Guest column – Andrew Hoggard

Spend wisely or pay at ballot box

By Andrew Hoggard

The general election is still more than a year away, but the economy is likely to come under close scrutiny from voters.

“ It’s the economy, stupid.” That’s a phrase attributed to the 1992 Clinton campaign and explains how a relatively unknown Democratic contender beat out the sitting President who had just overseen a highly successful military campaign, which left most people assuming he would waltz back in. But, like Churchill at the end of World War 2, the voters focused on the economy not past wartime exploits.

New Zealand’s current government would do well to remember these examples from history, and there is probably another column I could write on why it’s important to learn about the history of all the planet for lessons for the future, not just navel gaze into our own.

So, while this current government was re-elected with huge support in what you might describe as a wartime election in 2020 – the war on covid – 2023 will be back to the economy, which is not looking that rosy.

The recent Federated Farmers farm confidence survey painted a rather gloomy picture. It was at a record low and the number one thing on farmers minds was, you guessed it, the economy. You might think that sounds preposterous given the good prices farmers are generally getting. However, I strongly believe the threat of inflation is front and centre for a lot of farmers, knowing full well that where inflation goes interest rates follow.

While the CPI rate has been 5.9% the rate of inflation for key agricultural components has been eye watering; fertiliser in particular was high even before the war in Ukraine. When not controlled, inflation can lead to things going downhill at an exponential rate. Recent history provides many examples of this, I recall having to pay 50,000 Zimbabwean dollars for a burger and beer at Victoria Falls 20 years ago.

There are a number of global factors at play which are beyond our government’s ability to control, however, there are factors that they can influence. These are the fiscal and regulatory levers they can pull.

On the fiscal side it’s ensuring that spending is quality-focused, not just splashed around. We said this to the Parliament’s Finance Select Committee recently; the response was “well, what would you cut?”. The gist of which was implying that to rein in spending meant cutting things out of health, education, policing and other stuff we all want.

While I’m pretty sure there are spending cuts that could be made in those areas, it would be with the Wellington-based bureaucracy not with the core services.

We all see plenty of examples of government spending that would be questionable: $1.9 billion spent on mental health with no discernible outcomes; $50 million on the cycle bridge to nowhere; the doubling of the number of ‘spin doctors’ employed by government; and let’s not even get started on the covid relief grants from the Ministry of Culture and Heritage.

This is all borrowed money, it is money my children and probably their children will need to repay at some point.

On the regulatory front there are a number of areas where the government policy, in my view, is going to hamper business and likely drive up inflation as well.

First and foremost is the RMA reform that is currently going on. We have real concerns that instead of being improved, the RMA replacement legislation is actually going to be made worse, quite frankly.

Then there’s the seeming unwillingness to allow migrants into the country, at a time in which businesses are screaming out for staff. Again this leads to less productivity, and less ability to add value from New Zealand firms and produce, all leading to less export earnings for NZ, meaning as a country we have less ability to purchase.

The fair pay agreements legislation is almost like back to the future, however, instead of starting off in 1985, we are returning to 1984 and all the failures of the Muldoon government.

Unless we as a country ensure that government spending is focused on quality spend on core services and regulatory changes are properly thought through and impacts understood, then we face some very tough times ahead economically. n

“I strongly believe the threat of inflation is front and centre for a lot of farmers, knowing full well that where inflation goes interest rates follow.”

Federated Farmers president Andrew Hoggard says the state of the economy will be a big focus for voters when the general election comes around.