The Letter Tuesday 8 June 2004

TIME TO VOTE

The primary ballot closes at 5pm Friday, the ACT caucus meets on the weekend and the new leader is announced Sunday. NZ's first primary has been a great success with large meetings, a huge increase in membership, vigorous but fair campaigns and favourable publicity. Only the NZ Herald thinks elections are divisive and has misreported the primary to make its point.

The paper falsely claimed Rodney Hide had attacked the president's neutrality, he did not; that Stephen Franks had likened the primary to the cultural revolution, another fabrication; and now the paper says Richard Prebble "is making it obvious he does not want Mr Hide to succeed him".

The obvious evidence is Richard's public endorsement that Rodney has the qualities to lead ACT. What the paper can't comprehend is Richard has also endorsed Ken, Muriel and Stephen and the Herald clearly thinks ACT should pick its leaders in secret. Such leaders have no mandate. Helen Clark struggled and Bill English failed. ACT's new leader will have the mandate that comes from a nationwide democratic vote.

OFF TOURING

Parliament is in a two-week, Queen's Birthday, recess. The PM is off visiting Europe again. Helen Clark loves the European Chardonnay Socialists and has managed to visit Europe, we believe, every year of her 23 years in parliament. Twice so far this year! Don Brash is in the USA carefully not talking about nuclear policy. Last week the most significant foreign policy development was the signing of a further free trade agreement with China.

OFF THE BUDGET

Polls indicate the budget has not delivered the boost Labour had hoped for. Cullen's budget is the worst for over 20 years, yet ACT is alone in completely rejecting tax and spend. National: Roger Sowry argued in caucus that National should not oppose the budget legislation increasing family support. The job was left to Katherine Rich and her speech was ambivalent. NZ First: support the budget. United: claim they're their ideas. Greens: "Labour's best budget".

POVERTY TRAP DEEPENS

The budget fails on its own terms. The measures do not encourage beneficiaries to return to work and do not help most working families. Parliamentary questions from ACT show the net income gap between a two child, single income family on $25,000 a year and an identical family on $50,000 has got closer. Pre taxes and benefits the $50,000 household earns twice as much. Before the budget, the post tax/benefit position was that the $50,000 household received $742 per week and the $25,000 household (regardless of whether they worked) got $609, just $133 a week less. After the budget this gap narrows to just $97 a week.

THE POLITICS

The centre-right can make the case for sound economics and win the political argument. The budget is not fair. The only role for over 1.2 million households is to pay for Labour's generosity with our taxes. Treasury's prediction that the budget will lead to slower growth than Australia is, long-term, very serious. Instead of attacking these weaknesses, National's associate finance spokesman, John Key (a genuine prospect), is instead raising a social credit type argument that the Cullen super fund should be "invested" in roads. It is a worry.

ECONOMIC EFFECTS

Anecdotal evidence is that the budget is boosting consumer spending. Sales of mid-range housing in Auckland that had slowed prior to the budget, lifted post budget.

OIL SHOCK

There are no truck boycotts as there have been in the USA and Europe. It seems the NZ economy is able to absorb such shocks. Air NZ has revealed it is fully hedged for three months. Mainfreight says the transport firm is not affected by fuel price changes, having put in place fuel surcharges. Such a contrast to the first OPEC fuel shock that put the NZ economy into a recession and had government responding with carless days. To put the present fuel price rise into context, first oil shock price in today's dollars is the equivalent to US $100 a barrel.

THE END IS NIGH?

The current panic story is China's emergence as an economic power means the world faces a permanent petrol shortage. We are sceptical. There may be some short-term shortages and price spikes but at $40 a barrel there are huge proven oil fields that become economic to develop. Saudi Arabia keeps the price of oil down for fear that a price hike will lead to the development of new oil fields that will cause a glut and a collapse in oil prices. The economic predictions in the budget based on $30 a barrel in the long-term are about right.

OUT OF TOUCH

At the Labour caucus following the biggest demonstration on parliament's grounds ever, the Hikoi was not mentioned. Helen Clark did not refer to the land march and no MP was brave enough to raise the issue. Outside the caucus MPs are questioning Clark's judgement and asking whether she can lead them to a third victory. The budget is not the miracle weapon promised and the rumblings will grow. Helen, it might be wiser to stay at home.

MAORI PARTY

The Maori party's 2.5% polling is amazing. As the Maori population is young, the number of Maori voters is small. Labour could lose all six Maori seats. Labour says that MPs like John Tamihere are safe. What if Pita Sharples, who has strong links to West Auckland, decides to run – not in his tribal area – but head to head with Tamihere?

THIS WEEK'S POLL

The Letter readers gave the budget just 1.9 (average) out of 10. This week's poll: Should Helen Clark visit Europe every year? We will give the PM your views when she returns. To vote - http://www.act.org.nz/poll.

ENDS

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