Robson-on-Politics - December 2007

National's chant "do as your allies" do suddenly gets tricky

Life used to be so simple for National Party MPs.

If the question was climate change, you just answered that 'we stand with our allies'. If the question was illegal foreign wars, you just said 'we stand with our allies'.

But then Kevin Rudd led the Labor Party to victory in Australia, and all of a sudden it has become a bit tricky.

I guess that means the National Party no longer supports sending combat troops to Iraq, and now fully supports New Zealand signing the Kyoto Protocol on Climate Change - or does it? What does a Nat do when Washington, London and Canberra have divergent positions on issues?

These are very testing times for the brains of National Party spokesmen and leaders.

Labor the Commonwealth: From the Oz correspondent

Kevin Rudd, the 26th Prime Minister of Australia, has called the election of the new Labor Federal government a turning of a new page in Australian history.

Labor got 43 per cent of the vote, around the share of the vote that the Labour-Progressive government got in New Zealand in both our 2002 and 2005 elections, but won a massive seat majority due to the spectacularly unrepresentative voting system that they still have across the ditch.

Rudd and the new deputy PM, Julia Guillard quickly put together a Cabinet based on ability and merit (unusually ignoring the convention of allotting places to the party's Right, Centre and Left strands). The PM has warned his new ministers that they are all 'on notice,' as he himself is. It is no secret Kevin Rudd will be demanding high levels of performance and dedication in his stated mission to create a new era for Australia.

Julia Gulliard's responsibilities reflect her importance in the new Government. She will be the driver of the 'education revolution', Minister for employment and workplace relations, making her in charge of ushering out the failed Employment Contract-type laws known as Work Choices - the workplace laws that more than any other led to the Liberal-National's biggest electoral defeat ever.

Labor beat the Lib-Nats not only because of Work Choices, which affected every Australian worker adversely; but also because of their anti-science refusal to accept that Australia had to take action against climate change because that is what not only a majority of Australians want - but what overseas consumers of Aussie products demand.

Signing the Kyoto Protocol is on the agenda for one of the first 100 days achievements to be done. To underline how Australia has joined the civilised world, and left the primite orbit of the U.S. Republicans behind it, the new PM will be at the 11-day climate change summit in Bali which is tasked with creating a roadmap for negotiations on a global deal for climate change. He is taking key ministers with him including Finance Minister, Wayne Swan and Environment Ministers, Penny Wong and Peter Garrett.

That in itself is great news for Australia developing stronger relations with its region - China, India and Indonesia - but also good for New Zealand. To often New Zealand, and New Zealanders, are confused with Australia in many parts of Asia - now we won't be tarred with that negative brush because there is an Australian government in tune with the values of most Kiwis on these big issues.

The Opposition has difficult and stormy times ahead. But it hasn't taken long, about 24 hours in fact, for the conservatives in Australia to change their tune on both the Kyoto Protocol and on the need for an apology to the Stolen Generation - as PM Rudd has already pledged to do.

Growing gap in wages between NZ and Australia 1990-2000

Until the mid 1970s, the performance of the NZ and Australian economies was very similar but the extremist policies of the 1975-1984 National Government, NZ's public debt levels mushroomed as the government tried to borrow its way out of having to adjust to the loss of free export access to the U.K. market (after the UK joined the European free trading zone.

In terms of average after-tax incomes, there was still no significant gap as late as the late 1980s.

The gap in take-home incomes between New Zealand and Australia opened up in the early 1990s (under the last National government) and widened throughout that wasted decade of the 1990s when we had National-United, National-NZ First and National-Tau Henare governments.

What those governments did was run high unemployment policies (which depressed the wage structure of the economy), pushed the legal minimum wage lower and lower below the average wage, cut the level of the pension and welfare benefits (which put further downward pressure on wages) and decimated workers' wage negotiating power by introducing the Employment Contracts Act (a much more extreme form of the recently-departed John Howard's Work Choices policy).

Employers' decision on whether to invest in new technologies (which drive productivity gains) is significantly influenced by the relative costs of acquiring and running new technologies compared with the costs of paying for more employees. In New Zealand in the 1990s, employers significantly under-invested in new technologies (capital investment) because they could get more output by investing more in the country's relatively cheap labourforce instead.

What that means is that between 1990 and 1999, the rate of labour productivity growth in Australia began to significantly get ahead of the rate of labour productivity growth in New Zealand.

As every Year 10 economics student knows, a key driver needed for any economy to deliver on-going increases in living standards is increased labour productivity growth - and it was NZ's relatively poor labour productivity performance under National-led governments that coincided with the widening gap in incomes across the Tasman - something that is being arrested by the Labour-Progressive government.

To quote a Treasury report: "Between 1995 and 2002, lower capital intensity explains 70 percent of the difference in output per hour worked. Whereas the cost of labour relative to capital has been rising in Australia, it has fallen by 20 percent in New Zealand between 1987 and 2002. The relative price of labour to capital in New Zealand fell to 60 percent of the Australian value in 2002 after being comparable in thelate 1980s. It is to be expected that NZ enterprises would therefore tend to adopt less capital intensive produciton methods.'

http://www.treasury.govt.nz/publications/research-policy/wp/2005/05-05

Happy summer holidays - wishing you a progressive New Year

Next year we get to again participate in the great democratic process.

The Labour-Progressive government will be outlining the next steps of our programme that, since we were elected in late 1999, has delivered benefits for a majority of New Zealand families.

What will National stand for in 2008?

A return to the 1990s' policies of cheaper labour costs (smash the unions, causalise the workforce, cut government investment in R&D), and a re-opening of that 1990s widening trend in the income gap between Kiwis and Aussies which this government's policies had put behind us.

But all of the arguments for and against can wait till next year. Now it is almost time to head for the beach - see friends and family and celebrate the coming of a New Year.

ENDS

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