www.mccully.co.nz 19 May 2006

A Weekly Report from the Keyboard of Murray McCully MP for East Coast Bays

Well that seals it then. On two different fronts the 2006 Budget has determined the course ahead. First, New Zealand, having missed the last real chance to remain in the Australasian economic game, will now have severe problems for the next government to confront. Second, the Clark Government has sealed its fate and, no matter what they try from here, will find the voters have simply taken the phone off the hook by 2008. The public will have decided, as our Prime Minister is inclined to put it, to move on.

The economic calculation is simple. In the past six years the average net Australian wage has moved from 20% ahead of its New Zealand counterpart, to 33% today. The Australian economy, fuelled by over $40 billion in tax cuts, will grow at over 3% in each of the next couple of years. Growth in New Zealand, currently stalled at zero per cent, might beat 1%. The structural incentives for capital and skills to move across the Tasman are now substantial and getting bigger. Senior business leaders have become increasingly apprehensive on this point. And net migration from New Zealand to Australia has doubled in the past three years.

Faced with such a challenge, and armed with a Budget surplus of $8.5 billion, you might imagine that the Government would do something - virtually anything - to give the impression of action. But the 2006 Budget makes it clear the Clark/Cullen strategy is for New Zealand to simply lie down and give the game away.

The prescription is pretty simple. Right now New Zealand needs big, bold action on about four different fronts simultaneously: infrastructure initiatives (in energy, communications and roading); the removal of regulatory roadblocks (in the RMA in particular); a real focus on education/science/research/technology; and tax cuts to give individuals and companies the incentive and the scope to change several gears. And all of the above need to be big and bold enough to change the nature of the game.

Our problem, you, see, is that we have a government of school teachers and trade unionists (23 of the former and 28 of the latter), fixated with redistributing, rather than growing the economic cake. Having snuck home in 2005 with a couple of last-minute electoral bribes, the strategy for the 2008 election is to do the same. But by then our place in the trans-Tasman economy will be so diminished, our problems so serious, that the electoral phone will be off the hook. No one will be listening. Because this week the Clark/Cullen brigade made it abundantly clear to all that they really have passed their "use by" date.

Australia, Michael Cullen told Parliament this week, would “sooner or later run out of gas and coal.” Was this, National Leader Don Brash enquired of the Prime Minister, “her Government’s bold strategy for clawing back the gap between after tax incomes in Australia and New Zealand?”

This week Labour strategists were spinning to gullible hacks the cleverness of the so-called Working for Families (WFF) approach. So delighted would New Zealanders be to be brought into the programme’s net, that they would surely become Labour voters for life, our Government of teachers and unionists believes.

Here at the worldwide headquarters of mccully.co, we have a very different view of New Zealanders. We don’t think they are stupid and gullible. By 2008 we reckon they will have worked out the terrible disincentives in the effective marginal tax rates for those who want to better themselves. Just try this for size: a family with two kids earning $40,000 a year will, under WFF, qualify for family support, in-work payments and an accommodation supplement.

If they increase the family income to $50,000, the harsh abatement effect of the WFF regime will mean they get to keep just $2,000 of the $10,000 increase - an effective marginal tax rate of 80% in fact. A real killer of any incentive to get promoted, acquire more skills or work harder.

How much better off would they be if the Government simply cut their taxes - and avoided making them middle class welfare beneficiaries along the way. So here’s betting it won’t take long for most to work out that it’s their own money which the Government is using to bribe them.

The Law Society and Bar Association chiefs (Messrs Chris Darlow and James Farmer QC) were quick out of the blocks to respond to mccully.co criticism of Solicitor-General Terence Arnold’s elevation to the Court of Appeal. Without either taking the slightest trouble to consult their members, both were quick to condemn the criticism, and to reassure the public that Arnold was a jolly good chap who never spilled his port, threw food or caused all-in brawls at black tie Bar dinners.

The front page of the Law Society magazine "LawTalk" was entirely devoted to Law Society and Bar Association diatribes against the absolute scoundrel who had broken with several million years of tradition and criticised a judicial appointment. All of which must have left readers deeply perplexed. Because nowhere did the magazine bother to inform its readers as to the substance of the mccully.co criticisms.

The Law Society’s position was almost ironic. "The Courts are independent from the Executive Government. They do not take orders from Ministers or public servants and they make their decisions without fear or favour," said President Chris Darlow.

Which is the very point. The criticisms voiced by the humble Member for East Coast Bays, based upon careful reasoning and analysis of particular cases, were that Arnold, as Solicitor-General, had presided over a regime which was overly accommodating of the political needs of the Government.

(The very same Government that Mr Darlow wants judges to be independent from.) Criticisms that were not substantively addressed by either the Law Society or the Bar Association. And criticisms of which, regrettably, readers of LawTalk would have been completely unaware, because in their enthusiasm to rehearse the Darlow/Farmer line, they simply forgot to tell anyone what the fuss was all about.

What a pity it was too, that prior to racing into print, neither President bothered to consult their membership. For then they might have found out what their members have been communicating freely and regularly to the humble Member for East Coast Bays over recent days: that many believe the criticism of Arnold to be entirely reasonable, and concerns at the wisdom of his appointment well founded.

Public musings by Telecommunications Minister David Cunliffe that Telecom might need to cut its dividend saw a $200 million slump in its share price. The Stock Exchange has prompted a Securities Commission enquiry. Will this be the next example of a prima facie case, but no prosecution, for which the Clark Government now holds a world record?

This report is available weekly on my website at www.mccully.co.nz as well as being emailed each Friday. To subscribe, unsubscribe, or change your email address on the mailing list, please email murray.mccully@xtra.co.nz

ENDS

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