"Change" swings both ways

US lurches left, tiny New Zealand lurches right

According to the Sydney Morning Herald:

New Zealand's incoming prime minister John Key says his party's decisive win over the ruling Labour Party shows his nation has voted for change.

Key's centre-right National Party defeated the Labour Party, winning more than 45 per cent of the primary vote, enough to govern with the support of minor parties.

"In their hundreds of thousands across the country they have voted for change," Key told supporters at a function in Auckland.

Key, 47, promised a government he led would herald a more ambitious future for the country, which is in a recession and has rising unemployment.

"We need everybody pulling in the same direction. If we do that. If we work hard and if we remain determined we will make New Zealand as prosperous as we all know it can be," Key said.

"It will be a government that values individual achievement. It will be a government that supports those that cannot support themselves. And it will be a government we can all be part of," he said.

Key's defeat of the Labour government led by Prime Minister Helen Clark ends her nine-year reign as New Zealand's leader.

the government borrowed heavily and pumped the funds into large-scale industrial projects, would create trickle-down benefits in the form of jobs and revenue. This never happened: most of the Think Big projects yielded minimal profit whilst Muldoon was still Prime Minister and many were hampered by industrial disputes

Political commentator Bruce Jesson argued that Douglas acted fast to achieve a complete economic revolution within one parliamentary term, in case he did not get a second chance.[5] The reforms can be summarised as the dismantling of the Australasian model of state development that had existed for the previous 90 years, and its replacement by the Anglo-American neoliberal orthodoxy based on the monetarist policies of Milton Friedman and the Chicago School.[1] The financial market was deregulated and controls on foreign exchange removed. Subsidies to many industries, notably agriculture, were removed or significantly reduced, as was tariff protection. The marginal tax rate was halved over a number of years from 66% to 33%; this was paid for by the introduction of a tax on goods and services (GST) initially at 10%, later 12.5%, and a surtax on superannuation, which had been made universal from age 60 by the previous government.

The patient's diagnosis is quite clear. Government spending is now $15 billion per annum above the baseline trajectory that had been operating prior to Labour taking office. In 1999 tax revenue was $32 billion. Only 8 years later it's $52 billion, instead of $37 billion. Excessive spending has built a hot house environment with inflationary pressures that flow into every corner of the economy. Wages, prices, house costs, rents, mortgage rates and electricity all feel the relentless push from government overspending. Productivity has slowed to a crawl, while the rise in the standard of living, allowing for inflation, gradually subsides for most people, especially traditional Labour voters. It's a replay of Robert Muldoon. Thanks to excessive state spending and overuse of credit cards we import more and more. The government's spendthrift nature infects individual behaviour right across the country. High domestic interest rates are only one of the sideline results of excessive spending, like diabetes resulting from over-eating. The dollar soars because overseas investors are looking for a quick buck. They won't invest long-term in an economic graveyard.

Overspending governments often choose to regulate, rather than deal with the base cause of the disease. Few doctors admit mistakes. We now have 24,000 more people on the state's payroll than in 1999, steadily reaching double the number running the country eight years ago. Their remuneration races ahead of the private sector, and helps drive Wellington house prices and the inflationary environment many are allegedly there to control. Commissions and regulators spring up as ministers try to bandage the inflationary balloon to stop it exploding. Remember that awful movie of Evelyn Waugh's, "The Loved One"? It centred around the American funeral industry with a vast Mrs Joyboys in bed gorging herself until she burst? Labour is moving relentlessly down that road as ministers inflate spending and meddle in things beyond their expertise, completely confident they know better than the market place. Any wonder that an upwardly mobile one million Kiwis now live overseas, escaping the huge gap that has opened up between wages at home and those elsewhere?