The Reserve Bank should have been cutting rates much earlier as the economy started to slow due to the credit crunch and high oil prices. Instead, it pointlessly tried to fight the inflation coming from those oil price rises by strangling our economy with high interest rates. Now, at least we are finally getting cuts but they are so large that they amount to little short of panic from the Reserve Bank.

I won’t go into a lot of detail around their motives, as this blog has covered it off already, including some very sensible comments from Economist Susan St John this morning in the linked podcast.

But there are two issues here worth exploring further. Firstly how this issue was handled by Labour in relation to the election, and secondly how National has handled it since.

On the first matter, Labour, by omitting to flag up prior to the election a cost pressure that they were aware of, may have scored a bit of an own-goal on their entirely sensible and defendable policy of retaining ACC as a government not-for-profit monopoly.

Yes there is convention not to commit a future government to new spending during an election campaign, and this convention is in place for good reasons. And it is entirely understandable, given the timeframes outlined in the Department of Labour’s report that Cabinet was not able to sign off on increasing the provisions in the non-earners account before the election.

But there was nothing stopping Labour adding their knowledge of the need for increased ACC provisions into the Pre Election Economic and Fiscal Update. There is a section of the PREFU specifically for things like this – ‘unquantified risks’, a section where government can outline risks that “would, if they eventuated, impact on the Government’s forecast new operating and/or capital spending amounts.” (Indeed, s.26 (U) of the Public Finance Act would appear to suggest that adding the ACC shortfall to the PREFU wasn’t actually optional – it was mandatory. The phrase “all other circumstances that may have a material effect on the fiscal and economic outlook” is the key one here).

Now it’s not clear whether this was Labour’s omission or Treasury’s. It is of course Treasury’s responsibility to prepare the PREFU, and they should not have knowing left it out. But if it was Labour’s, it was a silly decision. If you try to fudge and hide things, you will always get found out.

But on the second point of National’s handling of the information.

Let’s not kid ourselves over this. This error on either Labour or Treasury’s part called for a response, but a proportional response from National is not what we saw.

John Key’s use of language at the press conference he called foreshadows a campaign they intend to run on creating public mistrust in what is in fact a world class accident compensation scheme.

There is no sense that ACC or the Department of Labour acted inappropriately. They followed protocols around giving advice to Ministers in regard to committing a future government during an election campaign. Further, based on comments John Key has made, it seems that when ACC knew of the future cost issue in May, they informed the ACC Minister that there would be an increase needed, although not the amount.

And on the case of the cost increases themselves, the four areas detailed in the paper John Key released seem straight forward. And as officials note in the paper, ACC’s consulting actuaries believe the movements between the current provision for the non-earners account, and the proposed provision, are reasonable.

Thus Nick Smith’s Ministerial Inquiry seems fairly pointless; the issues behind the need for the increase are already out in the public domain. As Linda Clark pointed out on Sunrise this morning, in some respects ‘Ministerial Inquiry’ is a fancy, official-sounding way of sternly saying ‘please explain’.

Based on their pre election comments over ACC, and John Key’s choice of words yesterday, in particular ‘ticking time bomb’, it seems evident that there were other motives at play in yesterday’s press conference.

Disappointingly, although not surprisingly, the media have continued to uncritically use John Key’s spin. (How many times have you heard that phrase ‘ticking time bomb’ over the last 24 hours…)

And people should watch out for the Tory commentators who will join in, and start bagging ACC, using the current funding issue to call for privatisation.

Take Graeme Hunt for example: “Many people think ACC is paid for by general taxes while, of course, it’s largely paid for by employers and it’s long overdue for the system to be reformed.”

He is of course telling porkies: a quick look at page two of the 2008 ACC annual report reveals revenue from car drivers, workers and taxpayers (through the government) was $2,534 million over the last year, whereas revenue from employers and self employed was $1,118 million.

But that’s not the point. Tory commentators like Hunt, and John Key with his phrases like ticking time bomb, have a very precise purpose - to sully ACC’s reputation, and cast it as inefficient and in need of the disciplines of the private insurance industry. (A global industry, by the way, that includes companies like the recently bailed out US firm AIG. Hmm, the sort of people I want managing my accident cover…)

They’ll ignore the PricewaterhouseCoopers report finding ACC to be a world leader.

And if we let them, they will proceed to privatise one of New Zealand greatest assets, which, as many people have noted, no one actually wants privatised but the insurance industry themselves.

Let’s not let them.
- From a Standard reader.

Vet
Socialism
Maverick
Bipartisan
Trepidation
Precipice
Rogue
Mysogeny
Turmoil 

Here’s the link.

Now, he is “appealling” to us to stop him looking like a puffed up idiot. He wants us to do his job for him by identifying bad regulations. One would think that he would already have a list as long as your arm. After all, he has a Bill that is meant to stop all these terrible regulations from being made. And ACT campaigned on being able to increase GDP growth by 0.25% a year by getting rid of “all nutty regulations”, to calculate that gain ACT must know which regulations it is talking about… unless it just pulled the number out of its arse.

