The Letter

20 December 2004 Parliament finished the year with its traditional bout of urgency as the government passed the Aquaculture Bill, which gives 20% of all marine farms to Maori, and seven new bills, none of which were controversial. Labour's election strategy is to keep the political heat low and ride the prosperity to the polls. The Letter doesn't expect any radical new policy announcements.

YOU PICKED IT

Margaret Wilson topped our reader's poll as the minister you wanted shuffled out of a portfolio. The PM has done just that, nominating the unpopular minister to be Speaker. The Letter has no doubt Labour's polling delivered the same message. Wilson has never asked a question in parliament, but then if you know everything you don't need to. While she has shown no interest in parliament, we believe she may surprise in the chair and do less damage as Speaker.

NO NEW FACES

The official reason for no new ministers in the reshuffle is that Clark wants two ministerial slots to offer a potential coalition partner, should Labour win re-election. Clark will remember how unsuccessful bringing in new ministers was in the Palmer/Clark government in election year.

ITS BOOMING

We picked it first. November house sales confirm house prices are rising. The Letter believes this will be a record retail Christmas. There is no sign of Treasury's long predicted slow down. Of course it will come, if only, because no OECD country has ever grown sustainably when the State takes 40% of GDP – as Roger Kerr of the Roundtable points out. The economy will get even hotter if changes to immigration, which have just come into effect, result in more immigrants. 2005 may start like 2004 with interest rate rises.

RECKLESS SPENDING

Dr Cullen likes to present himself as keeping a tight grip on spending. The percentage of GDP spending has fallen slightly, but in dollar terms spending is increasing rapidly. When adjusted for the fall in unemployment benefits, we see government spending is rocketing upwards. Since Labour came into power the number of civil servants has risen from 29,463 to 35,645.

BIG GOVERNMENT, BIG FAILURE

A recent Treasury paper revealed a 7% increase in health spending has resulted in almost no improvement in output. A 20-30% increase in nurse's wages will mean a further massive increase in health spending with no improvement in outcomes. The Reserve Bank's feared wage inflation appears to be coming from the public sector, when other state groups seek matching increases. Labour governments are always undone by their friends on the left.

TAX CREDIBILITY

Don Brash's speech on tax cuts would have had more credibility if he'd admitted that real tax cuts will require cuts in government spending. Labour's massive increase in spending means National and United's tax cuts are predicated on the economy growing at a rate that is unprecedented. ACT, who would can the $2 billion Cullen fund, has the only credible tax policy.

PREDICTION FOR 2005

A tax cut. With all opposition parties campaigning for a tax cut, Cullen can now pinch their policy by a tax cut in the election budget. A smart move would be to copy Howard and adjust the thresholds for inflation.

THE PARTIES

Labour: Despite having lost three ministers, and losing a by-election to a new party formed by one of them, ends the year in a commanding lead. National: Is in better shape than this time last year. They have more money, people, policies and a credible leader. Orewa showed that National could win. NZ First: The rise of the Maori party has cost them an important constituency. With National performing so poorly in parliament Peters has been able to project himself as the government's most effective critic. Green Party: Have moved into a slot once held by the Alliance, an extreme left party. United: One poll has them on 1% another on 3.8%. They are in trouble. Maori Party: The Letter picks them first and they will win the Maori seats.

ACT

Last year ended with ACT polling at 6%, having its most successful post election year. Since Orewa ACT has not polled over 3%. ACT's policies, "One law for all", "Zero tolerance for crime" and now "A tax cut for every worker" have been stolen by other parties. This shows ACT's influence on the political agenda. ACT's challenge now is to translate these achievements into votes. The answer is only ACT has the practical solutions to race preference, violent crime and escalating taxation. ACT's focus group polling has never been better. The electorate knows ACT raised these issues first, has a quality team and is willing to give Rodney Hide a go. Rodney's State of the Nation speech at The Crowne Plaza on 20 January 2005 will be important. Tickets available from http://www.act.org.nz/nation. If he can set the agenda and demonstrate a vote for ACT is needed to keep sound economics alive, then ACT can increase its vote next election.

TOTAL WASTE

Airfares are about to rise to pay for extra airport security. Despite screening millions of passengers and confiscating thousands of Swiss army knives, not one domestic security risk has been identified. The true cost, in delayed departures and extra travel times is huge. The government has scrapped the skyhawks so why would a terrorist attempt to hijack a passenger plane when they can rent a Cessna, fill it with fuel and fly it straight into the Beehive? While screening for international flights is now a fact of life, the internal screening is a self inflicted cost.

NEW YEAR GREETING

This is our last edition for 2004. We wish our readers a happy Christmas and a prosperous 2005.

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