David Seymour
Wellington, December 19, 2021
It has been a dramatic year for all New Zealand, to those here on our soil and the million Kiwis overseas who have been unable to come back to their own country.
It has been a huge year for ACT. To everyone who has shown us their support – or just taken the time to hear us out, thank you.
As we head into the holiday season, I am well aware of the cost that Kiwi families will pay for Covid– at the pump, paying the rent and at the checkouts.
Delayed and hidden costs
Kiwi families are starting to see the delayed and hidden cost of Covid. It comes in the form of rising prices. Over the next year, we are going to hear a lot about inflation and the cost of living and we need to understand the cause in order to fix it.
The average thing you buy went up by 4.9% in the past year. Some things less, others more, but people are noticing it across the board. It is like the government put GST up 5%. That would be a more honest way of recovering what it has spent on Covid, but politically disastrous for them.
Instead, the Reserve Bank of New Zealand has set interest rates low, and then printed extra money to boot. It is printed an extra $60 billion over the past two years, and it is all now sloshing around the economy, bidding up prices here and there.
The Reserve Bank’s next move will be the opposite –to raise interest rates. It is shifted the pain into the future. Every mortgage will cost more in the next few years. If low interest rates made 2020 and 2021 more buoyant than expected, they give 2022 a sinking feeling.
Basic Laws of Economics
At the same time, the production of goods and services has slowed down. People have not been able to work. Some businesses have not been shut. Any business relying on the border, like tourism or export education, forget it.
The basic laws of economics have not changed though. Inflation is ‘too much money chasing after too few goods.’ Pump up the money supply, throw a spanner in the productive economy, guess what? Prices will rise just as sure as night follows day.
Now, the government and its sympathisers will say, ‘Oh but prices are rising everywhere.’
It is true, in this sad world, you can justify anything by finding a country doing even worse.
Practically every country is following the same crazy policy of printing money to avoid hard choices. That does make it right, and it does not help when prices are rising where you live.
Suggestions to the government
Every country is dealing with Covid, too. True. But it does not mean we could not be doing more to control the cost of Covid. Here is what the government should be doing.
Number one is fix a big past mistake. The government should never have changed the Reserve Bank’s rules. By making it responsible for employment as well as inflation, the bank now has an excuse for ignoring inflation. It kept interest rates low and then printed even more money when it should have been focused on the blow out in prices.
Number two is controlling government spending. Low interest rates have aided and abetted the government’s fiscal blow out. In the middle of Covid, it spent $51 million designing the bike bridge that will not be built. That money is now out there chasing after too few goods, raising prices for everyone.
Altogether, the government has borrowed around $50 billion since the start of the Covid period. It has twice raised benefits for people who stay home and do not produce anything. The government is adding to inflation. It is out bidding against private developers to buy land, raising the price of that too. It is the most inflationary Government New Zealand has seen in generations.
Reconnecting with the world
Besides pumping put cheap money, the government it also needs to stop doing things that make it harder to work and produce.
We have a government that wants to keep the border closed to international students until May. Australian and Canadian institutions have their welcome mats out.
Surely, the government could figure a way to safely reconnect with the world before the 2022 academic year? Can we afford not to give our tertiary institutions a fighting chance?
The same can be said for tourism. Are there no countries in the world that fully vaccinated and negative tested tourists could come from? What about workers in the middle of a chronic labour shortage that’s pushing up wage costs? If we do not start taking these things seriously, there is a real danger that airlines won’t bother flying here and our problem will become more permanent then we bargained for.
Within our borders we could and should balance Covid with other needs. If the government sets out criteria for a city being at orange and the criteria are met, that city should be at orange. If we keep talking about an abundance of caution, we won’t have much abundance of anything else.
Finally, the government should hit pause on its campaign bludgeoning anyone vaguely interested in producing stuff. New holidays, labour laws, farm regulations, Emission Reduction Plans, and so it goes on. The Government should apply an abundance of caution to harming an economy that’s on life support.
The government needs to do all of the above if it wants to get the rising cost of living. If it keeps pumping out more money without more goods for them to chase, inflation will be its epitaph.
To all New Zealanders – ACT understands, and we will continue to fight your corner in 2022. Merry Christmas and Happy New Year!
David Seymour is Leader of ACT Party and elected Member of Parliament from Epsom, Auckland.
