Should Joe Hockey be looking up to Bill English?

My new local cafe stocks a range of newspapers, and I’ve been finding myself reading things like the Australian Financial Review (Australia’s equivalent of New Zealand’s NBR). Yesterday I almost spat out my morning coffee while reading an incredible op-ed from Jennifer Hewett.

She spent several hundred words extolling the economic skills of Bill English, claiming that the New Zealand economy should be the envy of Australia.

I have to give her credit for originality – it’s certainly not a line of logic I’d heard before.

My friend and fellow ex-pat New Zealander, Marcus Ganley, has written an excellent piece for Crikey pulling the op-ed apart. Read his full post here.

While National have got the treasury’s books on a path to surplus (made far easier due to the strong fiscal management of the 5th Labour government), they’ve done it at the expense of actually looking after the economy. Growth has been stifled and unemployment is simply too high.

As Marcus says…

Taking the size of the economy in 2008 (when the National Party was elected) as the base, the New Zealand economy is 1.18 times bigger today. This compares with Australia, where the 2013 economy is 1.25 times bigger than in 2008. Growth under the previous New Zealand government averaged just under 3.5% per year.
Under Clark’s government from 1999 to 2008, unemployment in New Zealand was continually below Australia’s. From 2005 to 2007, unemployment in New Zealand was below 4%. In 2005, according to Organisation for Economic Co-operation and Development statistics unemployment was in New Zealand was 1.2 percentage points lower than Australia. This has changed completely under the National Party. On the latest OECD figures unemployment in New Zealand is nearly 1.7 percentage points higher in New Zealand than Australia. At the same time, the wage gap between Australia and New Zealand has increased by nearly $NZ90 per week since the election of the National Party government.
At its essence government is about priorities. Strong fiscal management is important. It ensures government services are sustainable and avoids placing undue burden on future generations for the services provided today. However, fiscal management is not everything. Before heaping too much praise on New Zealand’s National Party, it is worth looking at the economy as a whole.
If Joe Hockey took the time to visit New Zealand, I can’t say he’d be impressed with our economy. It’s a country full of empty shop fronts, low value exports and dire unemployment.

2 thoughts on “Should Joe Hockey be looking up to Bill English?”

  1. I agree. The Keynesian message has not been put out the public well. Tony Abbott’s constant fear mongering about government debt while in Opposition has meant that if he wishes to keep to these standard, the inevitable spending cuts will cause massive damage to the Australian Economy. There seems to a perception that the LNP in Aus/ The National Party in NZ are better at managing the economy, a statement that cannot be backed up by very much evidence. U

  2. “Before heaping too much praise on New Zealand’s National Party, it is worth looking at the economy as a whole.”

    This is absolutely right, but the implication you seem to have taken from it is absolutely wrong: what’s happening to the economy (in its own right and relative to Australia) has little to do with *any* political party’s fiscal management.

    See this recent paper comparing Democrat and Republican “economic performance” while in office: while economic growth has, on average, been higher under Democrats than republicans, this is largely due to good luck (in the form of supportive oil prices – something US governments don’t control).
    (http://www.theatlantic.com/business/archive/2013/12/are-democrats-really-better-at-running-the-economy-than-republicans/282037/)

    The point being, the direction/state of the economy doesn’t much depend on the political party in power (if at all). In fact, economic theory makes an even stronger claim: fiscal policy, in general and irrespective of the party wielding it, should have no effect on the aggregate economy when monetary policy does its job properly – as has almost certainly been the case in NZ and Australia.

    When comparing NZ and Australia post-GFC, the major difference in economic performance hasn’t reflected this-or-that government’s performance, but the much faster run-up in Australia’s terms of trade. This, in turn, has been a result of recent composition of Chinese demand for both countries’ exports: faster growing demand for hard commodities from Australia (while China continues to industrialize) and less fast growing demand for foodstuffs from New Zealand. New Zealand’s picture only looks rosy in comparison now because Australia’s terms of trade is anticipated to fall (as China no longer needs to build as quickly), while New Zealand’s is expected to continue rising (as China gets richer and looks to consume more primary goods).

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