National makes a right turn
By Richard Harman (author)
A cynical National MP suggested to POLITIK that by appointing Paul Goldsmith as finance spokesperson, the party might find it had ended up with Ruth Richardson.
It’s an understandable observation.
Goldsmith is undoubtedly the driest economic spokesperson National has had since Don Brash or Richardson.
He ticks the right’s boxes with his support for smaller government, lower taxes and a greater role for private enterprise in delivering big ticket items like infrastructure.
Yet, the irony is that as the National MP who has to stands aside in Epsom for ACT MP, David Seymour, he would actually fit quite comfortably into ACT.
But for all that Goldsmith is a tribal Nat; he is well embedded within the party, and for that reason, he has to temper his private impulses with the pragmatics of life as the Opposition spokesperson on finance.
For a start, he is part of leader Simon Bridges’ inner circle.
He got there by adapting to opposition faster and more effectively than many of his front bench colleagues; particularly the finance spokesperson, Amy Adams.
During the recent round of party regional conferences, he filled in for Adams with the state-of-the-economy speech at the South Island conference.
The writing was clearly on the wall.
And though it is early days yet, he is already bringing a focus to the role that Adams did not.
Yet perhaps surprisingly that already means challenging some of the central planks of the Key- English government’s economic policies.
And he echoes a view among many of his colleagues that both Bill English and Steven Joyce misread the electorate in 2017 with their insistence on preserving surpluses rather than addressing big problems in health, particularly mental health.
“Frankly I think it was a mistake to have an election year budget which had yawning surpluses as far as the eye could see,” he told POLITIK.
But having said that he frames the decision facing a government as one which would take taxation into account.
“I think we should be continually focusing on the split between returning excess taxation and. continuing to invest in spending.”
So even though he recognises that National lost the debate over health spending, there remains scepticism about government spending.
“We give them a tick for an investment in mental health in the budget, but it's like everything; it's one thing to announce you're going to spend money, it's another thing to actually get an effective result for it.”
What follows from that is a fundamental aversion to high taxation.
Thus already National has proposed indexing taxation against inflation to prevent fiscal drag; a move that Goldsmith approves of.
“We haven't been making bold promises,” he said.
“What we've been talking about is tax indexation, which is just the basic principle that you shouldn't be surreptitiously increasing taxes every year.
“Our general inclination, of course, is to take no more than we need.
“The national government left the new Labor Government with yawning surpluses.
“I would always say if you look if you have surpluses, then the options should include a mix of tax cuts and wise investment.
“That means a bit of both; not exclusively one or the other.
But whether a National government in 2020 (if that were to happen) would have much room to consider those options is becoming increasingly doubtful.
The Budget Economic and Fiscal Update forecast surpluses to fall dramatically from $3.5 billion this year to $1.3 billion in 2020.
But that forecast also assumed growth of three per cent in the 2019 – 20 year.
Post Budget commentary suggested those estimates were brave.
The ANZ Bank was typical: “Treasury’s economic outlook is a little more optimistic than our own, and any surprises to the downside of their expectations could make for a few difficult decisions in the coming years.”
Goldsmith leaves the impression that the uncertainty of how the economy might travel over the next 18 months could temper his own preferences for a bold tax-cutting programme.
“It remains to be seen what we'll be confronted with when we get back to government.
“If we are left like we were last time with ever yawning deficits, then you have a lot more work to do and tougher decisions to make.”
In the meantime, he is keen to blame the government, at least partly, for the economic slowdown.
“Of course, there is an element of international factors here.
“But it is only an element.
“There is a significant domestic cause for the slowdown in New Zealand.
“The terms of trade are at historically high levels. So right now we should as a country be going well.
“The fact that we have slowed down despite those high prices suggests the Government needs to take responsibility for that incredible uncertainty that they've introduced over the past 18 months.”
By that, he particularly means the uncertainty over a possible capital gains tax.
He also cites the slowness (he says) with which the Government is addressing infrastructure issues.
And here it is quite clear he would embark on a different funding path to Labour.
“I'm relatively new to the portfolio, but my broad observation is an obvious one; that we need to be open to new ways and different ways of raising the capital for the infrastructure investment we have.
“And that should include more involvement from the private sector with private capital coming in and finding new ways to do that.
“There are lots of different ways that you can do that.
“But you know we are open to exploring that.”
What Goldsmith is proposing; lower taxation and more private sector involvement in infrastructure; is what National's right has been advocating since Sir Robert Muldoon lost the leadership in 1985.
There are an increasing number of National MPs now willing to concede that the Key-English-Joyce economic triumvirate were not willing to go as far as the party's right would have liked.
But in Goldsmith, they have their man.
And he is willing to move into relatively controversial territory in the name of a free market and light government intervention.
For example, he is opposed to any more controls on immigration.
“ The Nationals party has been more generally on the side of favouring good quality immigration in order to grow the economy.
“Fundamentally, I think. New Zealand's long term prospects depend to a large degree on Auckland in having the scale to be in the same game as the Asia-Pacific cities like Sydney Melbourne and Brisbane and so forth.
“And you know the trend all around the world is for more people to want to live in cities of scale so that you can see that you have the opportunities to do what you want and the agglomeration effects of big cities are well known.
“So I'm in favour of Auckland and continuing to grow.”
In many ways, the debate between Goldsmith and Finance Minister Grant Robertson will be a real debate because each is talking about a different approach to the economy. Goldsmith seeks efficiency and the empowerment of the individual while Robertson sees the economy as the servant of a community seeking answers to its most profound problems.
And that really defines the difference between National and Labour.