THE LETTER
Monday 11 October

WHY THE DEFEAT?

John Banks suffered a massive loss and the C&R, NZ's most successful electoral winning machine, its first defeat since the depression in 1938. The city is prosperous and the council under Banksie got things done, so what's gone wrong? The Herald under Wilson and Horton used to be a voice of conservatism and now under its absentee owner is the voice of its lefty journalists. Hubbard was able to promise the Eastern Highway, light, heavy and underground rail, and claim the rest of NZ would pay for it. The NBR's following Hubbard to church went too far but the Herald did no analysis. But Banks and the C&R have beaten the Herald before. Successful mayors like Sir Barry Curtis portray themselves above party politics. John Banks always gave the impression he was still a partisan National MP so he never widened his support base. The C&R loss was collateral damage; anti-Banks voters punished his allies.

ELECTORAL CONSEQUENCES

There is no evidence that local body politics has any effect on parliamentary elections. In Wellington where the centre right has done well, National has its lowest urban support. ACT's Hutt candidate Chris Milne topped his ward's vote but that will not affect ACT's polling. In Australia, Labor governing every state probably helped the Liberals federal victory.

STUNNING VICTORY

It is truly amazing that 65-year-old Howard has won four times with an increased majority. The boundaries do favour the Liberals. Federal politics is about foreign policy and defence and Australians feel safer with the Liberals in charge of security. It was the economy and 10 years of prosperity that won the election. It shows how hard it is to defeat a government in prosperous times. Howard also showed how easy it is to bribe voters with their own money. NZ's relative surplus is larger. If the polls swing against Clark who doubts she will do the same?

THERE ARE BILLIONS AVAILABLE

The BNZ's Chief Economist, Tony Alexander, in BNZ Weekly Overview 30 Sept, writes, "Last week the Treasury reported an operating surplus for the 2003/04 financial year of $6.6b once one adjusts for asset revaluations and so on. Treasury have tried to explain away the huge surplus as not actually producing cash which can be used for spending or tax cuts (with which this government appears to have a philosophical problem). But struggle as the Treasury boffins may, the truth is that there is almost $5b available to spend or give back to us taxpayers as tax cuts. Following is a quick analysis of the adjustments Treasury make to try and reduce the surplus to a miserable $0.5b. We think the adjustments they make are invalid..."

Alexander says Treasury has tried to classify as expenditure items that are not. True expenditure is something that does not create an asset like the civil service wages. The $1.2b cash remaining in SOEs, the earnings of NZ's super fund, the $1.7b student loans are all available for tax cuts. Alexander criticises classifying the $1.3b for purchasing assets as not being available. The government is using cash for capital it normally finances from borrowing. He does allow the $1.9b transferred to NZ's super fund as being truly deferred but points out there are some, (like The Letter), who would wind up the fund so the whole $6b is available for tax cuts. The BNZ weekly overview is worth reading http://www.act.org.nz/bnzoverview. Treasury secretary John Whitehead must be concerned when the Chief Economist of the BNZ says "Treasury are probably engaged in the biggest smoke and mirrors exercise we have seen from them since 1990", ie since Treasury was given independence from party politics by the Fiscal Responsibility Act.

SUPREME COURT CASE

The judges kept saying, "but ACT had 9 MPs and now the party has 8, surely proportionality has been disturbed?" The judges also grasped Donna's claim to have voted "with" ACT is wrong. Since Donna has been declared an independent her vote is always recorded as an independent vote.

GLORIFIED DISTRICT COURT

Media criticises the Supreme Court's layout partly because some journalists were refused admission because all the spectator chairs were taken. Actually the new court is larger than the room in which Privy Council appeals are heard in a house in Downing Street. The Privy Council being technically a committee meets around a table. The judges wanted a similar set up but the Department of Courts has provided a layout that looks like a district court. The judges are on such a high platform when they lean back they disappear from view. The bureaucrats plan to put the Supreme Court into the vacant old Wellington High Court. The building is subject to an historic places preservation order. The same heritage architects who are insisting that because there were no security measures when the Beehive was built, there must be no security features today, are insisting that the old High Court jury court room be rebuilt, dock and all. It's like holding a board meeting in the town hall. The Letter understands that the judges rather like the temporary accommodation on the third floor of the law school in the old government building. If they were allowed to redecorate the temporary Supreme Court building in the style of the boardroom, the judges would be quite happy to stay where they are. While the Supreme Court judges may be the last word on the law, they cannot stop the bureaucracy building them a multi-million dollar court they do not want or need.

THIS WEEK'S POLL

Last week 86% of readers said Treasury should cost every party's policies, something National and NZ First oppose. This week, "Who do you think is going to win the US presidential election?" Readers predicted Howard's win so lets test the wisdom of crowds and see if you can do it again - http://www.act.org.nz/poll

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