Notwithstanding some highly unpopular moves including the Emission Trading Scheme, a higher level of GST, faltering ministers and a troubled economy, the National Party can be confident of returning to govern the country for a second term when New Zealanders go to polls next year.
The architect of electoral success yet again would be Prime Minister and Party Leader John Key, whose laidback style of governance, characterised by transparency, integrity and a clean hand, has won the hearts of a majority of New Zealanders. Opinion polls may have been unkind to the Party but he remains the Preferred Prime Minister by more than 58% of the voting public.
Depending on the time of the Election 2011 (we believe it would be before the onset of winter), and the turnout at the polls, Mr Key can hope to lead the National Party back to the Treasury benches and his ministerial colleagues to the Beehive, provided of course, there are no political faux pas perpetrated by any of them.
Promises to keep
National has largely kept its election promises, although the rising incidence of crime and unemployment (contrary to its claim) and a number of unpopular decisions would be haunting. Nonetheless, with the next election at least another Budget away, Mr Key and his Government would have many opportunities to apply antiseptic measures and avert any adverse impact on their electoral fortunes.
The business community has been largely sympathetic and supportive of Mr Key and his pro-business policy agenda. His ability to keep the recession-hit economy on the rails and limit fall-out from the global financial crisis that crippled most developed economies and bankrupted a few are seen as scores for National.
Analysts say that New Zealand has become more investor-friendly with “quiet reforms” carried out by the Government, including easing restrictions on foreign direct investment, although no tangible benefits are on sight. If anything, there is a need to stem the flow of financial and human capital overseas, although any attempt to regulate would be seen as interference and stifling.
Populist Budget
National’s second Budget, delivered on May 20, was as populist as it was inflationary. However, tax reliefs, granted across the board, have somewhat appeased the people, who do not seem to mind the rise in GST (from 12½ % to 15%) from October 1 (Read our extensive budget analysis in our June 1, 2010 issue).
But the country’s ballooning deficit is a source of worry to planners and economists.
According to critics, Budget 2010 is a mixed bag of visionary and myopic policies.
With Crown Operating Expenditure slated to move up to $70.65 billion during the current budget year (increasing to $77.04 billion by 2014), there is a risk of external debt getting out of hand.
The bottom-line budget deficit for fiscal 2010 would be $7.07 billion, higher than the December 2009 estimate of $5.13 billion.
Core operating balance, excluding investment gains and losses, is forecast to register a deficit of $8.63 billion for fiscal 2011, again higher than the December estimate of $6.68 billion.
The wider core deficit is largely due to lower-than-expected tax revenues and the expected initial impact of the budget’s tax changes.
Financing costs and one-off expenditure items are also expected to weigh heavy.
According to the Treasury, New Zealand’s fiscal deficit will account for 6.5% of the Gross Domestic Product for year-ending June 30, 2011, but would shrink to 4.5% in 2012 and 3.3% in 2013.
It said net debt would peak to 27.4% of GDP in 2014-2015.
The projections also show that public debt will meet the long-term target of 20% of GDP in 2021-2022, which would be a “substantial achievement” given the size of the shock New Zealand endured during the global slowdown.
“The Crown Accounts would be back in surplus by 2016.”
Fiscal conservatism
Despite the deteriorating outlook for the public finances, Mr Key is unlikely to back down from his campaign promises on incentive building exercises. In any event, the fiscal conservatism implied by Party’s centre-right government would mean that policy measures would be presented as having a long-term benefit for productivity and competitiveness.
From an environmentalist’s perspective, though, the Government’s positives are outweighed by much larger negatives. The Emissions-Trading Scheme excludes agricultural emissions until 2015, and its generous allocations of free carbon credits to business have been lambasted by environmentalists.
The country’s transport strategy favours road building over already-scant public transport, and there is much talk of the need to ease resource-management rules that act as barriers to business. In February, the government revealed it was considering opening some of the country’s pristine public land up for mining, an activity to which the dwarves in “The Hobbit” are much given; but it is not popular with more elvish sensibilities.
Balancing economic growth and preventing environmental degradation is a challenge to any Government, and National’s performance would have lasting impact on the country and its people.
Photo: Prime Minister and Leader of National Party launching this page of Electionlink at the office of Indian Newslink on June 10, 2010. Among those present were Ministers Tim Groser, Maurice Williamson, Pansy Wong, Auckland Mayor John Banks, MPs and others. Picture by Narendra Bedekar ©
