cost of living logic, should go higher?
And, oh, the way we do things is regarded as world best practice – which is somehow an argument for doing nothing. Ever.
You don't often see English muddled like this and if nothing else, it's a sign that Labour has landed some sort of hit.
The final plus for the Opposition is that it edges into traditional National territory and makes Labour look like a more sophisticated economic thinker. It's much harder for National to paint Labour as 'tax and spend' imbeciles if Labour is coming up with the innovative fiscal ideas.
National got much praise at the start of the year for stealing from Labour with its education policy; it maintained its centre-right commitment to link pay and performance yet was being generous to a profession it's often at logger-heads with. Today, Labour got its own back by keeping its centre-left credentials alive through a more hands-on, reforming and (theoretically) job-creating approach to economic policy, yet won praise (however guarded) from most on the right.
That's not to say this is necessarily a vote-winner. Labour now has to win the compulsion arguement that lies at the heart of this reform. Do New Zealanders really want to be compelled to save? Perhaps the example of compulsory saving in Australia and parts of Asia and the ability for those countries to own their own banks and companies will be compelling to voters. But some will look at their hand-to-mouth existence and ask where the savings money will come from. Others will say they'd rather pay down the mortgage, thanks very much. That's still going to be a tough debate to win.
And in amongst English's spray of ill-aimed bullets, the comments about the cost of living could yet hit home. If Labour's core argument this election is that the recovery isn't reaching the wallets of you and me and the cost of living is too high, how does it justify adding another cost to each and every household? Can it sustain the argument that what extra you pay into KiwiSaver will be won back by lower interest rates and thereby lower mortgage or rental payments? We'll see.
But as far as Labour's pivot week goes, this is the start the party needed. With the baby bonus, however, the policy started to lose its sting on days two and three as the detail unravelled. Let's see if Labour can hold itsself together this time.