Look, there are always improvements that can be made to regulations, just like everything else, but there is no evidence that it is a major problem that can’t be solved by incremental improvements as per normal. What is clear is that Hide is way out of his depth. Being the blow-hard in opposition is easy, governing is hard and serious work. Hide just isn’t up to it, he can barely string a coherent idea together (did you see this mess of an op/ed yesterday?); a real strategy to make improvements in such a complicated and multi-faceted area as regulation is beyond him.

On a deeper level, we see that Hide’s empty puffery on regulation is just another example of the Right appealing to the reactionary moron in us all. The Right (and, too often, the media) encourages us to engage with politics in a dumb, fact-free, cliched way: ‘all this red tape is strangling us’, ‘this PC Nanny State is wrecking my life’, ‘they waste all our tax on beaurucrats’. They fight on these dishonest cliches because they don’t have anything else.

The problem National/ACT is now discovering is that you might be able to win power with endless repetition of this rubbish but, once you’re in power, you have high expectations to meet and no substance to with which to fulfil them.

If you’re down in Christchurch, try to get along. It’s a good opportunity to meet some like minded people, have a drink, have a laugh, and talk politics. Oh, and there’s the Facebook group, which you can join up if you want to get an email letting you know about events.

What: Drinking Liberally - Christchurch

When: 6pm, 11 December

Where: Warner’s Pub, on the Square.

Who: Guest speaker EPMU National Secretary and probably next Labour President Andrew Little, and good jokers and jokeresses like yourself.

I’m sure Goff’s cheeky suggestion that Key give him a ring for some advice was only intended, as Armstrong suggests, to rub salt into the wound but you might wonder what would have been so hard about picking up the phone to Kevin Rudd to hammer out a joint solution with the Aussies. What’s that? You didn’t get his number at APEC John, just his autograph?

Auckland University economist and ACC expert Dr Susan St John couldn’t quite understand the rabid yelling “I’m totally surprised at the over the top extravagant language here, over what seems to be a reasonable minor matter”

But Key knows very well what he’s doing. He’s beating it up with a purpose. Of course Key knows only decisions approved by Cabinet can be included in the Prefu - and Cabinet couldn’t make a decision about a heated election issue like ACC in the election period. That’s Constitution 101. If Key didn’t know that himself, he had advisers to tell him.

The real reason behind the boy crying wolf is far more sinister. It was picked up by top ACC Lawyer, John Miller. “It seems too easy to suddenly come out with this, and I think it is a precursor for shaping it up for privatisation, saying look how appalling this is, we’ve got to get these insurance companies in”

Now, Key has ordered a Ministerial inquiry. It’s the same damn thing they did in the nineties. Using the power and privilege of government to smokescreen a secret agenda no one voted for.

Blogger Still Maintains Clark Just Like Mugabe

The power-sharing arrangement Helen Clark has permitted after the opposition National party’s election victory may dissolve into violence at any time, reports an anonymous blogger who continues to insist New Zealand has become exactly like Zimbabwe.

There is increasing concern for the blogger, who appears to be trapped in the imaginary alternative universe where he lived for the last two terms of the Labour government.

Readers had believed the blogger to be freely interpreting real world events, and expected the tone to settle following the election of a National-led government. But they have now realised he is in fact mentally locked in “a whole nother universe”.

His recent posts indicate that in ‘HelenGrad’ violent unrest and oppression are increasing, inflation has hit a record 500 000% and refugees are fleeing across the border to South Africa.

Indeed.

For the sake of the hundreds of Kiwis stranded in Thailand, can’t John just spare us the dithering and let Phil Goff handle the crisis?

UPDATE: Hilarious parody over at the Dim Post: ‘Key slams government response to Bangkok crisis‘

“Under our present prison policy the inmates are basically running the prison”

Why does anyone take this man seriously?

Several journos criticised his performance at his first post-Cabinet press conference. There is growing criticism of Key’s response to the situation in Thailand. Certainly both both his lack of urgency and his loose lips regarding contingency plans he had planned to keep confidential haven’t instilled confidence.

Tracey Watkins reckons that, by dithering on the financial crisis, National is risking its honeymoon ending sooner, rather than later:

The rest of the world, in other words, has decided to “go defcon” – while on our side of the globe, despite the “whatever it takes” promises from Prime Minister John Key and Mr English, there has only been cautious talk about bringing forward small infrastructure projects, and a whiff of “awaiting developments” in the air. Even the much- touted December economic stimulus package has had to borrow heavily from Labour’s October 1 tax cuts, which have already been banked, to arrive at the $7 billion figure that is being tossed around as a sign of willing on the Government’s part to join the “fiscal stimulation” party…

But National’s talk so far of curbing government spending has been cautious – and while it seems increasingly likely that some hard decisions will have to be made in light of the deteriorating position, it has ruled out the sort of upheaval that a harsh prescription like ACT’s would incur. The other option, to throw a far bigger package at the recession than the one National entered the election campaign with, would be in line with the current international fashion – but it comes with no guarantee of success either.

With Mr Key out of the country for Apec in his first week on the job, today – when he leads his first Cabinet meeting – is the first real day of the new Government getting down to business.

Events on the international stage, including the Air New Zealand disaster, may overshadow it – and the report card for the new Government, to date, on its response to those disasters in its first week is mixed. After a slow response earlier in the week to events in India (again, we can blame the fact that ministers’ offices are still only on skeleton staff) it had stepped up a gear by the end of the week in responding to the Air New Zealand disaster.

But those are matters beyond the Government’s control; it is on how it responds over the next few weeks to the more pressing matters within its control that will decide whether the honeymoon is a long one or cut short prematurely.

Colin James is also critical of Key’s continued unwillingness to be firm on anything, although his concern is more that National should try to sneak things through while the honeymoon is on:

if John Key is to make good his vaunted “ambition” and enrich us, he must improve infrastructure and hone institutional settings.

Key has promised additions to Labour’s infrastructure and human capital programmes. But on institutional settings he was bland pre-election and post-election. He has taken to not ruling things out, even a carbon tax. Prime ministers have to rule things out - and in. A good time to start is on the honeymoon, when voters are still smoochy. A bad time to start is in a second term when electoral leeway is tighter.

I guess we are all used to the Prime Minister being firm and clear but, in fact, that was Helen Clark’s personality and abilities, not a consequence of the position. I think, now, what we’re discovering is that people don’t change just because their job changes. In opposition, Key was unwilling to say anything that might offend, was vacillating, and had a tendency to mis-speak. Now he is PM, he is still indecisive and vague, and he seems to lack a sense of the gravity of the decisions he must make.

Between 1990 and 2005, agriculture became 30% more efficient in terms of greenhouse gas emissions. Agriculture produced $115 (in 1995 dollars) worth of goods and services for every Kg of carbon (or carbon equivalent) emissions in 1990. By 2005 that had risen to $150 per kg of emissions. That 30% improvement in carbon intensity is actually better than the economy as a whole, which had a 24% improvement.

(sources: mfe, stats)

As, you can see the improvement in carbon intensity for agriculture went flat in the last few years, probably because the switch from lower-carbon crops to dairy has counteracted general improvements in carbon efficiency. But the fact remains, we can and we have cut the amount of greenhouse gas we emit for each dollar of agricultural production.

Of course, because production is growing the actual emissions from agriculture have grown even as carbon intensity has improved. To actually reduce emissions we need to improve carbon intensity faster (or stop growing production). That’s not impossible, carbon intensity is improving anyway, we just need to invest in research. Unfortunately, our new government is set to destroy the multi-billion dollar Fast Forward Fund that was established to do just that.

Remember, when National/ACT says that we can’t reduce emissions from agriculture they are wrong, and they are the ones who are preventing further progress. They simply have no commitment to fighting climate change.

Here’s hoping we will see an ambitious program from National/ACT to protect Kiwis by creating jobs, boosting wages, looking after those who lose their jobs, and ensuring the social wage (the goods and services Kiwis receive free of direct charge from the State) is not eroded.

[also, John, you're in power now - drop the anti-Labour bullshit, you are responsible for your government, there's no use saying Labour was crap too. And governing is about more than catchy lines so stop repeating the vacuous campaign lines like 'balance our environmental responsiblities with our economic opportunities', which you said three times in ten minutes during your press conference]

The Hollow Men revealed, among other things, that Mr Keenan counselled Dr Brash to campaign on populist issues such as law and order and the Treaty of Waitangi “gravy train”, rather than his desire to sell state assets, increase the age of entitlement for superannuation, introduce education vouchers and further privatise the health system.

I’ve got to say, it’s a good match. Peter Keenan’s style should fit right in with the “tough on crime” and Rodney-as-celebrity schtick ACT uses to deflect attention from its extreme right-wing economic agenda.

Of course, in a sane world someone with Keenan’s background should be unemployable in New Zealand’s political scene. I guess Rodney Hide really is as shameless as he seems.

In fact, you could argue it’s been explicitly designed to divert money out of the pockets of working families and into the pockets of the already very wealthy.

According to the CTU’s economist Peter Conway:

“under the Government’s proposals a worker on $20,000 a year will pay $300 a year more tax in 2010 than what is set out in current legislation whereas someone on $500,000 a year will pay $9,202 less tax. This is unfair”.

“A two-child low income family where the parents work 50 hours a week to earn $50,000 will also pay more tax of around $300 a year by 2010 whereas the high income family earning $120,000 in the same circumstances will pay $900 a year less tax.”

Yep, you read correctly. Under National’s tax plan 40% of the cash goes to the top 10% of income earners, and it’s being paid for by gutting your retirement savings and taking money off low-middle income families.

If National really were the moderate, sensible centrists the media keep telling us they are then they might consider the CTU’s advice and introduce fairer, more progressive tax cuts like Gordon Brown is in the UK. Somehow, I don’t see that happening.